FROM: Congressman John Sarbanes (D, 3rd, MD)
I have heard from many of you regarding the $700 billion financial stabilization plan proposed by Treasury Secretary Paulson and President Bush. Let me give you my thoughts.
Simply put, Secretary Paulson and President Bush have brought us a proposal designed by Wall Street for Wall Street. Given that it was this Administration’s lax regulation and oversight that enabled the financial services industry to make bad loans, package them into risky securities, and sell them up the line so that they now infect our domestic and global markets, we should scrutinize what they have sent to us very carefully.
These are challenging economic times; credit is tightening and the crisis of confidence is certainly spreading. The conditions under which Congress is being forced to act are difficult. In reviewing the legislation that is being drafted in response to the Administration’s proposals, we should be guided by certain principles.
First we must give confidence to the market. But any plan adopted by the Congress must also give confidence to the American taxpayers that their dollars are not being used recklessly. The execution of the rescue package must be completely transparent to the American People.
The amounts sought by the Administration are staggering. There should be a way to phase this program in contingent upon its proper execution. In addition, we should be providing resources to Wall Street only at such levels as are needed to stabilize the markets. If extra amounts are to be committed as stimulus, they should be targeted to those who need them most on Main Street.
There must also be limitations on the compensation of executives at companies looking to the government to take on their unwise investments. To ask the American taxpayer to rescue any company that continues to reward its top executives with millions of dollars in compensation or severance would be unconscionable.
In addition, any rescue plan should restructure underlying loans to prevent additional foreclosures. If the terms of a bad loan are adjusted to ensure repayment, families stay in their homes, the lender continues to receive payment, and the taxpayer avoids underwriting a default. If the restructuring comes too late to avoid bankruptcy, courts should be allowed to adjust the terms of a mortgage during those proceedings.
If taxpayers are being shouldered with the bill, they should receive an equity stake in participating companies so the taxpayer can also benefit if such companies become profitable in the future.
Please keep your emails coming. I value your input.
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