David Price
A friend and reader was kind enough to share this email from Representative David Price in response to a query about his position on the "bailout" bill, which was rejected by the House of Representatives yesterday.
To my knowledge, the rejected bill did nothing to eliminate so-called 'golden parachutes" that are written into existing employment contracts for CEOs and other executives of failing and troubled financial institutions. Unlike, for instance, contracts that steel or airline companies had with their union employees to cover pensions and health care for retirees, which were torn up by bankruptcy judges, these golden parachutes are not going to be reconsidered. Similarly, the provision that the taxpayer get all of this bailout money back? Not exactly carved in stone. And i wouldn't bet my mortgage that the bill would "help deserving homeowners negotiate reasonable repayment terms and stay in their homes."
There are other alternatives to the modified Paulson plan that Democrats mostly supported, and Republicans mostly rejected. Why not write a bill that all Democrats can support, pass it in the House and Senate, and let the Republicans and George Bush stand against it? They've spent the past two weeks yelling that the sky is falling. We tried to play their game their way, and they still acted like a bunch of high school bullies.
Fuck 'em.
Isn't this exactly why we elected Democratic majorities in both houses of Congress two years ago?
UPDATE: Some good discussion of what i'm thinking here.
Update II: Direct and to the point.
Thank you for contacting me about our country's financial crisis and the proposed recovery legislation. Today the House defeated this legislation, the Emergency Economic Stabilization Act, by a vote of 205 to 228, despite my support.
Like you, I do not have any interest in "bailing out" Wall Street firms and business leaders who have speculated recklessly, endangered our country's consumers and homebuyers, and resisted regulation that would protect the public interest. My concern is for Main Street - for the people depending on a sound economy and the availability of credit to buy a house or car, to run their business and meet payroll, and to save for college and retirement.
Like it or not, we are all in this together, and the entire economy is threatened as we teeter on the edge of a 1929-style meltdown. Today Wachovia Bank, a North Carolinamainstay, collapsed. But this goes much deeper than bank failures. Last week, the City of Raleigh could not find a buyer for a $300 million bond, and Wake County cancelled its planned $472 million bond issue for school construction, Wake Tech, libraries, and open space acquisition. Both have AAA bond ratings.
Although President Bush lacks the credibility to be of much help, I take the dire warnings of economic analysts very seriously, particularly in light of everything that has happened in the last few weeks. But I could not support Secretary Paulson's request for a blank check for $700 billion to purchase mortgage-backed securities and stabilize the markets.
I thus became part of the intensive discussions over the last ten days to rewrite the Treasury plan in several critical respects. The legislation which came before us today would:
o Provide strict independent oversight and accountability for all activities undertaken by the US Treasury
o Release the $700 billion in installments, with multiple reviews along the way
o Make certain that the entire $700 billion is recaptured by the Treasury and thus by the American taxpayer, by requiring that taxpayers share in any profits resulting from the government's help and providing for assessment of the financial industry for any remaining losses
o Forbid "golden parachutes" and limit other compensation for executives of participating financial institutions.
o Require the government to work with participating institutions and loan servicers to help deserving homeowners negotiate reasonable repayment terms and stay in their homes
The defeat of the bill prolongs and perhaps deepens the crisis. Coordinating with the Senate, the House will need to return within days to try again. Perhaps the economic situation will then lead some members to reconsider. Perhaps the bill can be changed in ways that attract a majority; I certainly have a list of improvements I would like to see. But considering the members who voted "no," I will want to scrutinize carefully any changes designed to attract them.
I am committed over the next few days to continue working to avert financial collapse and get the best possible deal for America's taxpayers and homeowners. I welcome and share your concern about this situation and will be glad to hear from you at any time.
Sincerely,
DAVID PRICE
Member of Congress
To my knowledge, the rejected bill did nothing to eliminate so-called 'golden parachutes" that are written into existing employment contracts for CEOs and other executives of failing and troubled financial institutions. Unlike, for instance, contracts that steel or airline companies had with their union employees to cover pensions and health care for retirees, which were torn up by bankruptcy judges, these golden parachutes are not going to be reconsidered. Similarly, the provision that the taxpayer get all of this bailout money back? Not exactly carved in stone. And i wouldn't bet my mortgage that the bill would "help deserving homeowners negotiate reasonable repayment terms and stay in their homes."
