[Congressional Record Volume 153, Number 166 (Tuesday, October 30, 2007)]
[House]
[Pages H12210-H12211]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1730
           TREASURY SECRETARY PAULSON AND THE SUBPRIME MARKET

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
  Ms. KAPTUR. Mr. Speaker, there was an article recently in Information 
Clearing House urging our country's leaders to exhibit leadership in 
these

[[Page H12211]]

times of economic crisis. And it was such a compelling article, I 
wanted to read part of it into the Record tonight.
  It talks about some of the recent bloodbaths that we have seen on 
Wall Street that prove the trouble in our credit markets have not been 
relieved by the Fed's rate cuts. The Dow Jones slipped 367 points on 
the 20th anniversary of Black Monday, the stock market's biggest 1-day 
loss in history. And in the past week or so, Asian markets have 
plunged. Stocks are down sharply in Japan, Australia, Hong Kong, 
Indonesia, the Philippines, Taiwan, and South Korea. And there are 
ongoing problems being caused by what is happening in our subprime 
housing lending market.
  ``The sudden downturn in our stock market has provided a fitting 
backdrop for Treasury Secretary Paulson's appearance at the G-7 
meetings here in Washington. Paulson has largely shrugged off the 
decline in housing and the growing volatility in the equities markets.
  ``What everyone at the meetings really wanted to know was why the 
United States destabilized the global economic system by selling 
hundreds of billions of dollars of worthless mortgage-backed securities 
to banks and pension funds around the world. ``Aren't there any 
regulations in the United States,'' they asked? ``And how is Paulson 
going to make amends to the institutions and investors who lost their 
shirts in this massive mortgage scheme?'' Unfortunately, the Treasury 
Secretary didn't address any of these questions. He offered no 
recommendations for fixing the problem. Indeed, I can tell you the 
Treasury Department isn't even offering public television ads and 
commercial ads in communities like my own that are suffering under the 
weight of these rising foreclosures.

  Last month's net foreign influx of capital shows how quickly capital 
can evaporate when other countries lose confidence in us. In fact, 
foreign investors pulled $163 billion out of U.S. securities and 
treasuries in August alone. Net capital inflows into our country have 
turned negative. And that's money that won't be returning to the United 
States until we get our act together.
  This multitrillion-dollar subprime swindle was the greatest financial 
fraud in history. But Paulson and his colleagues at the Fed continue to 
blame everyone else. No one in China or Iran could have cooked up this 
structured finance rip-off which sent millions of homeowners into 
foreclosure, shattered 160 mortgage lenders, and undermined the global 
banking system. That was the work of Wall Street and their accomplices 
at the Fed.
  Another article appeared in the New York Times by economics reporter 
Gretchen Morgenson. She calls her article, ``Get Ready for the Big 
Squeeze.'' And she says, ``Anyone who thinks we've hit bottom in the 
increasingly scary lending world is paying little mind to the 
remarkably low levels of reserves that the big banks have set aside for 
themselves for loan losses. And who let that happen? Part of the 
problem for banks is the result of an almost two-decade drop in loan 
loss reserves.'' That's the fault of this Congress, it's the fault of 
the Treasury, and the fault of the Federal Reserve.
  The present gang of Wall Street warlords have transformed the world's 
most transparent and resilient market, our own, into an opaque galaxy 
of complex dead instruments and shady, off-balance sheet operations. 
It's no better than a carnival shell game.
  As the banks continue to get rocked from explosions in the housing 
industry, the unwinding derivatives and carry trades will precipitate a 
mass exodus from the equities markets. And we know that with surging 
oil and food prices, it's bearing down heavily on the American people 
as their discretionary income vanishes from increasing inflation and 
shrinking home equity. Wages have remained stagnant while personal 
savings have fallen to negative levels.
  The aftershock from Alan Greenspan's cheap credit policies will be 
felt for decades. Record trade imbalances give further evidence of our 
situation. And no country has ever devalued its way to prosperity. As 
our dollar falls globally, destroying the dollar will ultimately 
destroy our country. And it will destroy the value of savings, for 
those people in this country that do have savings. It will destroy the 
value of equity they've built up in their homes. It will destroy the 
value of equities of this country.
  Global credit markets are now facing unprecedented disruptions due to 
the mortgage-derivatives fraud which originated here in this country 
before spreading across the world; $400 billion in asset-backed 
commercial paper has failed to roll over, and the story is not over 
yet.
  Mr. Speaker, leadership is critical in times of economic crisis. Yet 
this Congress seems to be tiptoeing around the magnitude of what is 
facing the people of this country. This isn't time for prevarication, 
obfuscation, or public relations gimmicks by the Secretary of Treasury 
or the Fed. We need leaders who will tell the truth and forestall the 
growing probability of social disorder.
  I commend this article to my colleagues and to the American people.

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