Lawmakers divided on recovery measure
Local congressmen, and those running for office, reacted Monday after the U.S. House of Representatives voted 228 to 205 to reject the Emergency Economic Stabilization Act of 2008. U.S. Rep. John Murtha, D-Johnstown, was critical of his fellow congressmen who voted against the act, while Bill Russell, the Republican candidate running against Murtha in the upcoming General Election, said the proposed act would not have solved the country’s financial struggles.
Likewise, U.S. Rep. Bill Shuster, R-Hollidaysburg, and his opponent, Democratic candidate Tony Barr, both said they were against the plan but acknowledged that action must be taken.
The unprecedented plan to buy distressed banks’ least desirable mortgage assets, a plan that would cost American taxpayers up to $700 billion, originally gave the treasury secretary unchecked power to orchestrate a bailout of the country’s financial system.
However, what began as a three-page proposal morphed into a complex rescue package, with enhanced congressional oversight, some added protections for taxpayers and a slap on the wrist to highly paid, underperforming executives.
Despite the changes, the goal remained the same: buy bad mortgage-related bets from weakened financial companies so they can raise fresh capital and resume normal lending operations to businesses, municipalities and consumers.
If the Economic Stabilization Act had passed, the Treasury Department would have received $250 billion immediately to start buying up banks’ and other financial institutions’ least valuable mortgages and complex financial instruments backed by those mortgages.
Additional billions would have been made available at the discretion of the president and Congress.
While Democratic negotiators made significant changes to the plan, they did not get everything they had sought, including what they claimed was more help for troubled homeowners.
House Republicans, meanwhile, fought hard to include a provision that established a program whereby banks could buy government insurance to back the principal and interest on certain troubled assets, rather than selling them outright, arguing that it was a better deal for taxpayers, and would reduce the overall cost of the rescue package.
Responding to the vote that occurred Monday, Murtha said the current financial crisis is having an impact on all Americans and that everyone will suffer because the House rejected the legislation.
“This is not a perfect bill, but failure to act will have global ramifications and freeze our credit markets here at home. This will prevent Americans from obtaining loans for new homes, new cars, higher education, start-up businesses, or meeting their payrolls. Failure to act will hurt every American,” he said.
Murtha said the Bush administration’s original request for a $700 billion blank check was unacceptable and that changes to the original proposal ensured that taxpayers would be repaid.
“…Congress made certain that taxpayers will be repaid, with Wall Street making up any cost shortfall,” he said, noting that other stipulations ensured that taxpayers ensured an ownership stake and would share in the profits of participating companies.
Regulations that would have prevented abuse and excessive pay and million dollar buyout packages for company executives would have also been banned, according to Murtha.
However, Murtha’s opponent disagreed with the congressman and said the proposed legislation would have done more harm than good.
Russell said the Economic Stabilization Act left taxpayers holding the bill and was a step toward socialism.
“Government control of economic assets is not a good things and undermines the development of business and the economy,” he said.
Russell said that government needs to completely remove itself from the private sector, and he blamed those in office for causing the financial turmoil the country currently faces.
Institutions were harmed when the government required them to make subprime loans to high-risk borrowers not ready for the responsibility, he said.
“We need to get government out of the private sector,” Russell said. “They’re trying to push through a quick fix without taking the time to step back and take a look at how we got here in the first place,” Russell said.
Russell said he believes that something needs to be worked out but said a bailout is not the answer.
“There needs to be a workout, not a bailout, and it needs to be financed by the private sector. Taxpayers should not be left holding the bag,” he said.
Both Shuster and Barr said the proposed legislation would not have solved the country’s current economic problems.
“Inaction has never been an option, but the plan proposed by treasury Secretary Paulson should have never been the only option,” Shuster said, adding that the plan brought forward for a vote Monday would have put future generations of American taxpayers on the hook for Wall Street’s failures and would have fundamentally and irreversibly changed government’s role in the country’s free enterprise system.
Shuster said the plan would have also placed $700 billion of taxpayers’ money in the hands of one man and was not guaranteed to solve the problem.
“I fear the cost of this bill’s unintended consequences. This rescue plan could very well set our nation down the slippery slope toward socialism. Once the government socializes losses, it will have an open door to socialize the profits. If we bail out risky behavior, even riskier behavior will be encouraged with the full faith and credit of our government,” he said.
Shuster said short-term assurance of stability in the stock market cannot be weighed against the long-term prosperity and freedom of future generations.
Barr, Shuster’s opponent, said he was glad the Economic Stabilization Act failed.
“We are in an economic crisis and something needs to be done. However, giving Wall Street fat cats that created this mess out of their own greed a bailout was not a real solution,” he said.
Barr said the government needs to focus on making and building “real things” and providing “real services.”
The only way to strengthen the country, and subsequently the economy, is from the bottom up, according to Barr.
“We must focus on job creation by investing in the Greene Energy Economy…We must undo NAFTA, the other free trade agreements, tax breaks for corporations that send our jobs overseas, and other practices that subvert the real economy here on Main Street,” he said.