Rep. Lois Capps on Monday voted for the Emergency Economic Stabilization Act of 2008 (House Resolution 3997). This legislation, which failed on a 205-228 vote, was designed to address the financial crisis now paralyzing Wall Street and credit markets, and seriously threatening the health of the economy.
“I am disappointed in the failure of Republican support for what is largely the president’s bill to deal with the crisis in the financial markets,” Capps said. “While the leaders of both parties made numerous improvements to the president’s proposal to protect taxpayers, no one really wanted to vote for this bill. But Secretary [Henry] Paulson, Fed Chairman [Ben] Bernanke and a range of economists all have raised red flags about the situation we are in and the need for Congress to act quickly and decisively. I hope that we can come back and reach an agreement on legislation to stabilize our economy.”
The congresswoman released the following statement regarding the legislation:
“Madame speaker, I rise in very reluctant support of this bipartisan effort to address our nation’s economic crisis.
“I do so because the very core of our American economy is at risk and we must act now in order to prevent its collapse. This is the diagnosis presented to us by Treasury Secretary Paulson, Federal Reserve Chairman Bernanke and countless economists. In my own survey of the finance and banking world, I have heard the same analysis of our current predicament and the need for Congress to act quickly.
“What we face here is an economic meltdown brought on by a housing bubble, fueled in part by the subprime mortgage scandals, and made possible by the lack of regulatory oversight by the Bush administration. Wall Street now sits on billions of dollars of mortgages it cannot price and it cannot sell. The response to this uncertainty has been a near freeze of credit markets, increasing unemployment and a slowing of our economy. Already, car, home, student and business loans are drying up across the economy and should this continue — or get worse — the markets would likely drop precipitously and the economy would come to a standstill or worse.
“Obviously, my concern is not with the effect on large financial institutions. They got themselves into this mess and if we could just turn our head while they failed that would be fine with me. My concern is how this economic calamity would affect ordinary Americans. And here the prediction is truly dire.
“If the secretary is correct, lending would come to a near halt. That means it would be much, much more difficult — and expensive — to obtain loans to buy a car, a home or to run a business. Small, medium and large businesses alike would begin layoffs because the ability to obtain a loan is such a critical part of running a business today, much less growing a business. We have already seen over job losses of over 600,000 people in the U.S. this year. The unemployment rate in California has increased to 7.7 percent, the highest in over 12 years and up from 5.5 percent only 12 months ago.
“Foreclosures would continue unabated. So far this year, over a half-million foreclosures have been filed in California, and the state is on pace to see more than 841,000 foreclosure filings this year. Eight of the 10 metropolitan areas with the highest foreclosure rates in the nation are in California. As bad as those foreclosures are for the people losing their homes, they also contribute to the downward pressure on home values for other properties in the neighborhood, hurting homeowners who are totally innocent in all this.
“In addition, more innocent and hardworking Americans could see their life savings sapped, as IRAs and 401(k)s lose value in a plummeting stock market. And increased unemployment also means lower tax revenues and greater calls for government assistance, resulting in even more exploding federal deficits.
“In short, we could be facing a huge recession if we’re lucky, a depression if we aren’t. This is what our economic leaders tell us is the future we face if we don’t act now.
“I share my constituents’ disgust with this situation. The idea that hardworking taxpayers have to put their money at risk to stabilize the economy because of the bad choices, nefarious actions and utter incompetence of Wall Street, its regulators and the Bush administration is nauseating. But, if Secretary Paulson and the others are correct, the alternative is much worse and a serious threat to every single American.
“Madame speaker, the proposal originally offered by President Bush to address this crisis was completely unacceptable. True to form, the president simply asked the Congress to provide him with a blank check, no questions asked.
“The administration wanted no oversight — by Congress, the courts or anyone — of how it would spend the money it asked for. It rejected calls to limit CEO pay in companies that would be bailed out by taxpayers. It refused to help the growing number of Americans facing foreclosure and the millions of Americans whose housing values affected by those foreclosures. And it failed to ensure taxpayers would benefit as much as the Wall Street firms getting this federal assistance.
“The legislation before us today is very much the president’s product. But Democrats have made critical improvements. Most importantly, the bill contains mechanisms to ensure taxpayers get their money back by requiring taxpayer ownership stakes in companies that benefit from this rescue plan, so if the companies return to profitability then taxpayers prosper as well. And it sets up insurance collections measures and a potential new tax on the financial services industry after five years if repayment of taxpayer rescue funds hasn’t occurred.
“We limit the compensation of top corporate executives whose companies benefit from taxpayer assistance, put a halt to “golden parachutes,” and require repayment of bonuses based on company profits that may vanish at a later date. We establish an oversight board and a special inspector general to oversee Secretary Paulson’s actions, and require the details of his actions to be posted on the Internet.
“The bill also should help small business and families that need credit by aiding smaller banks hurt by the mortgage crisis, expanding eligibility for mortgage refinancing help and encouraging loan servicers to make problem loans more affordable. While these steps are helpful to homeowners potentially facing foreclosure, they are critical to innocent families whose home values are plummeting from record foreclosure rates and abandoned, foreclosed properties in their neighborhoods.
“Finally, while the immediate need is to stabilize the markets and get our economy back on track, we begin the process of reestablishing common sense regulation protecting consumers and encouraging stability in our markets. Much of this current mess arises from the governing choices of President Bush and his party, especially their undying faith in deregulation and a systematic policy to dismantle vital consumer protections. That has to be reversed. On President Bush’s watch we have seen widening income inequality, anemic job creation, skyrocketing energy prices, record federal budget deficits and now a potential historic financial meltdown. This record of failure is clear and we have to turn a page on it.
“Madame speaker, this is not an easy vote to cast, but it is necessary for the future stability of our economy and the lives of everyday Americans.”
Randolph Harrison is chief of staff for Rep. Lois Capps.