DORGAN SAYS WALL STREET BAILOUT PLAN IS "STAMPEDE IN WRONG DIRECTION"

Senator outlines plan that would stop the same mistakes from happening again

Monday, September 22, 2008

CONTACT: Justin Kitsch
or  Brenden Timpe
PHONE: 202-224-2551

(WASHINGTON, D.C.) – U.S. Senator Byron Dorgan (D-ND) today issued the following statement on the proposal for a federal bailout of the financial industry. He said Congress should not approve the bailout without increasing regulation and making other changes to ensure the problems will not happen again.

STATEMENT OF U.S. SENATOR BYRON DORGAN
“The financial rescue proposal offered this weekend by the Bush administration is nearly unbelievable. President Bush wants Congress to provide a minimum of $700 billion in taxpayer money so that the federal government can purchase toxic securities from failing Wall Street firms without any safeguards or oversight attached to that bailout. The Bush administration is also asking for unlimited authority, proposing that, no matter what they do with the $700 billion in taxpayer money, it would not be subject to any oversight or review by the courts or Congress. Nothing like this has been done in the history of our country.

“I am prepared to take aggressive emergency action to prevent a collapse of our financial system. But this proposal looks to me like a stampede in the wrong direction. Right now it looks like a proposal to reward the very people on Wall Street who created this mess, and who pocketed more than $100 billion over the last several years making it.

“How did we get here? In 1999, when the Congress was pressured to repeal the financial protections that were put in place following the Great Depression, I voted against it. That bill, the mis-named Financial Modernization Act, repealed the Glass-Steagall Act. I warned then that a ‘financial swamp’ would result from the casino-like prospect of merging banking with the speculative activity of real estate and securities.

“In 1999, when the bill was debated, I warned, ‘This bill will also raise the likelihood of future massive taxpayer bailouts…I also think we will, in 10 years time, look back and say…we forgot the lessons of the past.’ I take no satisfaction that I was right.

“I agree that the Congress must now act, but that action must be smart and effective. That means any action taken must be guided by two principles: protecting U.S. taxpayers from being ripped off in a rushed, blank-check, no-strings-attached Wall Street bailout, and ensuring accountability and oversight to put an end to the very reckless business practices that led to this crisis and put our entire economy at risk.

“Congressional action must include:

1. Restoring the stability and safety of the banking system by recreating protections of the Glass-Steagall Act, which prohibited the merging of banking businesses with riskier investments. That post-Depression Era protection served us well for seven decades before its repeal.

2. Addressing the wildly excessive compensation on Wall Street, which has incentivized reckless behavior. In recent years, Wall Street has doled out more than $100 billion in bonuses to the very people who have steered us into this mess, including more than $33 billion in each of 2007 and 2006.

3. Developing a system of regulation that would require accountability for the speculative investment activities of hedge funds and investment banks that create and sell complex securities.

4. Providing for a period of forbearance on mortgages where homeowners could continue to pay mortgages at a set rate.

5. Creating a Taxpayer Protection Task Force that would investigate and claw back ill-gotten gains. This would be targeted at individuals and firms that profited from creating and selling worthless securities and toxic products. Despite the fact that this practice caused the current economic crisis, many of these individuals and firms now seek to benefit from a government bailout.

6. Making sure that U.S. taxpayers get to share in the increased values – not just the burden of risk – of the firms they are bailing out.

“If government action is taken without the safeguards described above, it will not address or cure the major problems of our financial system, and it could wreck our economy and lower our standard of living. This is a crisis and we must address it quickly, but we need to get this right.”

—END—