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FOR IMMEDIATE RELEASE:22-Sep-2008

CONTACT: Press Office 202-228-1122

Mikulski: America Needs Prompt and Targeted Action on Financial Crisis

WASHINGTON, D.C. – Senator Barbara A. Mikulski (D-Md.) took to the Senate floor today to urge Congress to take prompt but deliberate action to help resolve the financial crisis. The Senator voiced her strong opposition to allowing the Bush Administration to stampede a proposal through without careful vetting and consideration to ensure that middle class America is not punished for Wall Street's errors.

 

"We must act with resolve, but we cannot be a rubber stamp for the Administration's proposal. This gives sweeping authority to those who were asleep at the switch in the first place," said Senator Mikulski. "This is a three-page bill that gives the Secretary of the Treasury unlimited power to intervene in our financial markets, without any review by Congress, agencies or courts. This makes Secretary Paulson a financial czar – it says, give us a blank check with no balances. Well, I say, no checks without balances."

 

Senator Mikulski's floor speech, as delivered, is below:

 

"I want to speak about this bailout that we've been asked to do. Starting last week, we were told by the powers that be in the Bush Administration that we needed to do a $700 billion bailout to stabilize our economy. When we heard that, Americans became scared. People who saved for their retirement, those who've been faithful in paying their mortgage, those who've worked hard to pay for college were wondering, 'What is going on?' People who've worked hard and played by the rules are wondering if they are being asked to bail out those who didn't.

 

"Americans are mad as hell and they want to know, what about them? They've watched Wall Street executives pay themselves lavish salaries. They've watched them do irresponsible lending practices. They've watched them do casino economics, gambling on risky investment mechanisms and now those very same Americans who've worked hard and played by the rules and were prudent investors, prudent savers, prudent citizens are asked to pay the bill for those who didn't.

 

"Now, it is for these people that I know that government must do something. We must protect our economy, we must protect our way of life and we must protect our middle class. Sure, the economy is in a crisis and yes, we do have a credit crisis. Wall Street did make very bad decisions, but now they're asking Main Street to pay the bill. We must act to restore our confidence in our economy.

 

"I agree we must act promptly, but this Senator will not be stampeded into voting for this Bush Administration bill. So far, during the last seven years, every time there's a crisis, they generate fear and they generate bad ideas. Do you remember after the horrific days of 9/11 when we all came to the floor and pledged our patriotism, and I said we needed to put politics aside because we needed to be the red, white, and blue party? Well, they took advantage of that, and in that process we passed something like the Patriot Act, allowing the government to act with undue secrecy, with no parameters. We created the dysfunctional Department of Homeland Security. Now, we're being asked to deal with the fiscal crisis, the financial crisis, and I am concerned that we're going to create a fiscal FEMA [Federal Emergency Management Agency].

 

"We must act with resolve, but we cannot be a rubber stamp for the Administration's proposal. This proposal gives sweeping authority to those who were asleep at the switch in the first place. Remember the Fed? Remember the maestro at the Fed who lowered interest rates? And now we have helped create the housing bubble? Then there's the treasury. There's the Secretary of the Treasury. A couple of months ago he said 'no problem.' Then a couple months later they said, 'Oh, there is a problem,' and we lumped from one bailout to another. Bear Stearns, the insurance company, and now to Lehman and that failed. We've gone from no problem, to lumping around, to now $700 billion and a blank check. We've seen those George Bush plans before.

 

"Now, we have a three-page bill, and it gives the Secretary of the Treasury unlimited power to intervene in our financial markets, without any review by Congress, agencies or courts. This makes the Secretary of the Treasury a financial czar, a financial potentate, because it's a blank check with no balances. Well, I say, no checks without balances. Even the President of the United States of America has to come to Congress if he wants to declare war. I believe the Secretary of the Treasury should be accountable to the Congress if he's going to intervene with $700 billion in his pocket. No blank check. There must be regulation. There must be safeguards. If they don't want safeguards, no way.

