A Skeptical view of the Wall Street Bailout

Monday, October 6, 2008

Text From the Congressional Record

Mr. SHERMAN. Thank you. I thank the gentlelady from Ohio.

The only way they can pass this bill is by creating and by sustaining a panic atmosphere. That atmosphere is not justified. Many of us were told in private conversations, if we voted against this bill, that, on Monday, the sky would fall and that the market would drop 2,000 or 3,000 points the first day and another 2,000 the second day. A few Members were even told that there would be martial law in America if we voted “no.” That’s what I call fear mongering–unjustified, proven wrong.

We’ve got a week; we’ve got 2 weeks to write a good bill. The only way to pass a bad bill: Keep the panic pressure on.

Now, what has the Senate done to this bill? First, they’ve added pork to it in the hope that that would buy off some votes. Second, they’ve created a double hostage situation. Now, we already know that the first bill was a hostage situation. When Paulson announced this crisis, he basically sent a ransom note, and that ransom note read, “We’ve got your 401(k), and you’ll never see it alive again unless you send us $700 billion in unmarked bills.” So we had one hostage situation.

There’s the AMT patch, a necessary tax provision that Congress passes every year. Without this patch, the AMT tax, which is designed to fall only on the wealthy, will hit another 20 million American households. Everyone knows we have to pass this. We sent it to the Senate for them to pass. Instead of passing it, they created a hostage situation. They refused to pass it. They put it on this bill. So now we’re being told, if you don’t send $700 billion to Wall Street, we’re going

to tax 20 million American families in a way no one in Congress wants to do. That’s totally phony. If we vote down this bill, the Senate will pass the AMT patch bill that we sent them just like they do every year.

There has been some attempt to tell the American people that this bill isn’t going to cost anything permanently because, in 2013, we’re going to get the money back from the financial services industry. Nothing could be further from the truth. All the bill says is that the President has to send us a proposal to tax the financial services industry. Now, keep in mind, if the President has any good ideas in 2013, he’ll send them to us or she’ll send them to us. If the President is only sending us
revenue ideas because they have to send them and they don’t want to send that proposal, well then, they’re going to send it with a note, saying, “I’m required to give you this proposal, but I think it’s a bad idea.” What do you think we’re going to do with a Presidential proposal that is disparaged by the President?

Furthermore, it would be absolutely impossible and contrary to the intent of the bill, contrary to the logic of the bill and contrary to the statutory provisions of the bill to construct a tax that hit only those companies that got bailed out. Instead, the tax is going to hit the entire financial services industry, and a proposal like that is highly unlikely to pass the House. If it passed the House and if it got over to the Senate, 41 Senators could block it, and Wall Street could have enough
money to hire 4,100 lobbyists.

Now, why is it that we can’t tax the individual companies that are bailed out on some sort of proportional basis?

Well, first, many of those firms aren’t going to exist in 2013. Second, we’re not even keeping track of how much money we lost on the assets we’re buying from Goldman Sachs versus how much money we’re losing on the assets we’re buying from Citibank. We’ll know how much we bought from each of them, but we might buy really toxic assets from one and only mildly troublesome assets from the other. We’ll mix them together. Then we’ll sell them off and we’ll suffer a loss, and we won’t know how to attribute
that loss. How much are we going to tax Goldman Sachs? How much are we going to tax Citibank? We’ll never know how to tax those we’ll have bailed out.

Some of these companies we’re bailing out are just going to be shell companies, so you know they’re going to disappear before 2013, and you know that a tax bill is going to hit similarly sized banks with the same rate of tax: the banks that got a big bailout, the banks that got a small bailout, the banks that didn’t get a bailout, the banks that sold us kind of bad assets, the banks that sold us assets that turned out to be worthless.

Such a controversial tax bill submitted under duress by a President is not going to pass this House, let alone pass the Senate, which can stop it with 41 votes. Wall Street gets their money now, and we get it back: never.

Now, as I said, hundreds of billions of dollars are going to be used to bail out foreign investors. That is why my amendment, which easily fixes that problem, has been rejected, because the White House demands that we bail out these foreign investors. That’s what they want to do. That’s what they promised the Saudi royal family. That’s what they promised the Bank of China. Those promises will be honored with the tax money squeezed out of the American people.

