Here We Go Again: The Second Half of the Bank Bailout

Floor Speech

HERE WE GO AGAIN: THE SECOND HALF OF THE BANK BAILOUT -- (House of Representatives - January 14, 2009)

Mr. Speaker, I rise this evening to warn America that here we go again. Wall Street, the Bush administration, the chief executor of Goldman Sachs Hank Paulson, who in his spare time sells U.S. debt to China and Saudi Arabia as our Treasury Secretary, are asking to get their hands on the second half of the $700 billion bank bailout.

Last fall the administration and Wall Street's chief cheerleader Treasury Secretary Paulson scared Congress into adopting the first round of Wall Street bailout money. They called it the TARP. Some people would call it the "TRAP.'' That was adopted without hearings, without debate or amendments, and without proper justification, safeguards, or oversight. Fortunately, the Secretary of Treasury abandoned the intended purchase of troubled assets and has used the money instead to purchase capital in banks; so banks are buying banks now. But that funding should have gone to the Federal Deposit Insurance Corporation to purchase the capital rather than Treasury. He didn't use the money to do anything about the central part of the problem: mortgage workouts, the foreclosure crisis.

So why do we now have a proposal here to give the Secretary of Treasury another $350 billion to spend on only God knows what? The bill says that $40 to $100 billion, and that's a $60 billion spread, my friends, is intended for some kind of foreclosure relief but doesn't specify how it's to be accomplished. Congress's job is to specify. Is a $60 billion swing between those two numbers the best we can do in estimating the cost of this program? What is the remaining $250 billion to $310 billion to be used for? Who decides? Just Treasury? If we are going to continue putting capital into financial institutions, shouldn't we at least order the Securities and Exchange Commission to stop destroying capital through market value accounting? What an opportunity for the special interests on Wall Street to take control when no one here seems to be in control, 6 days before our new President is sworn in.

Today, trying to correct the huge inadequacies of this bill, I went to the Rules Committee to prevent more damage and outright financial crimes associated with this, and I asked for two amendments, and both were denied.

The first amendment would have suspended any more money being expended from the first $350 billion, if there's any left, and would stop the next $350 billion until the Congressional Oversight Panel established in the original law has forensically accounted for each dollar of the original $350 billion. Why not examine the effects of the first $350 billion on the economy? Why not assess the effect of what the Federal Reserve policies in lowering their interest rates has been on our economy? That amendment, to follow the money, was denied. Now, here you have an agency that's selling trillions of dollars of our debt, and they're not telling Congress what they have done with $350 billion?

The other amendment that I offered would have increased oversight and strengthened the role of the Federal Deposit Insurance Corporation overseeing TARP funds. It would have provided for oversight by the FDIC directly into the boardrooms of the banks that are getting our taxpayer money. Don't we have a right to know what they're doing with it? The FDIC is the right agency to oversee that.

So the Rules Committee denied me. I wasn't expecting they would approve it because this seems like a greased deal to me, but it shouldn't be a greased deal for the American people. Before we send another $350 billion out of the door, there ought to be some accountability here.

The legislation that will be before us provides no plan to stop foreclosures, which is the root of the problem. In fact, there is nothing in there about renegotiation or holding the banks and the servicers accountable. The bill continues to do more of the same, which simply has not been working, but it gives all this power to Treasury, this secretive agency that isn't sharing anything.

The legislation does not help homeowners to defend themselves against criminal acts of massive fraud being perpetrated against them by Wall Street banksters in processing foreclosures.

The legislation continues to shift both the risk and the cost of the program off corporations and their boards of directors and their executives who perpetrated this scheme on the taxpayers. And the legislation does not address the root of the problem: foreclosures themselves. So it will be just as ineffective on Main Street as the first round of TARP in addressing the core problems.

Truly TARP is a trap.

Mr. Speaker, I would like to place in the Record additional comments about the impact, sadly, of the original bailout bill on my district and end with saying the intent of TARP was to stabilize our financial system, which means our housing industry. It's not happening, and we shouldn't give them more money.

The root of the problem and will not achieve the goal of preventing foreclosures and keeping people in their homes. There are many effective foreclosure prevention strategies being deployed by attorneys and advocates and we need to translate these into systemic solutions.

This Congress must embark upon a full investigation of how the "Shadow Banking Sector'' created by the Wall Street Investment Banks post-repeal of the Glass-Steagall Act (Gramm-Leach-Bliley) constructed a private money-creation system that in 10 short years equals or exceeds the assets of all regulated banks nationwide.

In short, there are solutions. We need a consumer-centric model. What we have now is so creditor-centric it will eventually lead to a complete collapse because consumers/taxpayers cannot handle the burden.

My district has been hard hit by the foreclosure crisis. Last year, in my home county of Lucas, another 4,100 homes were foreclosed, part of the 10 percent of my district's local housing stock that has been lost over the last 2.5 years. As foreclosure rates continue to rise in Ohio and across our Nation, it's pretty obvious that the Federal responses, such as the $700 billion Troubled Asset Relief Program (TARP) rescue, are not working on the Main Streets of our communities.

The intent of the TARP bailout was to help stabilize our financial system, which includes in large measure our housing industry. Yet, we see financial institutions foreclosing on families rather than working to stabilize families in their homes. A stable home permits people to focus on obtaining and maintaining employment, purchasing food, and contributing to society in positive ways rather than relying on social services funded by State and Federal dollars. Furthermore, we see communities falling apart. Community members and local banks are effectively locked out of the opportunity to bid on these properties and reinvest in themselves because monies from the Department of Housing and Urban Development which would allow community banks and members to purchase foreclosed homes have not yet arrived. We all know that you are more likely to do something for your neighbor than for someone you do not know across the country. Too often, Wall Street's actions engage out of town developers and investors who purchase homes anywhere they can, not just in their hometown--without any connection to the people and the community. This situation cannot continue.

We have the opportunity to direct positive change to restore our Main Streets and communities.

Source