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
Jail?
I’ll be amazed if they spend 15 minutes in a “timeout”...
For me, I know something needs to be done. But I am also glad for the House GOP speaking up. Technically, this is supposed to be the House's job (speaking up, being racorous...) more so than the Senate, to make sure the people are properly represented and in this case, protected.
When ever you have government talking about almost $1 TRILLION dollars of taxpayer money on the table to bail out corrupt, inept or whatever, Wall Streeters, at the speed this was happening, SOMEONE needs to stand up and say whoa slow down there for a second.
Wall Street – Not Taxpayers – Should Fund the Recovery
//////////////
x ACT Lee
McCain can win the election this week if he strangles this bailout and saves US 700 billion dollars. Get Palin out there too for Gods Sake.
Kill the Bailout and Shoot it in the head.
The Dow was in much worse shape during the 2000-02, when it went down 36 percent. Today its 24 percent down from its high.
It is another Y2K scare again.
The wallstreet thieves want US to bail them and their politician out of....JAIL. Spend $700 billion, 5 percent of our gross domestic product? no never.
Take your money before the banks do!
Therefore, even though they have the votes to pass this with no GOP votes whatsoever, they will not do so.
When this starts causing massive problems the dems can say, Oh it was a joint effort and the Republicans are to blame.
Either a mortgage is delinquent, or it isn’t. If it isn’t delinquent, then the gov’t can buy them at face value, irrespective of their market value (e.g. a mortgage charging say 5.60 interest would likely be priced below 100c to a dollar, as investors are demanding a higher return).
***********
I am not sure where you are coming from with this. I heard on CNBC this morning that only 25% of the subprime mortgages are delinquent (or maybe in foreclosure, the difference doesn’t matter for purposes of this discussion). The market is clearly valuing securities backed by subprime at a nearly 100% default rate.
Are you saying that the government should pay face value for these? As much as I think government intervention is needed, there is no way I think they should be paying face value for these!
What is your recommended solution to this crisis?
“Either a mortgage is delinquent, or it isn’t.”
I wish it were that simple. It is not. These mortgages are bundled and sold and resold and backed by CDSs. It is a good idea to learn more about the problem before coming up with a solution!!
Paulson, a Democrat, was one of Bush’s dumber appointments from day one.
I agree completely. Watching this week’s events (including the Congress hearings), I am encouraged that the democratic process is working. It is not pretty but it is working. I just wish that the MSM would be more impartial in their reporting.
I also wish there was an intelligence test necessary to vote but I know that this is impossible ;-)
The dems know this will be a disaster for the American people.
**************
I am not sure if they think it will be a disaster or whether they are seeing the dollar signs coming out of this to fund big government. In any case, I think they are trying to have it both ways. To me it was similar to what they did with the war vote. They voted for it but blamed it on Bush when it went wrong.
I am pleased to see the House Republicans pushing back. I would have liked to see them engaged more in getting a plan that works (since I think something needs to be done). Perhaps they had little input since they are in the minority so making it clear that the Dems are knee deep in this is a nice consolation prize.
There are some good ideas in the Republican House plan, but of course they’ll never get the Dems to go along with most of this. They might get some concessions, but the eventual plan is going to be a disaster.
In addition to costing whatever it ends up costing, the eventual bailout (excuse me, “rescue plan”) will leave us with a multitude of new regulations along with new bureaucracies to enforce this regulation (er.. “oversite”), and will add even more moral hazard and otherwise perpetuate the banking cartel that brought us this mess.
Sometimes, the smartest thing to do, is nothing. This is one of those times.
” We call, call, call our Congressmen.
When I call mine today- I am telling them NO ACORN, NO LA RAZA, NO LABOR UNION earmarks. And.no mark to markup for value.”
YES!
Tell ‘em what you think they need to know BUMP!
Tatt
Well, if we had had more warning (we actually did, but some people [democrats] didn't want to hear it), where regulatory oversight could of been brought to bear, perhaps this "crisis" could have been avoided, or at least lessened.
But this 11th hour - oh look crisis - situation does require something. If money flow ceases, then dominoes are going to fall all over the place, and people playing by the rules and keeping their noses (and books) clean are gonna be swept up in the meltdown, and the country will be screwed.
So at this particular time, doing absolutely nothing, is insane.
And no, I don't like it either. I would rather see market correction on it's own, but with the hour being 11 and meltdown is at 12, there's just not enough time for those forces to work.
Now as they say: The devil is in the details.
The GOP plan is the only sensible one. Insure the mortgages, but not the derivatives associated with them.
There is more than securitization there are also the swaps. These are more like insurance products. Cash flow is not the main valuation. Risk of default needs to be taken into consideration. DCF is a terrible way to value variable or risk instruments. There is no “rational” D with these things.
Next time don’t be so churlish.
SE Mom,
I just got a reply from one of my wunnerful Senators... Thought I would share my response, with an excerpt.
“Senator Isakson,
Thank you for your reply, and your explanation. I do have some understanding of what the problem is, and more importantly, how we got here. The major issue here is, once again, mistrust. Even in response to this constituent, who has access to the ugly reality of Sec. Paulsen’s package, you work to try and calm the sheep. “The term bailout has been used a lot in this debate. Not a dollar of the $700 billion will go to the brokers who created the securities. Instead, they will go to the investors who bought them, and then only after they take a significant discount or loss.” Oh please, I do not know everything, but I do know that far too much of that 700 billion dollar price tag, was designated to go to people and organizations that the average American taxpayer would NEVER have condoned!
The Wall Street fiasco, and your defense of it, provides yet another reason to make the case for TERM LIMITS. Too many of our statesmen, have become politicians, who seek only to serve themselves.
The American taxpayer will no longer work to ensure a steady income for the federal government, and the criminals who line up at it’s trough.
NO earmarks for ACORN, La Raza,the American Urban League, or anyone else. The Free Money for everyone stops now. No mark ups. If you have to sweeten the deal, it must not be so bad after all. And any profit, comes back to US, the American taxpayer, NOT given in turn to ante up in yet another backroom deal.
Ever a vigilant American,
Tatt
“Sometimes, the smartest thing to do, is nothing. This is one of those times.”
Holy Cow, are you serious? Just because you do not understand this or know what to do does not mean we do not have a serious problem that needs to be fixed.
HOOAH! WOW! Excellent letter:)
Thanks for posting it!
Beams proudly. Thank you!
Like you, this American is not going down without a fight, and is quite willing to take a few down with me ; }
Tatt
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