They talk about executive compensation being controlled in this bill. They do put some controls on some bonuses being given to some departing executives–great–but they allow $1-million-a-month salaries. If some executive says, “well, you know, you wanted to pay me a good bonus on top of my $1-million-a-month salary and now the bonus formula is being changed a little bit,” the company can say, “You know, [Page: H10693]
you’re right. We wanted to give you more
money. We’ll raise your $1-million-a-month salary to $2 million a month.”

Now, if that qualifies as limits on the executive compensation of companies that need and get a bailout under this bill, please explain to me how that is. Look, Bill Gates is running a great company. He doesn’t need a bailout. I hope he gets paid a whole lot. But if your company has been run into the ground, if you need a bailout, if you’re part of the reason for this panic situation, why do you need to pay over $1 million a year to any executive? That ought to be the limit. Frankly, it strikes
me as a generous limit.

We’re told that there’s going to be oversight under this bill. There is a good, Democratic-dominated board that is created. It is a critique board, not a control board. It is a board that will issue press releases and reports, but it will not halt and it will not reverse and it will not delay any decision that will be made by the Secretary of the Treasury, which brings up another thing:

Why are we having Paulson run this thing? I thought he already had a job. The Secretary of the Treasury ought to be a full-time job if we’re in a period of an unparalleled, sky-is-falling economic crisis. Furthermore, he is temporary. He is leaving Washington in January. Why doesn’t this bill provide for an administrator selected in a bipartisan way and with bipartisan support who is willing to stick around for 2 or 3 years? Because this is a Paulson-Bush power grab. Paulson doesn’t want somebody
else to do it. He wants to be up on Wall Street, handing out the money to the companies he likes and ignoring the phone calls from the firms he doesn’t like.

I want to point out that, if another Member comes to the floor in the next couple of minutes, he can claim the next hour. Otherwise, for better or for worse, this speech and all of the pontificating on this floor will be over soon. So I hope Members will come to the floor. We’ve got a lot to discuss.

The board is just a critique board. Paulson’s power is undiminished, and we’re having a part-time, temporary employee run this because that’s what Paulson really wants. Homeowners are not going to get any relief under this bill. All $700 billion can easily be spent.

I see the gentlelady from Ohio (Ms. Sutton), and I hope that she claims the next hour of time. I thank her for coming here and for being here so quickly. I will use the remaining 3 minutes of my time, and I will look forward to being part of her Special Order, right up until the Vice Presidential debate starts.
We are told in 2009 we are going to pass really good legislation to make sure that this never happens again–corporate governance reform, regulatory reform, we are going to get it done. What is really going to happen? We may write a really good bill in the House, something Wall Street really hates. Then it goes over to the Senate where 41 Senators out of 100 is all it takes to block it. I don’t think they will defeat reform legislation in the Senate. They will delay it and then they will dilute
it. And by the time it passes, it will be so diluted, Wall Street will drink it down with a smile on its face knowing that no effective reform is really being imposed upon them.

So we are not going to see meaningful regulatory reform; although we will pass something and Wall Street will tell you it is a big deal. We will see million-dollar-a-month salaries, or one-and-a-half million or $2 million a month salaries paid to the executives of these firms while they are getting a bailout with our taxpayer money.

We are going to see a very large percentage of this money going to buy securities, bad paper, and toxic assets currently in safes in Shanghai, Beijing, London and Riyadh, Saudi Arabia.

We will see all of the power in the hands of the Bush administration and in the hands of a part-time temporary administrator, namely the Secretary of the Treasury.

Under this bill, if it passes, we don’t really know what is going to happen to the economy. No one knows. The only thing that is certain, two things: Wall Street executives are going to get huge amounts of money and our children and grandchildren are going to get stuck with hundreds of billions of dollars of additional Federal debt. And we as a country, having just done a bad $700 billion program, will not be able to do anything to help homeowners because we won’t have the money. We won’t be
able to bail out local governments because we won’t have the money. We won’t be able to deal effectively with the real banking-lending crisis because we will have shot our entire wad on a bill that is guaranteed only to do one thing, and that is to help the truly wealthy on Wall Street.

My time has expired, and I look forward to the Speaker giving unanimous consent to the gentlelady from Ohio controlling the next hour.



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