Economy and Bailouts

I wrote a lengthy letter in response to the thousands who contacted our offices in regard to the bailout of a few financial giants. This was also published in the Shopper-News, so it is not necessary to reprint all that here. Suffice it to say that among many other reasons I voted against the bailout were these: 1) Even in boom times, thousands of small businesses go under and we do not bail them out, so it was very unfair to do what was done; 2) We had to borrow all the money and raise the national debt to 11.315 trillion, so we could not afford to do it; and 3) the legislation was rushed through, giving the Secretary of the Treasury far too much power, and giving really no time to gauge the effectiveness of many other mega-billion dollar actions that had been taken in the weeks just prior to the bailout, such as the takeover of Fannie Mae and Freddie Mac and actions on some other financial institutions by the Federal Reserve (a non-government organization).

There were other less expensive alternatives that would have been more effective in helping the economy. The top officer of the BB&T Banking Chain, headquartered in North Carolina, wrote every member of the House and Senate, with 14 points against the bailout. He said it was unfair to make healthy banks pay for the mistakes of bad or reckless banks. He added that simply giving everyone who would buy or build a house (whether a first home, second home, or whatever) a large tax credit would have done much more to help the economy and realtors and homebuilders and others at a much, much lower cost. However, it is almost impossible to get the federal government to do anything in a simple, economical way.

I joined 30 of my colleagues in the House in writing Secretary Paulson and Chairman Bernanke just before the first big bailout votes “to express our deep concerns over the increasing propensity, size and frequency of government interventions to prop up failing private sector companies. These bailouts have set a dangerous and unmistakable precedent for the federal government both to be looked to and indeed relied upon to save private sector companies from the consequences of their poor economic decisions.” I wish the government could wave a magic wand and get us out of our present economic problems. Unfortunately, it has been proven all over the world that the quickest way out of economic difficulties is to let the free market work.

Anyone who voted for the big bailout voted for a bill that was rushed through without any hearings, committee markups, or even a chance to offer amendments – in other words, without going through the normal legislative process. Now, most local business people say they have not seen the unfreezing of the credit markets this legislation was supposed to produce. Worst of all, three weeks after getting $15 billion from the Treasury Department, the Bank of America used $7 billion to increase its investment in the China Construction Bank Corp. Liberals have always opposed putting America first, but this is ridiculous.

No one wants to see the U.S. automobile industry go under. However, almost everyone who has spoken to me about this has asked things like “Where is the money coming from?” and “Where do all these bailouts stop?” We cannot even really afford to do what we have already done. And without major concessions by the union and especially by the retirees, almost nothing is going to work anyway. General Motors, for example, according to one report, has about 780,000 retirees, about three times as many employees as it has. Without major concessions, we would be making even lower income people pay for salaries and health and retirement benefits that every analysis says are really unaffordable.

As Washington Post columnist Robert Samuelson wrote: “The bailout should be more than union welfare.” A court-ordered reorganization is probably the only way to save these companies. The Congress has the power to do the same things the courts could do but the votes are simply not there to require the unpopular steps that would be necessary to turn these companies around.