We Will Find A Solution

Statement

There is no doubt our economy is treading tough waters. The actions of Congress this week have left many Central Texans with two questions:

How did we get into this mess and can we get ourselves out?

Almost a decade ago the government encouraged greater levels of home ownership. Lenders in metropolitan areas gave loans to people who would not typically qualify. Not long after, our economy was hit hard as terrorists murdered thousands of Americans on 9/11. In response, the government lowered interest rates making homes more affordable and infusing more cash into the economy. While these rates meant a recovery, they made it easier for more questionable borrowers to obtain a mortgage.

Suddenly it was profitable for banks to give exotic loans to borrowers who had no business getting a mortgage so they could flip the house for a profit. Homebuilders continued to build until we reached a point where there were more homes than borrowers. As prices started to fall, the plans of these investors began to unravel. Suddenly the plan to repeatedly sell houses at a profit wasn't an option anymore. Borrowers were no longer able to make a six-figure profit just for signing a mortgage and began to default on their loans as they faced higher payments.
This problem quickly began to affect Wall Street. These subprime mortgages were sold to investors hoping to make a buck. To add even more confusion, many of these loans were sliced and diced and packaged with other loans to give an illusion that they were stable. The economic world calls these packaged loans a Mortgage Backed Security (MBS). Since these MBS's were bought at significant prices, but now have little or no value, investment firms now face massive losses and a sudden lack of capital to back up existing obligations. Thus, the stock market is losing value, banks are failing, and everyday Americans are suddenly finding it hard to get a credit.

This is where Congress must act. As a free market believer, I firmly believe that the less government intervention the better, but one cannot argue that this drastic situation demands drastic action. However, I do not believe the plan which the House rejected is the best our country can do to alleviate this financial crisis.

On paper, the bailout plan appears to be a better alternative to the $700 billion the administration asked for. However, the administration would still have received $700 billion to bail out the very people that created the problem without providing a clear answer as to how we will pay for this. I find it unacceptable that the plan would defer the decision on how to pay the bill to whoever is in charge of Congress in five years. This plan must have a clear outline of how Wall Street, not Main Street, will foot the bill.

I opposed this plan because America can do better. In the days leading up to the vote, many options were presented by other economists, including William Isaac who dealt with the Savings and Loan crisis of the 1980s. While this plan offers greater taxpayer protection, it was not considered. I am also part of a group that is seeking out alternative plans. We worked through the weekend and are continuing to work toward a solution. Whatever plan we go with, we must remember that there is more than one solution to solve this problem, and we are better served coming to an agreement on a plan that is acceptable rather than trying to force through a plan that puts taxpayers at risk of losing $700 billion.

I know the uncertainty you face today. I know the apprehension we all feel as we watch what's happening on Wall Street. Rest assured that we are working diligently to create a plan to address this problem, and I will not rest until we have made sure that you no longer have to worry about your retirement, your house or your job. We will recover from this current crisis and our economy will again be strong.

This entry was posted on Wednesday, October 15th, 2008 at 11:33 am and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
One Response to "WE WILL FIND A SOLUTION"

1. Mark Says:
October 16th, 2008 at 1:09 pm

First of all, only the people who made the risky loans, and the people who over-committed themselves to their financial responsibility own these problems - I don't, nor anyone else who meets their financial obligations and makes sound business decisions. The bailout is the socialist nationalization of the banks, funded by the labor extracted from me by the government. Mind you that if I did not pay my taxes - the government would come take MY HOME! The defaulted mortgages are primarily investment-based transactions relating to the recent flip-that-house craze that developed during the real estate boom.

I do not authorize the government to take my labor by force, and invest and gamble in the stock market in an undiversified portfolio of financial institutions. This *investment* idea is as irresponsible as the unqualified loans that the failed banks made.

It is unconstitutional - the Federal government is not authorized to do this. How many on Capital Hill ever think of the limitations of government as a rule of law?

As pessimistc as I am, I percieve the initial failure of the bailout bill in the House was only a rouse to fake some grand conflict and debate over the bill. The reprieve during the injection of $150 billion of earmarks into the already $700 billion bill, served only for the House to take inventory of the members that would take the fall for the inevitable passage of Bank Nationalization Bill. The House acted in concert with the Senate, and all the representatives participated in allocating the head count for the inevitable approval of the bill. Those who were not running for re-election, or in districts that leaned socialist and were not at risk were assigned to vote *aye*. Those that were in *very* conservative districts and perhaps facing some competition in the upcoming election were saved the disgrace, to preserve their electability.

I see the Congress as a whole, one unit. As such wholly disgraceful.

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