Statements on Introduced Bills and Joint Resolutions
Floor Speech
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - June 11, 2009)
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By Mr. THUNE (for himself, Mr. COBURN, Mr. INHOFE, Mr. VITTER, Mr. JOHANNS, Mr. CORNYN, Mr. KYL, Mr. MCCONNELL, Mr. BARRASSO, and Mr. ENSIGN):
S. 1242. A bill to prohibit the Federal Government from holding ownership interests, and for other purposes; to the Committee on Banking, Housing, and Urban Affairs.
Mr. THUNE. Mr. President, over the past 15 months, the Federal Government has taken unprecedented actions to stabilize the U.S. economy. Unfortunately, these actions include the Federal Government acquiring direct ownership stakes in private companies, which exposes the American taxpayer to significant liabilities and creates a dangerous conflict of interest between the Federal Government and the private sector.
Thanks to the fact that the government has intervened in all these private companies, we now have about 500 banks, we have auto manufacturers, financial institutions, and insurance companies that the government now has an ownership interest in. President Obama has become a de facto CEO managing large segments of our economy, and Congress is now acting as a 535-Member board of directors.
I think it is fair to say when you combine business with politics, it inevitably leads to harmful conflicts of interest--which we are already beginning to see--because political decisions get substituted for business decisions.
As everyone in this Chamber knows all too well, government control of private business hampers investments. It hampers innovation, job creation. It diminishes the entrepreneurial spirit on which our economy is based.
Having the Federal Government call the shots for private industry is plain bad for business. It is bad for the economy, and it is bad for the American taxpayer.
So today I am introducing a piece of legislation, S. 1242, which gives the Federal Government an exit plan, a way of exiting the scene from the ownership that the Federal Government now has in all these various private companies in our economy. It essentially has four basic provisions.
The first provision is that upon enactment of the legislation, the Treasury Department may not purchase any additional ownership stake of private entities, such as warrants, preferred stock, or common stock purchased through the TARP program.
The second provision is this: The legislation would require the Treasury to sell any ownership stake of a private entity by July 1, 2010. Any revenue that comes in from the sale of those TARP assets would have to be used for debt reduction.
The third provision of the bill is that if the Treasury Secretary determines the assets are undervalued and there is a reasonable expectation that the assets will increase to their original purchase value, the Secretary may hold the assets for up to 1 additional year.
Finally, the fourth provision of the bill is that beyond July 1 of 2011, the Treasury Secretary may not hold any direct ownership of private companies unless Congress grants additional authority.
Essentially, what we are doing is saying that all this ownership interest the Federal Government now has acquired in all these private companies would have to be wound down, if you will, divested, by that July 1 deadline in the year 2010. If the Treasury Department determines that, in fact, doing so would impair the ability of the Treasury to recover the full value of those assets or if those assets are expected to appreciate, there is an additional year, up to a year of flexibility--essentially a waiver--from the July 1, 2010, deadline that would extend it to July 1, 2011. So it buys an additional year. But it does put a time certain out there, a deadline, if you will, by which the Federal Government has to dispose of and divest itself of all these ownership interests it has in our private economy.
The other issue I think is important is it prevents the Federal Government from acquiring an ownership stake going into the future. As I said before, any funds that are returned to the Treasury as a result of these assets being sold would have to be used for debt reduction. They cannot be recycled; they cannot be reused; they cannot go into some fund that is going to be used for additional acquisition of private sector assets.
I think the reason why this is important is if you look at what Secretary Geithner has said, he has indicated before that their intention is that when
some of these funds come back into the Treasury--and we saw this recently with banks that agreed to pay this money back--they are going to reuse it. I don't believe that is what was intended in the first place. I don't think this was at any point designed to become a slush fund that could be used for the acquisition of other assets; it was designed to be used--at least initially, the way it was presented--for the purchase of toxic assets, illiquid assets on the balance sheets of many of our financial institutions. It quickly evolved into something else. It became a fund that was used to acquire an equity stake, equity interest in many of these companies. So I don't think that was the purpose for which it was intended.
I think a lot of people who made votes assumed at the time it wouldn't be used to buy toxic assets. It ended up being used to buy an ownership interest in these companies, and I think, again, the American people are uncomfortable with the notion of the Federal Government owning a big share of our private economy. I also do not think it was intended in the first place to be used to buy the assets of other types of industries--essentially, to do industrial policy, as some people have referred to it--to acquire assets of auto manufacturers, for example; it was designed specifically for the financial services industry.
