A Skeptical View of the Wall Street Bailout

A SKEPTICAL VIEW OF THE WALL STREET BAILOUT -- (House of Representatives - October 02, 2008)

Ms. KAPTUR. I thank the gentleman, the chairman of a subcommittee on International Relations, who has just dedicated himself, his great intelligence and great fervor, to helping to explain to the American people and our colleagues what is really at stake, and to try to move this institution, the House of Representatives, the closest body left at the Federal level to the American people, to move us to the right decision tomorrow.

Tonight, so many of us, we are praying for our American republic, and we ask the American people to pray with us and to pray for this House, and to pray without fear. Franklin Roosevelt said, ``All we have to fear is fear itself.'' We need to make wise decisions; not decisions made in haste or in panic.

If we vote ``no'' tomorrow, that is not a vote for no action. A ``no'' vote tomorrow will signal we want a better answer, and we will work here until we get it.

The other night the Senate voted to pass their version of a bill, and the stock market went down. Explain that to me. They passed the bill. It goes down.

I don't think there is any relationship between day-to-day trades, what is happening in the markets and what is happening here. We know that there is a serious issue in our financial system because credit markets are seized up. As others have said, what we can do there is to ask the FDIC to employ its emergency powers, which are already law, and agree to cover all creditors, bondholders and depositors in those institutions and that that will take the fear out of that system because they're scared, too, because they don't know, if they borrow from bank X in another city, whether that bank will be around the next day. Those banks are liquid. In other words, they have money to lend, but they're afraid, too. So we've got to get the fear out of the system. Let us pray to not have fear.

If we pass the bill the administration has sent us, one of the things that's going to happen, plus what they did over in the Senate, is that we're going to add 870 more billion dollars to our debt. We can't afford to do that right now. That is a very bad decision because we are in debt. We will be over $12 trillion in debt. The value of our dollar is already going down. This will push it down more, and our deficit is going up, which is not such a good position to be in. So we need a solution that doesn't raise our deficit by any more.

By declaring that emergency at the FDIC, it gives the FDIC and its bank examiners enormous powers to go around and to try to make the loans that are necessary, to work out real estate loans where those need to be worked out. They can even get into executive compensation, and they can look for fraudulent accounting throughout the country. That's what bank examiners do, and they're really good at it. Ask any banker. We need to enliven that system and make it function.

Then we need to ask the Securities and Exchange Commission, which has moved along this week and has been doing better than it has in the past, to help these banks within their accounting systems give a true value to the real estate assets on their books and not to some artificial index that bears no relation to reality, to what has happened in Cleveland or in Toledo or anywhere else, and to use the private sector as we did back in the 1980s--to heal the system and to use its power and to do it with discipline and rigor, not to take $870 billion and reward those who have had very bad behavior on Wall Street.

I'm sure my dear colleague from California and Congressman Kucinich from Ohio, who has been such a stalwart in fighting for the people of Cleveland and of our country, would agree that the bill they're sending over from the Senate has had no hearings in this House. When we sent our bill over there, it was about that thick. The bill that came back to us today is about that thick. It was so heavy I couldn't even carry it over here to the floor. We have had not hearing one on that bill here in this Chamber. We are not following regular order, and that is not in the interest of the American people. At a minimum, there ought to be regular order with the committees of jurisdiction.

They've stuffed tax issues in that bill over on the Senate side. I understand there are Exxon Valdez provisions. There is even something for wooden arrows for children. There are trade provisions in there, and there is even Puerto Rican rum. How about that one? They've put the Alternative Minimum Tax in there, which sounds great except they didn't have any offsets, so it increases the deficit even more.

We haven't had hearings, so we'll have to do a better job of due diligence here. Really, our leadership should allow us to do that. One day or two days or five days isn't going to make that much difference in what is happening in the markets.

Let me give a point of view here as to one of the things that, I think, is happening in all of this. Why is the Treasury moving this in this way so fast now?

I think it has to do with the fact that so much of our debt has been financed by foreigners and by foreign banks that the Treasury is a little bit worried about that as we begin a new fiscal year and that rather than presenting a balanced budget or a budget that moves us to a balance over the next few years that they're giving us more debt on top of old debt, which is a backwards way to help this economy.

This past week, it was announced in Reuters news service that seven banks in China had lost over $700 million because of what happened at Lehman Brothers with its implosion and that the National Bank of China was paying attention to that and that the debt dealings that they were having with the United States, particularly at the beginning of the new fiscal year, which is October 1, had created a bit of tension in that system and that it is actually our deficit and our difficulty in financing that--because we have a President who conducted two wars without paying for them--that our credit situation is not as good as it should be.

There are instruments, we've been told, such as credit default swaps and collateralized debt obligations that have to be covered. Well, let's be honest with one another. If that's what we're going to be doing, then let's tell the American people, and let's get it done the right way. We understand, in this $870 billion that they want to take from the taxpayers, that over half of that money will go to foreign creditors. Doesn't this Congress and don't the American people have a right to know to whom and how much and what this all means and how we got into this situation? Because, if we really don't understand what we're getting into, we can't get out of it. If only a few people know--and this is an inside trade, inside of Washington--and the American people don't understand it and we don't do this together as a people, then how are we really going to make it better unless we all walk together and get through this together?

I have a great deal of confidence in our banking system, and I would encourage and would hope that Secretary Paulson and the chairman of the Federal Reserve, Chairman Bernanke, and the head of the Federal Deposit Insurance Corporation, Chairman Bair, and the head of the Securities and Exchange Commission, Christopher Cox, eat lunch tomorrow. I hope you figure out how to advise the President of the United States because I really do think those emergency powers at the FDIC would give great confidence to the system. When you do that, you will get an inflow of foreign funds into this country rather than the kind of policy you're following now, which is making those credit markets tighter and tighter and tighter in a banking system that is fundamentally sound and liquid.

So pay attention to the booking of those assets through the Securities and Exchange Commission. Help our banks weather this period. Give them some confidence, and help us to heal this in the full sunlight, not in a quick vote that is rushed through here tomorrow.

I want to thank my dear colleague from California, Brad Sherman, who has been a true, true leader in this effort to try to do this the right way, not the fast way. I thank the gentleman.

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