TARP Recipient Ownership Trust Act

Floor Speech

TARP RECIPIENT OWNERSHIP TRUST ACT -- (Senate - June 22, 2009)

Mr. WARNER. Mr. President, I rise today to discuss bipartisan legislation that I am cosponsoring with my colleague Senator Corker concerning the Federal Government's recently acquired ownership stake in a number of private companies.

I think we all know the taxpayers have been on a roller coaster ride for the past 9 months, and from their perspective, each twist and turn has left us more deeply invested in troubled markets and oftentimes troubled companies. Americans are concerned about getting their money back and want to keep politics out of how we manage these investments we have had to make over the last few months.

Last week, Senator Corker and I introduced S. 1280, the TARP Recipient Ownership Trust Act. What will this bill do? Three very simple things. First, it will remove politics from our management of taxpayer investments in private companies. Second, it will ensure these investments are managed in order to maximize taxpayer returns. Third, it will allow us to plan for removing the government from the private sector by setting a date certain for selling these investments.

To achieve these goals, Senator Corker and I are proposing that if the government owns more than 20 percent of a private company we place that ownership stake in an independent trust. This trust would be run with a fiduciary duty for taxpayers by three independent directors appointed by the President. These directors would agree to perform this work for free as a service to the country and in doing so would give the American taxpayers what they deserve: the upside of the massive investments they have provided over the past 9 months. The trust wouldn't be an open-ended ownership in these companies; the trust would have to sell all of these assets by the end of 2011, though they could ask for a brief extension if it were, again, in the interest of the taxpayers' return. In this way, taxpayers can know we won't own stock in these companies for the next 20 years. In practice, this means that taxpayer ownership of AIG, Citigroup, and General Motors would be managed in order to maximize the return on these taxpayer investments.

We have all seen how political and contentious the TARP program is becoming. I know back when we voted on this matter earlier this year how controversial it was. I still think it was unfortunate that we got into this circumstance but fortunately the right thing to do. While there are a lot of challenges about how we got into this program, if we did look around--actually, Steven Pearlstein of the Washington Post pointed out in an article recently that if 9 months ago, if 6 months ago, or even 3 months ago, back in the middle of March when the stock market was at its all-time low in terms of reacting to this crisis, any economist would have said by the end of June, would you be willing to look at a circumstance where the market was up 25, 30 percent--although it was a little bit down today--if many of the banks we had invested TARP funds in were actually trying to repay those TARP funds, and if we had seen the housing market, at least in many communities, start to stabilize, would we view that as a good outcome. Well, that is basically where we are. While we have enormous problems, we are seeing some progress. But one needs only to look at the number of TARP-related amendments that have been filed in the Senate in these past months. As a matter of fact, the leader was speaking today about the number of TARP amendments that could potentially be on the travel bill that we will have before us to know that this has become a lightning rod.

Some of the reasons for this concern are truly relevant and they are because the American people don't know when and how the TARP program is supposed to end. The American people, unfortunately, who invested in individual companies--some of the companies that now we have invested in--don't know how much we as the public will get back, or whether we, as the public investment, will politically interfere with the management of these companies. That is, again, why we need to implement this legislation Senator Corker and I have laid out that will put these ownership shares in this independent fiduciary trust.

I don't support cutting off TARP right now or limiting the tools it currently provides the administration, including the limited reuse of money that is repaid to the government. TARP already has a sunset date after which more funds cannot be spent, and since markets are not back to normal, even though there is improvement, we shouldn't prevent the use of the tools we currently have. But we do need to set parameters for managing our investments and winding them down in order to take the politics out of this program.

American taxpayers deserve to have their investments managed in order to maximize their returns. That is what the trust will do, and I hope we will consider using this model for other investments as well.

This trust will also help us take some of the politics out of the TARP program, and that is why I am proud of this legislation as bipartisan and led by my friend from Tennessee, Senator Corker. I hope my colleagues will join in supporting this bipartisan legislation, S. 1280, the TARP Recipient Ownership Trust Act. While this measure won't resolve all of our concerns surrounding TARP, I hope it can serve as a model to maximize the taxpayer returns on their investment.

Let me also take one additional moment to speak about another investment-related matter. Under the leadership of Senator Jack Reed from Rhode Island, when the initial investments and the initial TARP plan were put together, Senator Reed, I think appropriately, said if we invest in banks in addition to getting a traditional return, we, the public, who are taking [
these risks ought to see some upside potential for taking the risks in terms of warrants. Luckily, the Congress went along with that and we did receive warrants from a number of the banks we invested in. I personally am very happy to see that a number of these banks are starting to repay the investments the public made. However, there remains the question: What are we going to do with the warrants? Senator Reed and I have asked Secretary Geithner a number of times, and we hope he would also consider placing these warrants into some type of independent trust as well so that, again, we, the taxpayers, can receive the upside of these investments.

We took the risks with these banks during these troubled times. I am happy to see these banks return these funds. However, for the banks to buy back or sell back these warrants at what I believe today is still a discounted price would not allow us, the taxpayers, to maximize our investments. So, again, I hope Secretary Geithner responds to the requests that Senator Reed and I have made in making sure that these warrants are appropriately put into the same type of independent fiduciary trusts that I am proposing for the private investments we have made under TARP.

I yield the floor.

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