There is no real exit strategy out there. In fact, Secretary Geithner was asked in front of the Senate Banking Committee a couple weeks ago about whether there was a plan to dispose of some of these assets, and he said there isn't a plan; it is not necessary at this point.
Well, I think we need to have an exit strategy. Everybody talks about an exit strategy. The President needs an exit strategy in Iraq. It seems to me we need to have an exit strategy that would allow the American taxpayer to recover funds they have been investing through the TARP program in all these various companies that would get the Federal Government out of the way of these companies and out of the day-to-day decisionmaking and management of these companies. My bill would prohibit that as well, in addition to some of these other provisions I mentioned.
It would prohibit or bar the Federal Government from dictating to these companies with respect to hiring decisions when it comes to senior executives, when it comes to boards of directors, when it comes to where to relocate or locate or close certain plants. Those are decisions that should not be made by politicians in Washington. They should not be made by bureaucrats in Washington, DC. They ought to be business decisions and not political decisions.
The bill, as I said, is very straightforward.
There are a number of folks who have commented on, made observations about what is happening in the economy right now, and this sort of proliferation of companies in which the Federal Government now has an ownership share. I wish to read for my colleagues some of what has been said by folks who I think know a lot about the private economy and whether it is a good idea to have the Federal Government owning and controlling as much as they do currently of some of these companies. If you look at the various percentages, they are significant. Of course, we know most recently General Motors, a $50 billion investment there gets the taxpayer ownership interest to about 60 percent; Chrysler, about 12 percent; Citibank, about 36 percent, and you can go down the list of all these various private companies in which the government now has an ownership interest.
There was an editorial in the Kansas City Star that said that:
What's worrisome is that while the administration said it isn't interested in running car companies, it has said little on an exit strategy.
It went on to say:
Any government bailout of private industry should be temporary and as brief as possible.
Anne Mulcahy, chief executive of Xerox--I am sure I just butchered the name--said recently:
I think all of us understand the need for the government to intervene and to take the actions they did, but I also think there's a need for an exit plan.
Jim Owens, who is the chief executive at Caterpillar, said:
I think that's fundamentally unhealthy. The Federal Government needs to be in and out.
Google's Eric Schmidt noted that the U.S. stimulus package was designed to cover a 2-year period. He said:
It's very important that government get out of business and let business do its thing. The most important thing to remember, I think, is that jobs, wealth, are created in the private sector. That's about capitalism.
In a Wall Street Journal opinion piece, Paul Ingrassia argues:
..... must have a clear exit timetable for the government to sell its shares for both Chrysler and GM and get the companies back in the hands of private investors. Mr. Obama has an exit strategy for Iraq; he needs one for Detroit, too.
So there are a lot of people who have a lot of experience when it comes to running companies who have concluded that the government does, in fact, need an exit strategy. I think, as I said before, it is fair to say that one doesn't exist today, and when Secretary Geithner testified in front of the Senate Banking Committee a couple weeks back he admitted as much, that there isn't an exit plan.
What my bill does is it gives us an exit plan. It gives us an exit plan with a deadline, with a little flexibility in the deadline, some ability to provide a waiver for the Treasury Department that would allow for an additional year, if necessary; if those assets the government holds are considered to be assets that could appreciate over time and, therefore, yield a higher return for the Federal Government but, at some point, we have to say enough is enough. We have to put an end to this practice we have gotten involved with, this precedent we have now created of having the Federal Government own more and more of our private economy.
I would argue, again, that is not good for business, it is not good for the economy, it is not good for job creation; it stifles the entrepreneurial spirit which has built this country and made it great, and I don't think it does anything to create jobs and get our economy back on track.
I hope we will have an opportunity to debate this. It seems to me at least that in the days ahead there will be various bills that will be debated on the floor of the Senate that would give us a chance to debate this issue. I intend to offer this, if I can't get some interest in moving it as a freestanding bill, as an amendment to other vehicles that might be moving through the Senate in the days and the weeks and the months ahead. But I do think it is important. I think it is important to the American taxpayer. I think it is important to the American economy. I think it is important to American business that the Federal Government have an exit strategy. We have a plan whereby we can move and get away from this practice we have undertaken now with great regularity and great frequency of acquiring even more and more interests in American business.
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