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I recently voted against the second Wall Street bailout bill. House and Senate Democrats responded to Treasury Secretary Henry Paulson’s request for unlimited control of 700 billion dollars of your money by adding nearly 200 billion dollars in “sweeteners” in order to get more votes for the bailout the second time around.
My vote is not for sale, and although the updated bill was better than the original bill I voted against, it didn’t get me to change my original vote against it. Raising the Federal Deposit Insurance Corporation’s (FDIC) limit for bank-insured deposits from 100,000 dollars to 250,000 dollars and improving mark-to-market accounting standards is a good start but does not go far enough.
The bill could have done more to stabilize the markets by requiring the Treasury Department to guarantee up to 100% of losses resulting from the failure of timely payment and interest from mortgage-backed securities (MBS) that originated prior to the bill's enactment. Such insurance would provide immediate value to the MBS and a foundation by which they could then be sold.
In order to finance this insurance, the Treasury Department could also assess a premium on outstanding MBS. Participation in the program would be mandatory for all holders of such MBS in order to guard against adverse selection where only the holders of troubled assets participate. A risk-based premium would be assessed on those with troubled MBS. The premium would expire when the Treasury Secretary determines the fund has sufficient resources to meet any projected losses.
Another needed action is an injection of private capital into the market, and this would be more likely to happen with a temporary elimination of capital gains taxes. That action, along with a reduction in our corporate income tax rates, would provide stability through investment and business growth. However, this legislation fundamentally changes the relationship between the government and the free market and burdens the taxpayer with a $700 billion price tag. Although I opposed this bill on a philosophical and principled level, I do hope our financial system improves and does so quickly.
Again, thank you for contacting me about this important issue. If you would like to receive further information on issues of importance to you, please log on to my website at http://jeffmiller.house.gov/. As always, please feel free to contact my office if you have any further concerns.
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