There are other alternatives to the modified Paulson plan that Democrats mostly supported, and Republicans mostly rejected. Why not write a bill that all Democrats can support, pass it in the House and Senate, and let the Republicans and George Bush stand against it? They've spent the past two weeks yelling that the sky is falling. We tried to play their game their way, and they still acted like a bunch of high school bullies.
Fuck 'em.
Isn't this exactly why we elected Democratic majorities in both houses of Congress two years ago?
UPDATE: Some good discussion of what i'm thinking here.
Update II: Direct and to the point.
Public sentiment remains against this bailout, but the public wants something to be done to address the current crisis. We have some breathing room. Since we're now doing "Government By Dow", I should point out that the Dow is up 266 points as I write this (10:00 a.m. PT). So the markets don't think the world will end today.
So it's time to craft a progressive solution to this problem and ditch the GOP. We have the majorities. Show some leadership. Pass a bailout plan with Democratic support, and then dare Bush to veto it. If things are as dire as he claims, he won't have much of a choice.
Labels: 2008 elections, David Price, economy
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9 Comments:
I'm with Price on this one. This was a compromise bill and no one is completely satisfied with it---I for one would like to see protection against unreasonable foreclosures. But...the credit markets have collapsed and time is of the essence if we are to avoid a meltdown of our economy.
My retirement account took a beating yesterday, wiping out the wretchedly meager gains of the past 8 years. But Wall Street is not the major beneficiary of this rescue package---the credit market is. Without credit, major companies (think United Airlines, GM) WILL go out of business in days. The auto and housing industries, already in desperate straits, will flounder. Unemployment will soar.
If ever there was a time to not make "the perfect the enemy of the good," this is it.
Steve Bocckino
By
Anonymous, at 9:30 AM
Isn't this exactly why we elected Democratic majorities in both houses of Congress two years ago?
What, to increase government spending and rack up the deficit even further? Because Bush wasn't doing a good enough job on his own?
I'm starting to feel like we've seen this before, somewhere. You have the Bush administration telling you there's a dire crisis, and you have to do exactly what he says or the terrorists - er, financial bogeyman - will win.
Well, surely, he wouldn't lie to us again.
It is a bit strange, though, since the democrats are usually all for wealth redistribution downward, but here they're redistributing upward. I guess at the end of the day anything that expands the power of the federal government (and the executive in particular, since they seem to think Obama will win) is A-OK by them.
When I heard the bill was sunk, I eagerly looked up the roll call in the hopes that Price might do the right thing. Unfortunately, he did not. Fortunately, I get to vote against him in November.
Everything else be damned, I'll be a one issue voter over this. Attempting to rob the taxpayers of almost a trillion dollars to fund a failed business model is not something that can go unpunished.
By
JeremyT, at 9:35 AM
Given that we're essentially back to the drawing board anyway, why not write a bill that that makes sense and pass it with solid Democratic support?
George Bush wouldn't dare veto it, would he?
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Barry, at 9:37 AM
Dean Baker is smarter than me:
The main cause of the economy's weakness is not insolvent banks and lack of credit; it's the loss of $4 trillion to $5 trillion in housing equity as a result of the bubble's partial deflation. Families used their equity to support their consumption in the years from 2002 to 2007, as the savings rate fell to almost zero.
With much of this equity now eliminated by the collapse of the bubble, many families can no longer sustain their levels of consumption. The main reason that banks won't lend to these families is that they no longer have home equity to serve as collateral. It wouldn't matter how much money the banks had, they are not going to make mortgage loans to people who have no equity.
And house prices are not going to come back. This is like Pets.com. We are not going to get the price of $200,000 homes in central California back up to $500,000.
The main problem in recovering from the recession will be finding ways to boost demand other than household consumption. In the longer run, this will mean reducing imports and increasing exports. In the short-run, we will have to rely on government stimulus to help spur growth and reduce unemployment. The Democratic demands for stimulus were not extraneous to the legitimate goal of a bank bailout bill. Fiscal stimulus must be central to any serious effort to boost the economy.
The weakness of the banks contributes to the downturn, but they are not the core of the problem. We would still be facing a recession even if all our banks were flush with cash. Hence the hype about the urgency of the bailout was an invention. It would be good to get our banks in order, but it also would be good to send $100 billion to state and local governments to support infrastructure projects and other spending.
