U.S. Representative John Carter (TX-31), House Conference Secretary, made the following statement after a small group of Members of Congress, including Carter, met and produced a common sense alternative to the $700 billion Bush/Paulson Bailout Plan.  The plan would have Wall Street fund the recovery of the economy rather than American taxpayers. 

“It is completely unacceptable that Main Street should have to pay for the sins of Wall Street.  What we propose, while not perfect, puts the burden on Wall Street and the executives that have caused this problem rather than you the taxpayer.  We have reached out to Democrats seeking their input and opinion and are hopeful that we can produce a truly bipartisan agreement that will stop the bleeding on Wall Street.  Rest assured that any bill that gains my support will not only cure the current symptoms, but will also fundamentally change business as usual on Wall Street.  Not only will we enact significant reforms, but we will seek out those at fault and make sure they are punished for any fraud or crime committed. “

• Rather than providing taxpayer funded purchases of frozen mortgage assets, this plan would adopt a mortgage insurance approach to solve the problem

• Currently the federal government insures approximately half of all mortgage backed securities (MBS).  This plan will insure the rest of current outstanding MBS; however, rather than taxpayers funding insurance, the holders of these assets would pay for it.  The Treasury Department can design a system to charge premiums to the holders of MBS to fully finance the insurance.

• Instead of injecting taxpayer capital into the market to produce liquidity, private capital will be drawn into the market by removing regulatory and tax barriers that are currently blocking private capital formation.  Too much private capital is sitting on the sidelines during the crisis.

• Temporary tax relief provisions can help companies free up capital to maintain operations, create jobs, and lend to one another.  In addition, we should allow for a temporary suspension of dividend payments by financial institutions and other regulatory measures to address the problems surrounding private capital liquidity.

• Increase Transparency.  Require participating firms to disclose to Treasury the value of their mortgage assets on their books, the value of any private bids within the last year for such assets, and their last audit report.

• Limit Federal Exposure for High Risk Loans: Mandate that the GSEs no longer securitize any unsound mortgages.

• Call on the SEC to audit reports of failed companies to ensure that the financial standing of these troubled companies was accurately portrayed.

• Call on the SEC to review the performance of the Credit Rating Agencies and their ability to accurately reflect the risks of these failed investment securities.

• Create a blue ribbon panel with representatives from Treasury, SEC, and the Fed to make recommendations to Congress for reforms of the financial sector by January 1, 2009.