Dear Mr. [Blogger who is not a large ungulate with palmate antlers],
Thank you for contacting my office to express your opinion regarding H.R. 1424, the Emergency Economic Stabilization Act of 2008 (EESA), or the so-called "financial bailout." The response from the state was unprecedented and I greatly appreciated hearing from each and every Alaskan on this issue.
During the first part of 2008 and into the fall, as the U.S. mortgage market worsened, I like most Americans became concerned about the stability of our financial system. In April of 2008, as a Democratic-led Congress debated the naming of post-offices and commemorative coins, I joined sixty of my Republican colleagues in cosponsoring a crucial piece of legislation to fix the struggling housing market. This legislation, H.R. 5857, the Homeownership Protection and Housing Market Stabilization Act of 2008, would have addressed the root causes of the subprime mortgage crisis. This legislation would have modernized the Federal Housing Administration (FHA) and improved the regulation of the Government Sponsored Enterprises (GSE), Fannie Mae and Freddie Mack. Additionally, H.R. 5857 would have created a new one-page document to remind the homebuyer of any upcoming rate resets or changes in terms, each and every month. This bill would also have combated and prevented mortgage fraud, promoted housing counseling and encouraged loan workouts for borrowers facing foreclosure. However, the Democratic leadership refused to bring this bill up for consideration and, as a result, Congress' reaction to this problem was too little, too late.
In the fall of 2008, in the hopes of finally addressing the housing market concerns of many banks, investors and everyday workers, the Administration conceived a giant bailout of the banking industry. Originally introduced on September 20, 2008 as the "Troubled Asset Relief Program," Secretary Henry Paulson's "bailout" plan was both ambitious and hasty. At its core, this plan called for a $700 billion government buyout of mortgage backed securities Mortgage Backed Securities. It is important to note that, throughout the negotiations, the core of every bailout package still contained this exact and extraordinary sum of taxpayer dollars.
On September 29, 2008, the House considered and voted on a rushed first draft of EESA. Including some oversight and sparse regulatory reform, this legislation contained a modified version of the $700 billion dollar TARP program. According to its supporters, this was no longer a taxpayer bailout, but rather, a taxpayer investment in the banking industry. By buying these "devalued" Mortgage Backed Securities, the U.S. taxpayer would not only provide liquidity to the credit market, but would also have the chance to make money on these assets. However, I remained cautious. In my 35 years of Congressional experience, I have seen some bad pieces of legislation pass the House. Much of this bad legislation has been brought to the House floor, under duress, when there is a perceived crisis and inaction is deemed irresponsible. Yet, I believe that it is this "chicken little" view that "the sky is falling" is what is irresponsible. The duty of a Congressman is to not only think about the here and now, but about two years, ten years and twenty years down the line. In my view, not only did this legislation give unprecedented power to a lone unelected official, but it also set horrible precedents that may well have us sliding down a very slippery slope right into socialism. Consequently, I voted against this first draft of EESA, which failed to pass the House by a vote of 228-205.
Following the House rejection of EESA, the Senate began work on making this legislation more "palatable" to those that opposed it. In fact, the Senate was able to add several admirable measures to EESA which I have supported in the past and will continue to support. Foremost among these was the reauthorization of the secure rural schools program which provides $3.3 billion in funding to rural counties with national forest land. Also included in EESA was a provision that allows the Exxon Valdez plaintiffs to put up to $100,000 of their settlements into a one-time IRA deposit and to income average their settlements over three years so as to reduce their tax burden. Additionally, the Senate version of EESA also included a one year patch to the Alternative Minimum Tax (ATM) and an increase to the Federal Deposit Insurance Corporation (FDIC) limits from $100,000 to $250,000. Due in part to these reforms and greater perceived instability in the market, the Senate Passed EESA by a vote of 74-25.
On October 3, 2008, the House took up consideration of and voted on the Senate-passed version of EESA. This was an extremely difficult vote for me. While on the one hand, I understood the gravity of the financial crisis and I supported many of these new Senate-added provisions, on the other hand, these provisions were attached to a $700 Billion taxpayer-funded bailout of the banking industry. After hearing from thousands of my constituents though, I ultimately voted against EESA deciding that no amount of "sweeteners" would change the fact that this was still a $700 billion taxpayer bailout. Ultimately, EESA passed the House by a vote of 236-171 and was signed into law by the President.
Overall, a "bailout" should be the last resort, not the first. It is my belief that Wall Street should first try and bail itself out. I support several free-market measures including suspending the capital gains tax for investors that buy Mortgage Backed Securities. This measure, along with tax deductions for banks that lost money on investments in Fannie Mae and Freddie Mac, would use the market to free up the capital that these banks so desperately need. Additionally, I support providing 100% insurance for losses resulting from the failure of Mortgage Backed Securities, charging risk-based premiums for this insurance and making the purchase of this insurance mandatory. Such insurance would provide immediate value to the Mortgage Backed Securities and a foundation for which they could then be sold.
As for regulatory reform, I believe that we should address the underlying reasons that got us into this situation by suspending "mark-to-market regulations," privatizing Fannie Mae and Freddie Mac and creating a twelve member, bipartisan and bicameral Select Committee on Financial Security. This Select Committee would study and report to Congress about future financial emergencies and would provide recommendations of how to prevent these emergencies from happening. Finally, I believe that we should further empower federal agencies to use existing programs like "Hope for Homeowners" to help people work out their troubled mortgages, not create new ones. Moreover, should the taxpayer incur any costs from any these proposals, I propose that we open up the Outer Continental Shelf (OCS) and the Arctic National Wildlife Reserve (ANWR) to oil exploration and use the taxes on these revenues to pay for this free-market "workout" of Wall Street instead of burying our children and grandchildren under massive amounts of debt.
Once again, thank you for expressing your views on this issue. If you haven't already, I would encourage you to sign up for my e-newsletter at http://donyoung.house.gov/IMA/issue_subscribe.htm and my YouTube channel at http://www.youtube.com/profile?user=RepDonYoung. Doing so will allow me to provide you with updates on this and other important issues. If I can be of any assistance in the future, please do not hesitate to contact me.
Congressman for All Alaska
Where's Lisa's letter? She's late!