Those who work hard and follow
the rules are upset at the Wall Street titans whose greed led them to flaunt
the rules and create the current credit crisis.
Because Congressman Kanjorski shares the concerns of average Americans
about these problems, he worked as a leader on the House Financial Services
Committee to make sure that the Emergency Economic Stabilization Act protected
taxpayers' dollars, workers' paychecks, and retirees' pensions.
Money and credit are the lifeblood of an
economy, and during the last year the credit markets have become increasingly
clogged as financial institutions' trust in one another has worn away because
of the troubled mortgage assets that they hold.
- Without
access to credit, businesses would not have the money they need to pay their
workers, and workers would lose their jobs.
It would also result in significant drops in the prices of stocks and
bonds held by pensions and retirement plans.
- A
shutdown of the credit system would also result in difficulty in getting a loan
to go to school, get a mortgage to buy a home, obtain an advance to pay for emergency
needs like a car repair or a medical procedure, and borrow money to expand a
business.
After pursuing in recent months a number of
makeshift fixes at several financial companies to address specific problems resulting
from the credit crisis, Treasury Secretary Henry Paulson and Federal Reserve
Chairman Ben Bernanke determined on September 18 that they needed even more
power to repair the problems in the credit markets and restore confidence.
- Because
government inaction previously contributed greatly to the Great Depression,
they advised the Congress to take quick, bold action now. Shortly thereafter Secretary Paulson sent to the
Congress a 3-page legislative proposal to create a program of $700 billion to
permit the government to purchase the troubled assets of financial
institutions.
- In
working to negotiate a revised plan, Congressman Kanjorski and his colleagues consulted
many reputable, world-class economists who agreed about the need for a
large-scale government intervention and advised the Congress to act on the
Treasury's plan.
Congressman Kanjorski had very strong concerns about
the initial Treasury plan as it would have essentially provided an open-ended,
blank check without needed controls.
Fortunately, we live in a democracy, and as the Chairman of the Financial
Services Capital Markets Subcommittee, Congressman Kanjorski worked to fix this
plan as much as possible and as quickly as possible before the Emergency
Economic Stabilization Act became law.
Congressman Kanjorski, first and foremost,
wanted to make sure that the Emergency Economic Stabilization Act helped to
protect the people living and working on Main Street, not to bail out the
businesses and banks operating on Wall Street.
- As
such, Congressman Kanjorski worked with his colleagues to alter the initial
Treasury plan in a way that protects taxpayers, limits the financial windfalls
of executives at the distressed companies getting help, establishes strong
oversight and accountability, provides transparency, limits overall costs, and
benefits Americans.
- As
a result of Congressman Kanjorski's efforts to address each of these issues,
the Congress rejected the initial Treasury proposal of less than 3 pages and
produced a revised bill to implement Secretary Paulson's plan of more than 100
pages.
Because taxpayers should not have to pay for the
blunders of others, Congressman Kanjorski's first priority for the Emergency
Economic Stabilization Act was to protect them in several ways, including
forcing the financial industry to pay for the costs of the rescue and providing
the money for the program in several installments rather than in one lump sum.
- The
new law forces the President to develop a mechanism to make the financial
industry reimburse the government for any costs of the troubled asset relief
program, if the program results in any losses to taxpayers after five years.
- By
providing the government with an equity interest in the entities that it helps,
the new law ensures that hard-working Americans will get an ownership interest
in the companies that they help, which will allow them to share in future
profits after a company recovers.
- Instead
of providing the Treasury Secretary with the entire $700 billion up front as first
requested, the Congress agreed to provide $250 billion initially, and an
additional $100 billion upon a certification by the President of a need for more
funds. The last installment of $350
billion is now subject to Congressional review and disapproval.
- Congressman
Kanjorski also worked to ensure that the law prevents unjust enrichment, provides
for fair contracting procedures, and minimizes conflicts of interest so that industry
insiders who created these problems do not unduly benefit from this program.
- To
help protect taxpayers even more, the law works to reduce short-term costs,
maximize long-term gains, and establish fair prices for any assets that the
government buys.
Corporate executives who made bad decisions
should not be allowed to dump their bad assets on the government and then collect
millions of dollars. As another
priority, Congressman Kanjorski therefore worked to revise the Treasury's initial
plan to ensure that the Wall Street fat cats who ask for government assistance do
not continue to get fat paychecks.
- The
new law works to block the golden parachutes of executives at distressed
companies so that these CEOs land just as hard as average workers when they
lose their jobs. The law also requires
the Treasury Department to issue rules on limiting excessive pay for the CEOs at
the companies assisted by the program.
- Moreover,
the new law claws back and recovers big bonuses earned by CEOs as a result of
any problems found in the future with faulty and fraudulent financial
statements.
-
In developing the Emergency Economic
Stabilization Act, Congressman Kanjorski also prioritized effective oversight,
strong accountability, and real transparency.
- The
Congressman insisted that the program provide for the real-time disclosure of transactions
on the Internet so that the American public can inspect the assets they buy.
- Because
we must punish the individuals who committed crimes in the development,
advertising, and sale of the financial products that contributed to the credit
crisis, Congressman Kanjorski strongly supported adding language to the law to force
federal regulators to cooperate with the Federal Bureau of Investigation in its
efforts to identify and bring these wrongdoers to justice.
- The
Congressman also worked to check the Treasury Secretary's powers by providing legal
review of the program in the courts, enhancing Congressional oversight of the
program's activities, and creating a number of internal and external watchdogs
to examine every decision and transaction under the program.
Because of Congressional efforts, the Emergency
Economic Stabilization Act now works to assist American interests, not foreign interests. Financial institutions eligible to
participate in this program must be licensed and regulated in the United States.
By requiring the government, as the holder of
mortgages and mortgage-backed securities, to do all that it reasonably can to
prevent foreclosures through loss mitigation efforts, the new law will also help
to keep people in their homes and spur economic recovery by preventing real
estate prices from falling further and perhaps even helping home prices to
rise.
In order to send an important message to average
Americans that their deposits are safe even in today's volatile markets,
Congressman Kanjorski supported the Senate's addition at the last minute of a
provision to increase the deposit insurance limits at credit unions and banks
from $100,000 to $250,000 on a temporary basis.
Like many, however, Congressman Kanjorski was
deeply disappointed that the Senate added many unrelated provisions, especially
more than $100 billion in unpaid tax cuts.
Because this economic crisis demanded immediate action, he decided to
vote reluctantly for the bill.
The Emergency Economic Stabilization Act's
passage is only the beginning of Congressional work on these issues. More must be done in the long term to revise
the oversight of the financial services industry, and the new law requires two separate
reports on regulatory modernization, both due in early 2009, to assist the
Congress in these efforts.
The urgency of the economic situation and the
changes made to the bill by the Congress ultimately helped to attract a large
number of diverse supporters for the bill, including the AARP (which represents
seniors), the Democratic and Republican governors' associations, the National
League of Cities, and the liberal-leaning Center on Budget and Policy Priorities,
in addition to countless other interests.
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