 

"We are in uncharted waters, so we need to ask tough questions. First of all, how do we know it'll work? What guarantees are there that it will work? Could it bankrupt our treasury because it has no parameters? Could it cause runaway inflation, further eroding our economy? What are the safeguards? Also, who's going to benefit? Is it going to be the same Wall Street go-go guys, the same Wall Street casino types? Whatever we do, we have to insist that those who created the scandal do not benefit from the bailout. No golden parachutes. Let them feel the hard landing that my constituents faced when they were laid off from Bethlehem Steel. Let them feel the hard landing of knowing what it's like to have your home foreclosed upon. Let them feel the hard landing that my constituents are facing right now. We do not need to subsidize bad behavior.

 

"Now, George Bush said he was the first M.B.A. President. Well, hello? I don't have confidence in this administration. Remember? This was the same crowd that brought us Katrina, FEMA and hey 'you are doing a great job Brownie.' Is this what we're now supposed to say to those managing our finances? I don't think so. We also have to prudently ask ourselves, 'Are there better options?'

 

"So let me be clear, I do believe that we need to act promptly but with safeguards. We need to act with resolve, but we need to have regulation and even retribution. If we have stabilization, which I believe we must do, we must also have reform.

 

"We're all looking at the Administration's plan, but I want everyone to know where I stand.

 

"At the minimum, the plan must, first of all, be limited and it must be temporary. It cannot be open-ended. There also must be a plan for those who have had those hard landings on Main Street. We need to put people first, to keep people in their homes, those who have had some of the most significant mortgage payment challenges. No golden parachutes that reward executives, for their excesses, their recklessness and their sheer stupidity and greed. No blank checks. There must be accountability and oversight. Rescue does require reform, regulation and a strong possibility of retribution. And it must be transparent.

 

"Sure, I'm for prompt action, but I'll say it again, I will not be stampeded the way I've been stampeded in this institution by this Administration in the past. We need to make sure we do it right, and that means not handing over a blank check or getting rid of the balances. We have to ask tough questions and be sure we have the right principles. If not, then the taxpayers will be on the hook.

 

"If we make the wrong decisions, taxpayers will be on the hook – not only for Wall Street's bad decisions, but also the government's bad decisions. We need to get government back on the side of the people who need it – public good over private profits. This means we need to take a look at a 21st century regulatory system. I am tired of creating or seeing this laxity where what emerges when we deregulate is the emergence of sharks and whales. Either way, the minnows get swallowed up. Well, I think we don't want our economy to sink, and I think it is time to swim. But when we do, we need to make sure we're asking the right questions.

 

"We need to fight for the middle class. We need to fight for the people who go by the rules. We need to have a legislative framework that regards those who did their very best and might be having a temporary spill. So I look forward to hearing more about this plan, but right now I need to know more, I need to be reassured more, and I need to be absolutely sure that those that created the crisis don't benefit from the crisis, and that we don't leave the middle class with all of the responsibility."

 

 

 

Edited by Doug White
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Guest American for Progress

The Bush administration's initial plan to bail out Wall Street's ailing financial markets was just three pages long. It called for Treasury Secretary Henry Paulson to be given unprecedented and unilateral authority to buy up $700 billion in souring mortgage assets from the very financial institutions that "engineered the current crisis." Section 8 of the proposed legislation ensured that none of Paulson's actions could be challenged by any court or federal agency. The section read: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

 

September 21, 2008

Text of Draft Proposal for Bailout Plan

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

 

TO PURCHASE MORTGAGE-RELATED ASSETS

 

Section 1. Short Title.

 

This Act may be cited as ____________________.

 

Sec. 2. Purchases of Mortgage-Related Assets.

 

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

 

(B) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

 

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

 

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

 

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

 

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

 

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

 

Sec. 3. Considerations.

 

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

 

(1) providing stability or preventing disruption to the financial markets or banking system; and

 

(2) protecting the taxpayer.

 

Sec. 4. Reports to Congress.

 

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

 

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

 

(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

 

(B) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

 

© Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

 

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

 

Sec. 6. Maximum Amount of Authorized Purchases.

 

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

 

Sec. 7. Funding.

 

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

 

Sec. 8. Review.

 

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

 

Sec. 9. Termination of Authority.

 

The authorities under this Act, with the exception of authorities granted in sections 2(B)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

 

Sec. 10. Increase in Statutory Limit on the Public Debt.

 

Subsection (B) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

 

Sec. 11. Credit Reform.

 

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

 

Sec. 12. Definitions.

 

For purposes of this section, the following definitions shall apply:

 

(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

 

(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.

 

(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

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