September 26, 2008

Economy

At this writing, the House and Senate are working to resolve the many differences that exist on how to address the financial crisis we are facing. No one knows whether we can resolve those differences or, if we can, whether the result will be worthy of support. As confusing and messy as it is, this is the democratic process as it should be with 435 Members of the House, 100 Senators - including two Presidential candidates, and a President and his Cabinet, all holding strong views on one of the most important issues of a generation.

Many of you have contacted our office to express your concerns about the legislation. I appreciate your calls and I share your concern. It is important that you know the issues I am committed to and that I hear your comments.

First, let me clearly state that the original 3 page Paulson proposal is dead. It was never seriously considered by anyone in Congress. In fact, I believe it was really Secretary Paulson's way to begin discussions. Regardless, Congress has no intention of simply allowing any one person to spend $700 billion as he or she sees fit.

Many experts on both sides of the aisle are describing this financial situation as the biggest economic crisis our nation has faced in decades. They predict that not taking action will lead to a major decrease in credit and will have a significant impact on all Americans. Our ability to obtain a mortgage, car loan, home equity loan or a student loan will be severely restricted.

I think most of us recognize that something must be done to stabilize the economy, but that the approach we take must be a comprehensive one. A whole host of provisions are still on the table and Congress continues to work with the Administration to finalize the legislative package.

Along with many others, I support placing limits on executive compensation so taxpayer money is not used for bonuses or severance pay for some of the very people who caused the problem.

There is wide agreement that an oversight mechanism must be a part of the bill. Of course, there is discussion on exactly how to accomplish this goal.

Many of us support including direct help for homeowners struggling to avoid foreclosure. However, some do disagree. Even amongst those of us who agree on the principle, there is discussion about who should qualify for help.

I have been one of the leading advocates for doing all we can to prevent the situation from happening again. This requires a complete re-writing of our regulatory system. Existing regulations must be strengthened and broadened. Financial entities not subject to any regulation must be brought into the system. I do not advocate over-regulation, but I do insist on adequate regulation to protect the system from future destruction from within.

The reason I am so adamant about the last point is because I believe that the problem is NOT really a housing problem. I believe the problem is really a lack of oversight on excessive greed in the financial system.

• If bank regulators had said, "You cannot loan to people who cannot afford the payments ...
• If all mortgage lenders had been subject to regulation (most mortgages no longer come from banks - they come from unregulated lenders)...
• If lenders and those who bought mortgages from them had been subject to the same capitalization requirements as regulated commercial banks (i.e. - they were required to keep a specified amount of cash on hand)...
• If those who bought and sold mortgages had been subject to the leverage limitations of commercial banks...
• If government had not been run by elected and appointed officials who believe government is incapable of doing anything good and the free market will always self-regulate...
• If... if... if...

Basically, if there had been a broad regulatory oversight system that was fairly enforced, this economic mess would not be occurring... regardless of housing prices. This is particularly frustrating to me as I have raised this issue in Congress for several years.

I recognize and understand that we may have to act on a proposal before we can include comprehensive regulatory reform in the package now being developed. But we must make sure that any proposal includes a requirement to take action soon.

No one knows when we will have a final legislative package to consider, but Congress remains in session and it is possible that votes on this matter will occur over the weekend. I thank those of you who have reached out to our office on this issue. Please keep your opinions coming.