How do we go about getting the banks in order? Almost every economist I know rejects the Paulson approach and argues instead for directly injecting capital into the banks. The taxpayers give them the money and then we own some, or all, of the bank. (That's what Warren Buffet did with Goldman Sachs.)
This isn't about begging for a sliver of equity as a concession for a $700 billion bailout, this is about constructing a bank rescue the way that business people would do it. We have an interest in a well-operating financial system. There is zero public interest in giving away taxpayer dollars to the Wall Street banks and their executives.
If Secretary Paulson constructed a package that was centered around buying direct equity stakes in the banks, he could quickly garner large majority support in both houses. Better yet, Congress could just construct its own package centered on buying equity stakes and send it to President Bush. If he balks, we can just threaten him with stories about the Great Depression.
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Barry, at 9:50 AM
I think Dean Baker is delusional if he thinks the House Republicans would rally around his plan just because he substitutes banks for Wall St. I think it is vital that whatever plan is adopted has some bipartisan support and is explained to the voters in a way the previous plan was not. I definitely do not think we Dems should go it alone.
Otherwise, his plan seems reasonable, putting equity more directly where it is needed, but it still doesn't help keep people in their houses if they miss a few payments.
Steve Bocckino
By
Anonymous, at 11:15 AM
Price is trying to hand the Congressional race to Lawson here. Where is this $700B+ coming from? All it will do is de-value the dollar. Why should government bailout certain institutions and not others? The government caused this mess by artificially manipulating interest rates and now we are all suffering. This is not the free market's fault, this is a command economy. David Price would not know what a free market was if it smacked him in the face. Businesses fail when they operate poorly, we should let them fail. Let's take our medicine and learn from this mess. The major lessons are proper risk management on the part of businesses and that government interference in the economy causes all woes. The credit bubble has just began to burst.
By
Pedro Applebucks, at 10:47 PM
I doubt that that the 4th CD election will be "close," and by close i mean less than a 25 point margin for David Price. The broad brush CW in Washington is that reps in contested races voted against the bailout, reps in safe seats voted for it.
Now that the first plan went down in the House, there's time to come back with a bill that responds much better to the real problems, rather than, to use an overworked cliche, merely puts lipstick on the pig of the Paulson plan. ("Nice economy you got here. Be a shame if anything bad were to happen to it, know what i mean? $700 billion ought to take care of your worries.")
Polls suggest that most Americans understand that government has a role to play in cleaning up Wall Street's mess. We also get it that just throwing money their way isn't the answer. If Reid, Pelosi, and the rest of the leadership would actually, you know, lead, they could get a bill to pass with overwhelming Democratic support and force the Republicans who wanted to be in on it to join up. Such a plan would not only restore some degree of confidence in the market, but also have lasting political effects.
Alas, Reid and Pelosi are, as far as i can tell, too chickenshit for such an effort. They're still thinking it's 1994 or something.
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Barry, at 9:59 AM
The issue of support for the bailout is quite questionable. It depends upon who is polling... questions and statistics can be manipulated easily. As for David Price, I think he has a closer race than the "pundits" think. Think about it, B.J. Lawson beat the Orange County G.O.P. leader, granted it is in a blue district... Lawson won with 71% of the vote, that's very significant and his message is not the same message as your typical Republican, so I would not write him off as a blowout. As far as the need for the bailout, it is not just throwing money at a solution (so you are right in that respect), but rather the government will likely screw it up. Our government lacks any sort of accountability whatsoever because it is a monopoly that can exercise force. Congressional power has become a formality, we learned that because we are fighting in Iraq. By the way, where is this money going to come from again? Also, did you know that Fed pumped in $600B into the money supply to make sure a bailout would happen? Just a thought... It's fun debating with liberals.
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Pedro Applebucks, at 4:53 PM
The fact is, we're screwed if this bailout doesn't pass. The fact is, though, that we're screwed about a hundred or thousand times worse if it does. That's why I am unalterably against it, in any way shape or form. I own a small amount of stocks, and I've seen them drop over the past couple of weeks. They will probably drop a lot if the bill is defeated. But I'm pulling for the bailout going down in flames. Why? Because what is being proposed is nothing less than a financial dictatorship, complete with crony capitalism, privatizing profits while socializing risk, and the accelerated destruction of the dollar, just to name a few. David Price voted for the bailout -- and as such, he will never, ever, have my vote again.
By
Anonymous, at 8:11 PM
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