Posted on 09/26/2008 8:35:05 AM PDT by SE Mom
Just delivered:
September 26, 2008
The Honorable Nancy Pelosi
Speaker of the House
H-232, U.S. Capitol
Washington, D.C. 20515
Madame Speaker:
As our discussion ended last night, we agreed to continue talking about how to best solve this economic crisis. Like you, House Republicans and I believe we must address this crisis quickly and in a way that protects the interests of families, seniors, small businesses, and all taxpayers. As you know, this process is not about faceless executives on Wall Street, but about keeping families in their homes, safeguarding their retirement security, college savings, and bank accounts, and protecting their jobs.
Over the last week, we have frequently discussed Secretary Paulson’s proposal, and I have repeatedly expressed the need for improvements on behalf of myself and my Republican colleagues. Our staffs have also been in regular contact. To that end, Financial Services Committee Ranking Member Spencer Bachus (R-AL) was tasked by House Republicans to engage in discussions with Chairman Barney Frank (D-MA) and Chairman Chris Dodd (D-CT) and report back to our Conference on the progress of those negotiations before a final deal could be made. Yet Chairman Frank and Chairman Dodd, on several occasions over the last several days, announced that a bipartisan deal was at hand even though the reservations about the underlying proposal I had expressed to you had not been addressed. Each time such announcements were made, or even rumored, I or my staff made it clear to media and to your staff that any such deal did not include House Republicans.
As we demonstrated at the beginning of this year when we crafted a timely agreement on the economic stimulus package, a bipartisan response to our nation’s priorities is never out of reach. And I believe the same holds true at this hour. House Republicans are prepared to stay in Washington to forge an agreement on a proposal that reflects the core free-market, pro-taxpayer principles of our Party.
With that in mind, earlier this week, with your knowledge, I directed our Chief Deputy Whip Eric Cantor (R-VA) to lead a working group of House Republicans to develop a package of ideas to move this process forward. His working group represented a broad cross-section of House Republicans – including both moderate and conservative members – and their goal was to develop ideas worthy of support on both sides of the aisle. We have discussed some of these ideas, and I would like to reiterate that I believe they should be given the consideration they deserve as our economic rescue discussions continue. A brief overview of the working group’s blueprint is included with this letter.
Madam Speaker, we owe it to all those with a stake in this process to continue our discussions until we arrive at an agreement that is acceptable on both sides of the aisle – and more importantly, one that serves the interests of American taxpayers. That is why I ask you and your Democratic colleagues to give the House Republican working group’s proposals serious consideration as this process moves forward. If such consideration is not given, a large majority of Republicans cannot – and will not – support Sec. Paulson’s plan. In the interest of the men and women we represent in Congress, I hope it does not come to that conclusion. I look forward to your timely response and to continuing our work together on an economic rescue package worthy of all of our support.
Sincerely,
John Boehner
Republican Leader
HOUSE REPUBLICAN WORKING GROUP – ECONOMIC RESCUE PRINCIPLES
I. Wall Street – Not Taxpayers – Should Fund the Recovery
The most troubling part of Sec. Paulson’s plan is that it relies wholly on taxpayer funds. House Republicans believe that rather than providing taxpayer funded purchases of frozen mortgage assets to solve this problem, any rescue package should adopt a plan to insure mortgage backed securities (MBS) through payment of insurance premiums.
Currently, the federal government insures approximately half of all MBS and can insure the rest of those still outstanding. However, rather than taxpayers funding the insurance, the holders of these assets should pay for it. The working group’s proposal would direct the Treasury Department to design a system to charge premiums to the holders of MBS to fully finance this insurance.
II. Private Capital – Not Tax Dollars – Should Be Injected Into Financial Markets
Instead of injecting taxpayer funds into the market to produce liquidity, private capital can be drawn into the market by removing burdensome regulatory and tax barriers that are currently blocking private capital formation. In short, too much private capital is sitting on the sidelines during this crisis, and it is well past time to unleash it.
Temporary tax relief provisions can help companies free up capital to maintain operations, create jobs, and lend to one another. In addition, the working group recommends a temporary suspension of dividend payments by financial institutions and other regulatory measures to address the problems surrounding private capital liquidity.
III. Immediate Transparency, Oversight, and Market Reform
Both Republicans and Democrats have made clear that they believe there is not a strong enough oversight component in Sec. Paulson’s plan. The House Republican working group’s proposal addresses this flaw. To begin, the plan would require participating firms to disclose to the Treasury Department the value of their mortgage assets on their books, the value of any private bids within the last year for such assets, and their last audit report. Additional safeguards include:
To limit federal exposure for high risk loans, the working group’s recommendations mandate that Government Sponsored Entities no longer securitize any unsound mortgages.
The plan would call on the Securities Exchange Commission (SEC) to audit reports of failed companies to ensure that the financial standing of these troubled companies was accurately portrayed.
The blueprint would guarantee that Wall Street executives do not benefit from taxpayer funding.
The proposal would call on the SEC to review the performance of the credit rating agencies and their ability to accurately reflect the risks of these failed investment securities.
The working group recommends that Congress create a blue ribbon panel with representatives of Treasury, SEC, and the Federal Reserve Board to make recommendations to Congress for reforms of the financial sector by January 1, 2009.
09/26 11:15 AM
“My only fear is that the grassroots Rublications (read most Freepers) will continue to resist this”
From the populist rhetoric I’m not sure most people are educated enough to understand it. People that think the government spent $85B on AIG are a good example of the latter.
Frustrating.
