Paul Wellstone Mental Health and Addiction Equity Act of 2008

Floor Speech

PAUL WELLSTONE MENTAL HEALTH AND ADDICTION EQUITY ACT OF 2008 -- (Senate - October 01, 2008)

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Ms. COLLINS. Madam President, I rise to speak in support of the bipartisan legislation we will vote on tonight, that will help to stabilize our financial markets, to prevent catastrophic consequences for our entire economy.

Nobody is happy with the crisis we face, with the urgent pressure to take decisive action or with the very limited policy options available to us at this point. I share the anger of many of my constituents over this crisis, and I subscribe to the principles many of them invoke. As the Senator has pointed out, the initial proposal the Treasury Secretary presented to us was deeply flawed. That is why I pushed for strong taxpayer protections to be included in the plan. That is why I insisted that any plan include limitations on excessive compensation and golden parachutes for executives of the Wall Street firms that helped create the current crisis and that now seek Federal assistance.

Those controls and safeguards are part of the bipartisan package now before the Senate. That is why I advocated for strong oversight and accountability provisions rather than a blank check for the Secretary of the Treasury.

Those oversight and accountability protections, too, have been included in this package. I supported the proposal for a special inspector general to review the way this program will operate. But the fact is, unfortunately, we have to face the reality that the collapse of the housing bubble and the mortgages, the subprime mortgages and the exotic securities that floated along with them, do not just affect the executive suites on Wall Street. In fact, the ramifications cascade throughout our economy, affecting the credit lines needed by small businesses to meet their payroll, the young couple seeking to buy their first home, the automobile dealer trying to finance his inventory, the 55-year-old worker whose 401(k) plan lost a great deal of its value, and even our States and counties.

The State of Maine found itself unable to finance a routine $50 million transportation bond last week. How did we get here? Well, the culprits are many. They include the greedy Wall Street traders whose culture rewards risk taking and focuses on short-term problems.

They include unscrupulous mortgage brokers who pushed people into mortgages that were totally unsuitable for them. They include the naive or the deceptive borrower who simply did not understand or misrepresented their ability to pay once their mortgage rate reset.

They include, at the heart of this scandal, the Government-backed mortgage finance companies, Fannie Mae and Freddie Mac, that took on huge amounts of risk with paltry levels of capital.

Sixteen years ago, some Members of Congress warned of the potential systemic risks Fannie Mae and Freddie Mac presented. Officials in both the Clinton and Bush administrations issued warnings and proposed reforms. In 2005, legislation that would have made a difference was actually considered by the Senate Banking Committee and proposed by Republican members of that committee. The full House considered a bill that would have helped, although, unfortunately, it rejected some strengthening amendments.

Unfortunately, these reforms did not get enacted until this July, when the sheer pressure of the mortgage crisis finally forced Congress to act. This is a huge crisis. There are some $1 trillion worth of subprime mortgages in the country. Freddie Mac and Fannie Mae hold or guarantee more than 40 percent of America's mortgages and lately have been buying more than 80 percent of new mortgages because the private sector for the mortgage finance market has virtually disappeared.

As a former Maine financial securities and banking and insurance regulator, I understand this is a very complex problem. Its roots lie in the past decade of the real estate bubble, the relaxed lending standards, the existence of this huge and exploding subprime mortgage market, the creation of complicated securities tied to mortgages that were not held by the originators of those mortgages, and then the sale of those securities when their risks were poorly disclosed, not well understood, and lightly regulated, if at all.

The subprime mortgages were bundled together into mortgage-backed securities that were, in turn, linked to complicated financial instruments that in some cases were not regulated at all. An example are the swaps we have heard discussed. The swaps are not securities so that, as such, they were not regulated by the SEC. While they perform a function very similar to an insurance policy, they are not insurance in the traditional sense, so they escaped regulation by State insurance regulators.

The lack of regulation set the stage for deep losses for countless investors and other entities that had entered into the swap contracts. But frustrated and angry though we are, the focus of our attention must be on averting the worsening storm of financial distress, and we must have the much-improved bipartisan package to halt its spread and to mitigate its damage.

We have all seen the big headline events, the bank failures, the Government takeover of Freddie Mac and Fannie Mae, the failures of Bear Stearns and Lehman Brothers, the forced sales of Merrill-Lynch and Wachovia. These are the big headline events, and they may seem detached from people's daily lives, but they are not. Millions of Americans are being reminded that the cost and supply of new mortgages, the value of our homes, the availability of student loans, the interest rates on our credit cards, the short-term loans for business payrolls and supplies, the value of our retirement savings, are all tightly connected to the global web of credit and finance.

Economists of every ideological leaning agree we face a catastrophic crisis if we do not act. Monday's sudden drop in the stock market, the disappearance of interbank lending, the flight from money market funds, all stand as indicators of trouble and signs of panic.

As the economists noted a few days ago:

The potential costs of producing nothing, or too little too slowly, include a financial crisis and a deep recession spilling across the world.

