September 24th, 2008 - The PRESIDING OFFICER. The Senator from Tennessee.
Mr. ALEXANDER. Mr. President, I came to the floor to join with the Senator from New Hampshire in congratulating the Senator from Oklahoma for his statesman-like comments. And not just his comments on the floor because those of us who know Senator Coburn know that what he says in public he says in private and vice versa, and we respect his views on fiscal matters. What he said was that we in the Senate have a responsibility to make sure we do nothing to cause a crisis in confidence, or more of one.
I thank the Senator from New Hampshire for pointing out to us that when you say $700 billion or a trillion dollars, you are not taking into account the real dollars -- and I will not repeat his speech about the cost. In fact, I will ask, if I may, a question of the Senator from New Hampshire, and I will yield the floor for a moment.
We hear these numbers, a trillion dollars and $700 billion.
May I ask the Senator from New Hampshire through the Chair, what would he guess the real cost of this economic recovery plan to be, this Secretary Paulson plan that we hear about, based on what he knows now? What does he suspect the real cost would be?
Mr. GREGG. Well, nobody actually knows, is the answer to that. But there are some pretty good parameters you can put it within. We know the Bear Stearns situation, which was $29 billion by the Fed, is probably going to be a wash. We expect the AIG -- which again was the Federal Reserve action, not coming off our Treasury books, which was $85 billion -- is probably going to be a winner. In other words, they will get more money back than they are spending. Freddie Mac and Fannie Mae, where we put up $200 billion, we essentially said we were willing to put up $200 billion and give the Treasury Secretary that type of authority, we have only spent $5 billion so far of that $200 billion. That $5 billion will net out, so the total cost of that $5 billion is going to be less than $5 billion, probably at the most maybe $1 billion, maybe $1.5 billion after you net out the assets.
So if you look at those parameters and look at the $700 billion number, what we are going to be buying is assets. Think of it this way: We are going to go out and buy a lot of cars that have been a little damaged; some have been really damaged. The pricing we pay for those cars isn't going to be what the person paid for them when they bought them off the lot. It is going to be what those cars are valued at damaged. There may be a premium, but I don't think it will be much. Then we will take those cars and either repair them and resell them or we are going to resell them, when the economy improves, as damaged cars. People will want them because they are going to repair them.
In either event, we are going to get back a fair amount of the money we invested because we have a physical asset. It is called a mortgage-backed security, most likely, and we own it and we can resell it. Or we can wait until it matures at face value and get the money back, having bought it at less than face value.
I honestly believe, and my guess is -- and everything is going to be a guess -- but my guess is the cost of this event will be less -- less -- than the initial stimulus package which we passed around here, which was $140 billion. That is a guess.
Mr. ALEXANDER. Mr. President, whatever the cost is, I do not want to see the cost of what will happen if we don't take action in the next few days. After you have lived a while, and after you have seen a few things, you begin to make some decisions based not just on the heart or the mind but on the gut. This is a gut decision to me, with a little bit of experience thrown in.
When I was Governor of Tennessee in the mid-1980s, I had the misfortune of presiding over a situation where we had 40 or 50 banks that failed. I stayed up all night with Paul Volcker and watched the Federal Reserve pull its credit for one of the banks in Knoxville. And that set off a chain of events which, if it had been a national chain of events, we would have seen 1,000 or 2,000 bank failures. That is what we had to deal with.
That was a controlled, small event compared to what could happen if we do not take steps to avert a credit crisis in the United States. Last week, before Thursday night's events, I was at the Volkswagen headquarter's opening in Virginia. I spoke with the credit manager there for the part of the company that loans money to people who buy cars, and said to me that he and people similar to him, even companies that large, the largest European automobile maker, were finding it difficult to get dollars.
What if General Motors Acceptance Corporation or Ford or Volkswagen or Nissan Credit cannot go into the market to get some money? Then they cannot loan me money to buy a Nissan or a Ford or a Saturn. If I can't buy a car, then the new Volkswagen plant or the Nissan plant or the General Motors plant that we are so excited about, doesn't have any jobs.
I applaud Senator Coburn, I applaud Senator Gregg, and the Senator from New Mexico, and the Republican leader here. Inaction is not an option here. I can only speak for one Senator, but from what I have heard on the Republican side of the aisle, we understand the seriousness of this problem. From what I have heard on the Democratic side of the aisle, most Democrats understand the seriousness of this problem. We want to put our imprint on the proposal, but we want a result. In my view, we must have a result to avert a set of events that none of us would want to see.
For those watching the legislative process here in Washington, I want to make it clear to them that in my view, and I believe the sentiment of a great many Senators, is that we want and expect a result. We understand the seriousness of the problem.
Mr. McCONNELL. Will the Senator yield for an observation?
Mr. ALEXANDER. Of course.
Mr. McCONNELL. I was listening carefully to Senator Gregg and the Senator from Tennessee, Senator Alexander, and Senator Coburn and I see another of my colleagues here, Senator Domenici. Let me give a real-world example from my State, information just received. Here is what this particular company experienced today.
"We were informed" -- I will leave out the name of the bank. "We were informed that an" -- I will leave out the name of the county -- "industrial revenue bond issued last year could not be resold this week in the market because of the freeze of the credit markets." Today. "These tax free bonds totaling $10 million were issued last year on a variable interest rate basis, secured by a full irrevocable letter of credit from one of the nation's largest and most well capitalized banks."
No credit problem at all, but no lending -- freeze credit. This crisis we are all talking about here is not about a bunch of people on Wall Street. It is about a bunch of people on Main Street, and whether we are going to act on a bipartisan basis to restore confidence, restore confidence in our country and to prevent what could be a major catastrophic event.
Mr. GREGG. Mr. President, if the Senator from Tennessee would allow me to express a question to our leader: The point the leader makes is absolutely valid, but it is not unique to Kentucky. We are hearing all over the country that municipal -- communities are unable to roll over their municipal bonds or are getting close to that threat. We have heard about major corporations that have been unable to move cash into franchises last week because the banks did not have the wherewithal to move cash because of the threat and the pressure that was being put on their money market accounts, which they had to protect and defend.
As you say, this is not a Wall Street event. This is going to be a Main Street event. People are going to be put out of work, they are going to lose their jobs, there is going to be a huge disruption. The potential for economic disarray is unprecedented.
I think it is very appropriate that the Senator from Kentucky, as the leader, has pointed out a very real-world event here because this is real-world stuff. This is not theory.
Mr. ALEXANDER. Mr. President, I see the Democratic whip here and I am glad to have an opportunity to make this point while he is here, since those of us on this side are Republicans.
I applaud the reaction of Senator Obama to this economic crisis. It is a Presidential reaction. It is restrained. It leaves room for discussion and it recognizes the problem. I applaud Senator McCain's decision to involve himself, if he can, in a solution to the problem. That is the kind of leadership we should expect of both men, both of whom are Members of this body.
I can't emphasize enough how much I believe this situation cries out for measured but urgent reaction, in a bipartisan way, by the Senate. Because, as all the Senators have said, if it were Wall Street, we could leave them to pick themselves up. But we are talking about whether you can get a student loan, whether you can get a car loan, whether you can get an auto loan, whether your money market account is safe, and whether you have any money on the block. That is the potential impact of what we are talking about and we need, within a few days, to take the kind of decisive action that builds confidence in our country.
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