Our Current Economic Crisis

Statement

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Ms. KAPTUR. I thank the Speaker very much for that, and wish to say that I recently entered into the Congressional Record an account of some of the key legislative history and executive actions that have led our Nation into our current economic crisis, a meltdown of people's accumulated savings, a loss of value in their homes and pensions, a 26-year high in unemployment, and major damage to our financial institutions and their ability to lend.

One of the individuals I talked about was the woman who headed the Commodity Futures Trading Commission back in 1998, in the late 1990s, and her name was Brooksley Born. She was an esteemed attorney, and she knew the field of regulation well. She said we had to regulate derivatives and, if we didn't, we would get in trouble. She was prescient and she was right.

Three of the men that ultimately caused her resignation were pictured on the front of Time Magazine about a year later: Alan Greenspan who then headed the Federal Reserve, Robert Rubin who chaired Citigroup, and Larry Summers who was then Secretary of Treasury.

You know, it is good to remember history so you are not doomed to repeat it. The unemployment figures just announced nationally and for my home State of Ohio reveal the grim situation: The State unemployment rate is marching toward double digits, the city of Toledo is facing a massive deficit that grows with each passing day, and around our district families, businesses, and local governments are struggling to make ends meet.

Let me offer a seven-step restoration program to put our economy back on track.

First of all, we ought to bring the ``too big to fail'' institutions back under control for the sake of the American people. They should never have been allowed to get so big that the failure of a Citigroup that this man used to head or an AIG insurance company, which is much more than an insurance company, or Lehman Brothers could threaten the entire global financial system. These raging beasts have got to be brought back under control; and, last week Federal Reserve Chairman Bernanke said, ``The `too big to fail' issue has emerged as an enormous problem both for policymakers and financial institutions generally.'' He is right. Job number one should be bringing the big institutions back under control and, in my opinion, breaking them up.

Number two, we should restore the goal of financial security; that is, people should have more equity and less debt, and it needs to be restored at all levels, from our kitchen tables to the government of the United States. Read chapters 8 and 9 of Kevin Phillips' book, American Theocracy. Treat yourself to a real understanding of how we have gotten ourselves into the situation we face today. Form a book club. Think about it.

Number three, we need to restore our national ethic that values savings over debt both in our households and in our government. Our government should set a national standard for prudent and responsible financial behavior for our citizenry and institutions. The fact that JP Morgan could take a dollar of home equity and leverage it 100 times beyond the value of the underlying asset goes well beyond the realm of reason.

Number four, we need to restore the word ``banking,'' ``prudent banking'' to our vocabulary, and excise the word ``financial services.'' And we ought to start right here in the House of Representatives by renaming the committee of jurisdiction what it used to be called, the Banking Committee. This means deposits and prudent lending must be unwound, separated, and regulated differently from the securitization process for a major portion of economic activity.

Number five, we ought to incentivize the accumulation of equity by ordinary citizens, and I was pleased to see that President Obama's budget includes savings proposals. And, we ought to restore an ethic of service to bank customers by those working in banks, not using them to empty out the limited savings of the American people.

Number seven, we ought to restore the balance of power between Wall Street and the megabanks on the one end of the scale with community-based banks and credit unions at the other end of the scale. We ought to ask Chairman Bernanke for more on that score.

And, finally, we ought to investigate, investigate, investigate. In an article last week titled, ``Then It's Securities Fraud,'' journalist Froma Harrop wrote that law professor William Black of the University of Missouri Kansas City, who is also renowned for his work in ethics, has mounted a campaign for a new Pecora-type investigation here in the Congress. That was a series of hearings held by the Senate Banking Committee into financial wrongdoing at the end of the Great Depression.

Harrop writes, ``As the bottom was falling out of derivatives trading, AIG was reporting healthy profits. That's not allowed under the law. Meanwhile, the company created a short-term bonus system for its top executives.''

Professor Black's call for a Pecora Commission should not go unheeded by this Congress. The issue of securities fraud is not a small matter.

The first order of business is to get the financial system righted so the ship doesn't sink. We owe that to the American people who are trying to hold on to their own dreams.

Then the Congress must launch an investigation like no other into the causes of this crisis. And frankly, it is a conundrum to this Member why that set of investigations has not already begun. We need to learn every detail about what happened and why and bring the wrongdoers to justice so that this never, ever happens again.

Next week, I'm going to offer greater detail about what America needs to do from this point forward. But certainly one of the actions that should be taken today is that the Federal Deposit Insurance Corporation and the Securities and Exchange Commission should immediately employ reforms in mark-to-market accounting so that we can actually help our banks begin to lend again, because we can never possibly replace the capital being destroyed every day by mark to market with the infusions from the taxpayers of the United States.

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