Since Treasury Secretary Paulson and Federal Reserve Chairman Bernanke testified before Congress on the depth of the financial crisis facing our economy, in the midst of our recovery from Hurricane Ike, I have heard from thousands of District Seven constituents expressing their shock and outrage over the government’s failure to prevent this crisis and their failure to respond with a sensible solution that instills confidence in the markets and protects taxpayers from long-term liabilities. Since I have represented you in Congress, I have consistently voted against loosening lending standards and supported reforms to prevent the systemic failures of Fannie Mae and Freddie Mac (link to votes below).
To be clear, I understand that Congress must do something to restore liquidity and ease credit, but yesterday’s bill was focused more on protecting Wall Street institutions than protecting taxpayers. Handing over unlimited power to the Treasury Secretary to purchase toxic assets with our tax dollars under a new system that will take weeks or months to set up and raising the debt limit to more than $11 trillion (or 78% of GDP) is not the solution; instead we should focus on preventing a run on banks by raising the FDIC limit to $250,000 for deposit insurance in checking and money market accounts.
As former Federal Reserve Governor and National Economic Council Director Larry Lindsey said, “Nearly 40% of the assets in the banking system are not protected by FDIC insurance because they are in accounts that exceed the $100,000 insurance limit. Most of these are not ‘investments’ in the usual sense of the word. They are often the transaction accounts of businesses that have to meet payrolls and pay vendors. If you have to make a biweekly payroll for 50 people, it is sheer folly to expect the paychecks to be drawn on accounts in three or four separate banks. Sometimes individuals who would normally keep a balance well under $100,000 might be over the limit to make a down payment on a house, purchase a car, or pay quarterly taxes.”
Suspending the “mark to market” accounting rules approved under Sarbanes-Oxley would improve corporate balance sheets overnight and inject much-needed capital back into the markets, and it can be done with a stroke of the pen by SEC Chairman Cox. Eliminating or suspending capital gains taxes, slashing corporate income taxes, and cutting taxes on offshore profits repatriated back into the U.S. would also provide short-term cash infusion and encourage investment.
I am committed to working with my colleagues in Congress to resolve this crisis as quickly as possible, but I cannot ignore my obligation to taxpayers just to say that Congress did something. We have an opportunity to come back in session on Thursday and consider a new bill, hopefully much-improved over Monday’s version, and send a strong message that we care enough to solve this crisis the right way.
Member of Congress
Me: I plead ignorance on “mark-to-market” policy, though I haven’t heard much good about it. The rest of this makes sense to me.
Don’t you love how Congress gets these odd holidays that normal citizens don’t have? Return to session on Thursday? Rosh Hashona for two days? I didn’t see that as a federal holiday. Anyway it is good to see that they can take a two day break from this complete financial meltdown/Armageddon to celebrate Rosh Hashona. Ramadan is right around the corner…