Washington, D.C. -- Members of Congress are continuing talks in a new effort to craft a bill that will address the crisis in the nation’s financial markets. Rep. Neil Abercrombie is among those offering a new set of proposals. Abercrombie has been in discussion with Republican and Democratic members who want to offer a plan that gives greater protection to taxpayers and mortgage holders by ending the credit crunch with private-sector solutions. The following is a statement by Abercrombie to outline a summary of proposals that should be included in new legislation.

“The defeat yesterday of the Bush Administration’s Wall Street Bailout Plan should have been a clear message that a majority in Congress are strongly in favor of stabilizing the country’s financial markets and increasing liquidity in credit markets, but not in the form of a $700 billion gift from the American taxpayers to the bankers and investors who caused the financial meltdown in the first place.

“Instead of a top-down approach that relies on public funds to cover Wall Street’s bad loans, we need a bottom-up plan that addresses the market problem at its source.  This can be accomplished without a huge infusion of public dollars through a series of regulatory changes in the Security and Exchange Commission (SEC) and Federal Deposit Insurance Corporation (FDIC).

Ending the Credit Crunch with No Taxpayer Dollars at Risk
Proposals for a new bill

“Invoke the existing powers of the U.S. Treasury, the Federal Deposit Insurance Corporation, Securities Exchange Commission, and the Private Sector.

Step 1:            Increase the FDIC insurance limit from $100,000 to $250,000 per account.
Purpose:         Stabilize depositor/lender confidence.

Step 2:            Implement a ‘Net Worth Certificate’ Program under FDIC control.
Purpose:         Stabilize capital position of banks.

Step 3:            End the SEC’s application of the ‘Fair Value Standard’ and implement an      ‘Economic Value Standard’;
Purpose:         The ‘fair value’ standard encourages bottoming out of asset value, whereas the   ‘economic value’ standard eliminates the artificial shortfall in value assignment to the asset.

Step 4:            Implement an SEC rule to end ‘Naked Short Selling.’
Purpose:         Eliminates stock price manipulation by selling stock short which is not actually borrowed or able to be borrowed.

Step 5:            Implement restoration of the ‘uptick Rule’ by the SEC.
Purpose:        Allows the SEC to block short sales of stock without SEC-sanctioned
   rise in the market.

Step 6:            Expand the existing Transaction Tax that funds the SEC to include a securities transfer fee on the sale and purchase of stock, swaps, options, futures, etc.
Purpose:        Discourages irresponsible short-term trading but has no impact on the small investor  and provides self-financed protection to cover illiquid asset investment.

Step 7:            Insure all mortgage-backed securities (MBS) by the U.S. Department of Treasury, 
   with premiums paid by the MBS holders.
Purpose:        Provides self-financed protection.

Step 8:            Authorize bankruptcy judges to modify terms and conditions of primary mortgages
     in conjunction with regulatory agencies named above.
Purpose:        Reforms Chapter 13 of the Bankruptcy Code, eliminating the prohibition on
   modifying a loan secured on a principal residence.

“Separate legislation is needed to consider:

1. Restricting Government Supported Enterprises (GSEs), like Freddie Mac and Fannie Mae from speculation in high-risk, unregulated commercial activity, such as hedge funds.

2. Extending tax credits for purchase of distressed mortgages rather than public funding as conceived in the Paulson Bill.

3. Supporting the U.S. banking system as opposed to Treasury or the Federal Reserve direct intervention in hedge funds, insurance, commodities activities, or on behalf of foreign-owned banks.

“Any legislation dealing with the present financial turmoil should be accompanied by a job stimulus package as manifested in the Job Creation and Unemployment Relief Act recently passed by the House of Representatives.  We need to act with dispatch.  But more importantly, we need to act responsibly and sensibly.”

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