Now That We Have This Bailout, Where Do We Go From Here?

Press Release

When it comes to the bailout, there's no shortage of blame to go around.

Wall Street traders bought into risky mortgages while homeowners bought more than they could afford. Federal regulators couldn't keep up with the 21st-century economy. And the partisan bickering of Washington, D.C., stood in the way of common-sense steps to address the underlying problems that helped create the current crisis.

It was this unsightly backdrop that sent Washington, D.C., into crisis mode in recent weeks. We were told that it was this bailout bill or economic collapse. We were told that we had to act immediately, that there was no time to consider other options. We were also told not to listen to our constituents, because they "didn't understand."

In each case, we were presented a false choice. Certainly we had to protect our financial system, but at what cost? Urgency clearly matters, but does urgency count if it leads to a dire mistake? And the idea that our "constituents don't understand" is as offensive as it is ignorant.

Average West Virginians may not be investment bankers, but they understand what $700 billion means. They understand the enormous debt this plan will leave to our children, and they raise concerns when Treasury Department officials can't even tell us why they chose $700 billion as the bill's dollar amount.

"It's not based on any particular data point," a Treasury spokesperson told Forbes. "We just wanted to choose a really large number."

I, for one, was not willing to put the tax dollars of West Virginia families on the line for a plan that was seemingly pulled out of thin air when greater clarity and taxpayer protections were warranted.

West Virginians deserved a serious discussion about different options for responding to this crisis. Yet that's not what they got. As late as last Thursday, the House Rules Committee refused to hear an alternative idea that would have cost the taxpayers much less.

It is even more disturbing to look back over the past few years and see the missed opportunities to modernize and regulate many of the institutions involved in the current crisis.

In 2005, I supported legislation in the House of Representatives to create a stronger regulator for government sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, who are regularly credited with creating the environment for the over-blown mortgages at the root of the current problem. Unfortunately that legislation was never taken up by the Senate.

I also supported legislation to modernize and better equip the Federal Housing Administration - a government agency uniquely designed to assist homebuyers and provide mortgage insurance - but it also died in the Senate back in 2006.

Since I became the ranking member on the House Financial Services Subcommittee on Housing, the Congress has finally enacted both of these key reforms, but we all would have benefited had they passed years ago.

From this point on, however, we must look forward. Despite my opposition to the bailout plan, I certainly hope for its success now that the taxpayers have such a major stake in the market. It's imperative that their stake is protected and although we were regrettably unable to fully examine many important aspects of the bill, it is undeniable that our economy depends on the availability of credit and we can't afford continued lending restrictions.

We must also seek smart changes in our regulatory framework to replace a patchwork system that was clearly inadequate for the modern economy. In March, the Secretary of the Treasury put forth a sweeping proposal for reform that proposes consolidating and streamlining key regulators, enhancing mortgage standards and creating a new regulatory coordinator to ensure better openness and transparency.

Focusing on these ideas, among others, presents an opportunity to truly engage in a debate about how to best modernize and upgrade our nation's financial institutions.

With an emphasis on these reforms and by exporting West Virginia frugality and common sense to the folks on Wall Street, we can help ensure that we never face this sort of crisis again.

Rep. Capito, a Republican, represents West Virginia's 2nd Congressional District.

Source