Time is short, and I am not referring to the time until adjournment. We must act because the crisis will grow worse with delay and because the Treasury does not have unlimited authority or resources to continue case-by-case rescues.

The current compromise agreement includes principles for which I have pushed, including strong protections for taxpayers so it is very unlikely that taxpayers will be on the hook for $700 billion. In fact, there is a chance, with proper management of this program, that in some cases the taxpayers could actually make a profit. The bill now includes strong protections, curbs on excessive executive compensation, including golden parachutes, and tough oversight and accountability.

We must act now. None of us wants to see the further devastating consequences for our economy.

It also benefits from the addition of two new features. The first is temporarily raising the deposit-insurance protection for bank and credit-union customers from the current $100,000 per account per institution to $250,000. This is important to reassure consumers about the safety of the banking system in a time of turmoil, and to provide added protection for people who feel obliged to move assets to safe havens.

The second added feature is making the tax-extenders package that was overwhelmingly approved by the Senate in September a part of this stabilization package. Providing additional tax relief for individuals and small businesses in a time of stress and rising prices is in itself a step toward economic stability.

I am pleased to note that the tax provisions include energy-related measures such as new language on application of the wood-stove credit. We are not only providing general tax relief, but also targeted measures that will encourage more use of renewable resources and reduce our dependence on imported oil, whose increased cost aggravates the other injuries from which our economy suffers.

This bipartisan financial-stabilization package, endorsed by our congressional leadership and by both Presidential candidates, does not eliminate the need to keep reasonable questions in mind. While exchanging Treasury funds for currently depressed or unmarketable mortgage-related assets would obviously be a powerful tool for freeing the channels of credit and investment, many questions remain about how the Government would ensure that mortgages and mortgage-backed securities are carefully appraised so that taxpayers do not overpay or, worse yet, stand liable for debts used to purchase currently unmarketable assets; that the purchased assets are carefully managed; and that taxpayers are adequately protected through such devices as warrants or contingent equity interests in return for their financial exposure.

The bill before us now includes a provision that addresses those concerns in a comprehensive fashion. It directs the President, 5 years after the Troubled Asset Relief Program takes effect, to evaluate the ultimate cost, if any, to taxpayers, and to propose a program for recovering any shortfall from the financial industry. Considering that taxpayers may actually make money on the resale of troubled assets purchased by the Treasury, this added level of protection seems to insulate them from risk of losses.

The current upheaval in the financial markets certainly has created great strain on the lives of families throughout the country as well as our financial markets. And it threatens a terrible recession here and around the world. The bill before us is not perfect, but it reflects a consensus on the shape of an effective intervention, and it provides robust provisions for accountability and taxpayer protection.

I urge my colleagues to join me in support of this carefully crafted and urgently needed measure, and in my call for a thorough review of our financial regulatory system so that the current crisis does not occur again.

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Ms. COLLINS. Mr. President, I rise to discuss the energy tax provisions of Senator Dodd's amendment to the Emergency Economic Stabilization Act. These provisions were included in the tax extenders, H.R. 6049, passed by the Senate last week. I strongly support these provisions, and I am pleased that they are included in the financial rescue plan we are voting on today.

The United States needs a balanced, comprehensive national energy policy that addresses our immediate problems and future needs without compromising the health of the environment. In fact, I believe we must embark on a national effort to achieve energy independence by 2020. This effort will require a stronger commitment to renewable energy sources and energy efficiency and conservation.

Some of the best ideas about what we need to do now and over the next 5 years to address our Nation's energy crisis are coming from people in my State of Maine. A professor at the University of Maine has a plan for clean, renewable offshore wind power to supply as much as 40 percent of the Nation's energy. Offshore wind production that is out of sight from land could provide an affordable source of renewable energy directly to population centers on each coast while supplying thousands of new jobs. In addition, it would expand Maine's electricity supply so that people could transition away from using oil.

Maine is also well positioned to take a leading role in the development of this tidal power. The U.S. wave and tidal energy resource potential that reasonably could be harnessed is about 10 percent of national energy demand. In Maine, a consortium of the University of Maine, Maine Maritime Academy, and industry is poised to become a key test bed site for tidal energy devices.

Maine also has a large supply of wood that could be used as an energy source. These stoves dramatically reduce both indoor and outdoor air pollution, use up to 50 percent less wood for the same amount of heat and utilize one of Maine's renewable resources. I am pleased that the energy tax bill includes a provision I authored to provide a $300 tax credit for replacing an old, inefficient wood stove with a cleanburning wood or wood pellet stove.

This credit will be an important tool to help people in my home State and throughout the Nation find affordable ways to heat their homes this winter. This legislation provides a credit for home heating systems which have thermal efficiencies greater than 75 percent and which use renewable, biomass fuels. Efficient, clean-burning biomass equipment currently is available that can achieve this thermal efficiency, and I believe that equipment should and would be eligible for tax incentives in this amendment.

Mr. President, again I am pleased that we are discussing renewable energy and energy efficiency tax credits today. I look forward to seeing these credits signed into law soon.

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