Emergency Economic Stabilization Act of 2008

Date: Oct. 3, 2008
Location: Washington, DC

EMERGENCY ECONOMIC STABILIZATION ACT OF 2008 -- (House of Representatives - October 03, 2008)


Mr. HOLT. Madam Speaker, I rise today in reluctant support of H.R. 1424, the Emergency Economic Stabilization Act.

My constituents are angry and I am too that we let our economy get to this point. The speculation and greed of Wall Street in recent years--coupled with years of failures, excesses, arrogance, and irresponsibility of the regulatory agents, Treasury and other Cabinet Departments, the White House and even some in Congress--has resulted in the meltdown of our Nation's financial and credit markets.

Many have passionately called for rejection of this compromise bill sent to us by the Senate following the rejection of the House bill earlier this week. There is a temptation for me to vote ``no.'' We could teach a lesson to Wall Street highflyers. We could teach a lesson to Secretary Paulson, President Bush, and the regulatory agencies. We could teach a lesson to the mortgage companies who entice borrowers to get over their heads. We could teach the Senators a lesson not to attach extraneous things to a financial bill. We could let the credit markets freeze up. We could let small businesses fail to meet next week's payroll. We could let college students drop out because they can't pay tuition. We could leave farmers, homeowners, and factories out in the cold. Would that teach the right lesson to the right people? I don't think so.

Market turmoil is affecting more than the 78,000 New Jerseyans who work on Wall Street and the 266,200 New Jerseyans who work in the financial services sector throughout the State. There are thousands of my constituents who are not traders or high powered executives but still work in impacted industries. If left unchecked the credit crisis will hurt all of New Jersey, painfully affecting New Jerseyans from factory to financial district from farm to pharma. Furthermore, millions of Americans who have retired or are nearing retirement have seen their value of their pensions shrink. If day-to-day credit tightens up, Americans will not be able to get loans for college, cars, or a new furnace for the corner store. We need to act to ensure that retirement funds and pension plans are not devastated by investments that have lost value in a jittery market. Indeed we must act--we must stand behind our institutions, restore confidence in our markets, and protect millions of Americans who would be affected by a continuing collapse. That said, this bill is only one way to do that, and not the best way. I have worked with my colleagues to improve this bill, and I believe these improvements are sufficient to make the bill worth approving.

There is much that should have been done and must still be done fix the problems in federal financial oversight agencies. The Treasury Department should have exercised its authority to oversee the mortgage markets. The Federal Deposit Insurance Corporation, FDIC, should have raised the insurance limit on deposits, which has not been raised for 28 years, and created a net worth certificate program similar to the one that helped shore up banks in the 1980s. The Securities and Exchange Commission, SEC, should have

prohibited short selling especially, naked short selling. It should have changed the mark-to-market rule that forces banks' assets to be valued not at their long term worth but at what they would be sold--if only they could be sold--for on market today. Alan Greenspan, the Chair of the Federal Reserve, should have followed the instructions of Congress in 1994 to regulate the mortgage market. Greenspan failed to act to institute oversight for years and years and when succeeding Chairman Bernanke finally recognized the need to act it was years too late. Had the Treasury Department, FDIC, the Federal Reserve, and SEC acted we would not be in this mess today. The Democratic Congress has tried to set this right several times. However, we failed to convince the administration to do what was right. Recently I have joined my colleagues in introducing legislation requiring the Treasury Department, FDIC, and SEC to take these actions and it is my hope that they will use their existing authority to undertake these common sense measures. Indeed some of those recommendations are included in this final version of the bill that is before us today.

After careful and thoughtful review, I support the bill before us today because this legislation will help to mitigate this financial crisis, restore confidence in our financial institutions, and bring much needed liquidity to our marketplace. This bill is not, as so many of my colleagues have said on the floor today, a bailout that will save the fat cats on Wall Street. Had we accepted Secretary Paulson's original proposal that is exactly what it would have been. If the President had his way, he would have ridden a wave of fear and railroaded Congress into passing Secretary Paulson's original 3-page proposal asking for $700 billion--with no oversight--to bail out the financial services agencies. I did not support the original plan. The bill before us is a significant improvement to the original Bush-Paulson plan. While I believe that every Member of this body has what they think are better ideas how to fix the problem, no one has 218 votes for his or her plan. This is the plan we have. Legislative compromise is rarely pretty to watch.