The theory is that if you make the mortgages whole (current) then the really bad stuff, the CDSs, are not so bad.
The free market is the best determinant of fair price. List them on eBay.
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Free market theory doesn’t work in a distressed environment. Consider you own a house in a development of 100 houses each valued at $100,000. 20 of your neighbors need to sell at distressed prices of say $50,000. Is your house now worth $100,000 or $50,000? Now let’s say that those 20 forced sales cause another 40 to sell at $30,000. What is your home worth now? This is a panic situation. IMO, if you are not forced to sell, the value of your home will return to a more reasonable price (maybe not $100,000 but surely more than $50,000). The market needs to be calmed before prices can return to a more appropriate market value.
Well done John McCain. Well done Leader Boehner and House GOP!!
Well done John McCain. Well done Leader Boehner and House GOP!!
Why would grassroots Republican and most FReepers, in your words, resist this plan? Especially when looking at the charity bailout alternative? Your post does not make sense to me.
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Believe me, I would love to be wrong about this. But looking at the responses on this thread and others I just see so much resistance to any sort of plan. These resisters think we are blowing smoke about the severity of this crisis to both Main Street and Wall Street.
“The market needs to be calmed before prices can return to a more appropriate market value.”
I’m not sure what your definition of propriety is. The most anyone is willing to pay for something at any given time could be considered the fair market value. It might make sense to make sure that amount doesn’t swing too radically over time. It’s not self-evident to me that a massive infusion of thousands of dollars from every man, woman, child and infant in America passes a cost/benefit test. It certainly bears some careful scrutiny by people acting in our interest.
“The market needs to be calmed before prices can return to a more appropriate market value.”
I’m not sure what your definition of propriety is. The most anyone is willing to pay for something at any given time could be considered the fair market value. It might make sense to make sure that amount doesn’t swing too radically over time. It’s not self-evident to me that a massive infusion of thousands of dollars from every man, woman, child and infant in America passes a cost/benefit test. It certainly bears some careful scrutiny by people acting in our interest.
I am so confused on what’s going on. Where does this 700 billion go?
The best analogy is a line of credit. The government is borrowing money to set up a LOC to buy at a very low price then re-sell the securities and derivatives that are not jammed up in the banks, brokers and hedgefunds. The banks, brokers and hedgefunds have them on the books as assets they can lend against but no body knows for sure what they are worth so the lending gets slowed down - dramatically. What the government is proposing is to use the $700B LOC to buy these when nobody else can or will and therefor get them cheap and sell them back in a more orderly market.
Learn about 401Ks. It is tax law not an investment vehicle. You actually cannot invest in or put money in a 401K. That is a nonsensical statement. A 401k is a legal construct that allows some of you money to go into investments that are not taxed until later.
I am so confused on what’s going on. Where does this 700 billion go?
The best analogy is a line of credit. The government is borrowing money to set up a LOC to buy at a very low price then re-sell the securities and derivatives that are not jammed up in the banks, brokers and hedgefunds. The banks, brokers and hedgefunds have them on the books as assets they can lend against but no body knows for sure what they are worth so the lending gets slowed down - dramatically. What the government is proposing is to use the $700B LOC to buy these when nobody else can or will and therefor get them cheap and sell them back in a more orderly market.
Learn about 401Ks. It is tax law not an investment vehicle. You actually cannot invest in a 401K. That is a nonsensical statement. A 401k is a legal construct that allows some of you money to go into investments that are not taxed until later.
“Why not just let these people be able to re-finance their homes or adjust the payments to what it used to be so we can keep the 700 billion?”
Many, many of these people would never qualify for a mortgage,UNDER ANY REASONABLE ASSESSMENT OF RISK, let alone for a re-fi. But reasonable assessments were tossed out the window by lenders who repackaged the loans & sold them. Fannie & Freddie “bought” billions of these mortgages. So F & F got “stuck” with a gazillion bad loans. Everyone who invested in F&F lost money. Which includes some global payers. And most likely, includes the companies/firms that manage & invest your 401K.
The 700 billion is a guesstimate as to what would have to be poured back into the market to “correct” the losses
suffered b/c of BAD INVESTMENT STRATEGY. So the question is: should the American taxpayer foot the bill for these players?
Don’t forget: by default, your a player, too. Even though you might not have known it.
Okay, now I think I understand. You feel many on the right are resistant to any type of bailout at all, whether principally a government or private bailout. Yes?
Okay, now I think I understand. You feel many on the right are resistant to any type of bailout at all, whether principally a government or private bailout. Yes?
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Yes. I am reading a lot of posts that just say “stick it to those fat cats. We want to see them suffer.” While I believe bad behavior should not be awarded, this type of class envy will drag us all down.
It is interesting but not surprising that this is not getting out in the media. Reagan always went directly to the American people and that is what he should do during these debates.
The Palin pick got me to support McCain but going against the Dems and this $700B tax payer Wall Street bailout will get me to “fight for him.”
The dems have a majority, they could pass this by themselves, they want political cover, because it’s unpopular, and they want to shift blame if it does not work.
I know Bush hired him to get Wall Street cred ... but seriously, how much cred does a guy have if he’s the former CEO of one of the first companies to go under in all of this.
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FYI, Paulson was CEO of Goldman - one of the last firms standing. Nevertheless, I do have my doubts about Paulson, it does seem that he is serving Obama’s interest more than Bush’s. I am not sure if it makes sense to let him go during a market crisis like this. Do you know anyone that would want to jump into this mess??
Some people had better be going to jail over this bullsh*t...
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