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The Bail Out aka The Emergency Financial Package
I came to the conclusion that had I been in Congress, I would have voted for the Emergency Financial Package. For starters, I am philosophically opposed to government intervention. Tax payer money should not be used to bail out the excesses of the fat cats on Wall Street, many who were walking away with millions of dollars while leaving a mess for others to clean up. That said, the taxpayers are left holding the bag, and if we do not get the credit markets moving again it could have far reaching consequences that will affect our economy and our livelihood. Unfortunately, the vote yesterday became a referendum on the greed that exists on Wall Street, and we failed to address the problem. Let's be clear on one thing: the people who made piles of money on Wall Street will be fine regardless whether this bailout is passed.
Some of the things that convinced me that the government needs to step in are:
- I listened to Senator Judd Gregg on C-span support the compromise plan. While not too many people know Senator Gregg, his brother was my roommate at Tuck School at Dartmouth and I have watched his career closely. I have always agreed with what he said and respected his opinions as a true fiscal conservative. The fact that he was one of the chief negotiators was, for me, persuasive that this plan, while not perfect, was OK.
- The risk of not taking action and allowing credit gridlock is too great. We need to stabilize the financial and credit markets to bring confidence back into the system. Once banks can establish a value for mortgage-backed securities, the credit gridlock will be broken and banks will once again lend money.
- The government is not necessarily going to spend 700 billion dollars. It is important to understand that these securities are not necessarily worthless. The net result could range from a 700 billion dollar loss to a profit. Because of mark to market, other regulations, and the way they are packaged, these securities are essentially valueless to the current owners who need them as collateral for their debt. The government's exposure will be reduced because many people will continue to pay their mortgages giving these securities some value.
Now it is time for Congress to reconvene and propose a solution to this problem. If I were in Congress, these are some of the elements that I would like to see in the plan:
- We must consider this a stopgap piece of legislation and be prepared to change it quickly if it does not appear to be working.
- We need to change the banking and financial regulations so that this never happens again. I am not against regulation. I am against excessive and ineffective regulations. Without pointing fingers at anyone, we need to rollback the relaxation of credit guidelines so that mortgages are once again safe investments.
- We need minimum use of taxpayer money. We need very close congressional oversight.
- 4. We need to look closely at breaking apart all these new mega banks back into the components. What happens if Chase, Bank of America, and Citi go bust?
- 5. We need a thorough review of the insurance component so that instead of purchasing assets outright, the government could set up a FDIC type fund.
- While we should not get into placing blame until after the markets are stabilized, we need to find out what happened, and if there is criminal activity, take action. We want to hold those that made millions of dollars at the expense of the taxpayers accountable.
- We need to appoint a committee similar to the 9/11 committee to find out what happened and what we should do. I would be happy to serve on such committee.
These are tough times for the people of the 8th Congressional District, and I would call on the sitting Congressman and the current Congress to take immediate action. It is not enough to say NO; Democrats and Republicans must work together over the next few days to resolve a plan that will provide stability to the markets that allow commerce and families to live everyday.
This is my pledge and my promise once elected to the United States Congress.
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