Inhofe Says Bailout Plan Must Be Improved for American Taxpayers
October 1, 2008
WASHINGTON, D.C. - U.S. Senator Jim Inhofe (R-Okla.) issued the following statement after voting against passage of the Paulson bailout proposal. The Senate voted in favor of the Economic Stimulus Stabilization Act by a vote of 74-25.
"From time to time in our dynamic economy, which has produced the highest standard of living the world has ever seen, we confront periods of turbulence and uncertainty," Senator Inhofe said. "Credit begins to tighten and institutions that made poor decisions begin to fail. These times can be difficult and painful for all of us. As Congress considers how to respond, its duty is to figure how we can best help all Americans confront an uncertain future. This bill does not do that.
"After examining the issue very closely and spending time with constituents, local business leaders, and elected officials, I felt compelled to vote against Secretary Paulson's proposal," Senator Inhofe said. "As we work to address the financial situation in a timely way, Congressional leaders must be mindful that such a massive proposal needs to have the support of the American people. It is the American taxpayer, after all, who is being asked foot the bill for this bailout. Constituents and business leaders here in Oklahoma continue to tell me they are hesitant to pay for mistakes made by others. Those concerns are valid, and its Congress's duty to find a solution that takes them into account.
"My vote tonight was against the Paulson plan - not against taking extraordinary action to provide necessary confidence to financial markets. The Paulson plan would have Washington take $700 billion worth of toxic Wall Street assets from financial firms' balance sheets and put them on the balance sheet of the federal government. This is problematic for a number of reasons. First, I think that this strategy runs the risk of increasing corruption in Washington. If Washington acquires for itself a greater role in the financial system, consultants and lobbyists will be lining up out the door seeking to influence the political process to their advantage, and they will have the deep pockets to be successful. Second, the plan is morally dubious since it directly rewards executives' poor choices. Third, it will encourage poor choices and excessive risk taking in the future because there's the possibility of a government rescue. Fourth, this plan will only work if asset managers from Wall Street are granted tremendous discretion with taxpayer dollars."
Full Remarks By Senator Inhofe
From time to time in our dynamic economy, which has produced the highest standard of living the world has ever seen, we confront periods of turbulence and uncertainty. Credit begins to tighten and institutions that made poor decisions begin to fail. These times can be difficult and painful for all of us. As Congress considers how to respond, its duty is to figure how we can best help all Americans confront an uncertain future. This bill does not do that.
After examining the issue very closely and spending time with constituents, local business leaders, and elected officials, I felt compelled to vote against Secretary Paulson's proposal," Senator Inhofe said. "As we work to address the financial situation in a timely way, Congressional leaders must be mindful that such a massive proposal needs to have the support of the American people. It is the American taxpayer, after all, who is being asked foot the bill for this bailout. Constituents and business leaders here in Oklahoma continue to tell me they are hesitant to pay for mistakes made by others. Those concerns are valid, and it's Congress's duty to find a solution that takes them into account.
My vote tonight was against the Paulson plan - not against taking extraordinary action to provide necessary confidence to financial markets. The Paulson plan would have Washington take $700 billion worth of toxic Wall Street assets from financial firms' balance sheets and put them on the balance sheet of the federal government. This is problematic for a number of reasons. First, I think that this strategy runs the risk of increasing corruption in Washington. If Washington acquires for itself a greater role in the financial system, consultants and lobbyists will be lining up out the door seeking to influence the political process to their advantage, and they will have the deep pockets to be successful. Second, the plan is morally dubious since it directly rewards executives' poor choices. Third, it will encourage poor choices and excessive risk taking in the future because there's the possibility of a government rescue. Fourth, this plan will only work if asset managers from Wall Street are granted tremendous discretion with taxpayer dollars.
The Treasury Secretary has said that we are in an extraordinary situation and he needs extraordinary authority to deal with it. I don't disagree, but is this the right way to do it? Banks need more capital and there is role for the government to provide additional capital in such situations. But providing capital to the banking system through government purchase of toxic assets will only work is if the government overpays for them. That's a wealth transfer from taxpayers to financial firms. Even if a weak firm is successful in unloading its worst assets onto the public balance sheet, there's no guarantee that it could or should immediately go out and start making a lot of loans. The simple fact is that no one on Wall Street or in Washington really knows whether this is going to work.
The problem with these troubled financial institutions is that they have assets on their books that were acquired during the housing bubble. Very smart people on Wall Street created complex mortgage-backed securities and know more about them than anyone else in the world. The current problem is that these very same people now don't know how much these assets are worth. The plan before us would have Washington attempt to do what the experts on Wall Street can't do. I'm not confident in its success.
While Congress and the Administration have been fighting this enormous battle over the Paulson plan, few have noticed that the Federal Deposit Insurance Corporation (FDIC), in the capable hands of Sheila Blair, has managed the orderly resolution of the two biggest bank failures in American history at no expense to the taxpayer. The legislation before us does increase the cap on deposit insurance to $250,000 and give the FDIC substantial resources, and I think that's a step in the right direction. In addition, many in Congress and in the private sector have pointed to certain accounting rules which may have been exacerbating the situation of falling asset prices on banks' balance sheets. I applaud the SEC for issuing additional guidance for valuing problematic assets and am hopeful that it will provide some relief to troubled institutions.
If Treasury needs a freer hand to maintain stability in the financial sector, Congress should examine its options and give it to him. From the outset, I have raised concerns about the Paulson plan, about how the mechanics of the program would work, and about who would be making these huge financial decisions with taxpayer funds. This massive proposal, larger than the defense budget, was first bought to Congress on September 20th, 2008, and at that time we were told we would have to immediately pass it or face an immediate catastrophe. We were presented with a panic scenario and told to force this through. It is now 10 days later, with the House yet to vote on final passage, and it is clear that Congress had, and still has, the time to take a hard look at this. From the very beginning, it was the Paulson plan or no plan. However, it is Congress's duty to examine its options, deliberate, come to a decision that has the support of America, and act. I regret that we were not allowed to do that.
###
|