This legislation includes protections to ensure that the taxpayers' money is not wasted. Only half of the authorized $700 billion would initially be available to the Treasury Department. A strict oversight board would be created to monitor how these funds are being used and the effect it has on the economy, and to advise the Secretary of the Treasury Department on how these funds are used. Congress and the President would have to approve the release of the next $350 billion if it is needed. This legislation would require the Treasury Department to implement a plan to mitigate foreclosures and to encourage lenders to modify loans and mortgages to prevent foreclosures and keep people in their homes. The bill also helps save small businesses that need credit by allowing small community banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks. It will shore up banks by increasing FDIC insurance to $250,000 and prevent runs on banks. Finally, we can expect that taxpayers will recoup most of the money spent on this proposal through the equity they will hold in companies helped by this proposal. The total cost will be much, much less than $700 billion.

This legislation also extends a needed tax relief which, unless extended, would expire at the end of the year. It will provide a one year patch that will prevent 88,000 New Jerseyans from getting hit by the Alternative Minimum Tax, AMT, this year. It will retain and create half a million jobs and strengthen our economy by extending the renewable energy tax credits. It will extend essential tax cuts for American families helping 4.5 million Americans afford college by extending the tuition deduction, and extending the child tax credit. It will extend for 1 year my initiative that allows a property tax deduction for taxpayers who do not itemize on their tax returns of $500 for single filers and $1,000 deduction for joint filers. The legislation helps American small businesses by extending the R&D tax credit and the new markets tax credit. It will also require mental health parity in employer-based insurance and end discrimination against patients seeking treatment for mental illness, an initiative that I have been working on since I was elected to Congress. These extraneous tax provisions should not have been added by the Senate. Nonetheless, most of the tax cuts in this bill have been passed by the House several times and are not ``pork.'' In fact they are the same tax benefits that are currently in effect and that this body has passed several times.

I do not deny that there are provisions in this bill that do not belong. In fact, the provisions decreasing the excise tax on Puerto Rican rum as well as the decrease in the excise tax on wooden arrows are egregious. There should not be a tax deduction for movie and television producers. Nor should this legislation encourage the production of dirty fuels like coal to liquids and oil shale. I cannot justify these provisions, but I will not vote against teachers being able to get a tax deduction for buying supplies for their students, against the solar tax credit which has helped New Jersey become one of the nation's leaders in solar energy production, or against incentives for businesses and individuals to donate items to schools.

We can expect that H.R. 1424 will help American families by loosening the credit market. However, if we do not address the origins of this problem we will be forced to come back again to address the symptoms. The root of this problem is that bad mortgages, when mixed with the good mortgages, have poisoned the financial papers. We need to help Americans saddled with these bad mortgages. It is estimated that a million currently solvent mortgages will turn toxic by next year and further destabilize our financial institutions. It is our responsibility to prevent this from happening. Doing so would benefit the homeowners, the neighborhoods, the towns, and the investors in the financial district.

I suggest that we consider a model that has been proven to help the homeowner, the Home Owners' Loan Corporation, HOLC. The Home Owners' Loan Corporation of the 1930's through the 1950's helped people with their mortgages. It was a Federal program that shored up a collapsing market and rescued a million homeowners. Incidentally, when it finally went out of business, it showed a net plus for the taxpayer. I will be introducing legislation which would create such a program. Indeed, that legislation should have been used instead of the Paulson-Bush approach.

I believe that Congress should come back into session after the November elections to pass such a bill and to take up an economic stimulus package that will help those suffering on Main Street. It is deeply concerning to me and infuriating to our constituents that as we have focused on the crisis on Wall Street we have not paid comparable attention to American families that have been struggling for months. The unemployment rate has been steadily increasing, reaching 6.1 percent this month, the highest level since 1992. This year, 605,000 Americans have lost their jobs. Employed Americans are continuing to struggle with increasing energy and food costs and decreasing wages. Many are at risk of losing their pensions due to bad decisions made by Wall Street. We must deal with the bad mortgages. People want to punish those who behaved recklessly. There may be actual legal action. That may provide some satisfaction, but without today's bill it would not address the crisis of confidence, it would not help the people who are about to be hurt financially. We must deal with the long term problems: problems of bond traders wheeling and dealing in paper with no thought of the homes, factories and people behind these bonds; problems of some employers who show no allegiance to their workers; problems of families who in good times consume more than they save; problems of regulatory agencies that revel in the unrestrained trading. We should not wait for a new administration to help Americans who are suffering from this economic downturn and I urge my colleagues to reconvene Congress after the elections to address our Nation's pressing economic concerns.