[Congressional Record Volume 154, Number 51 (Wednesday, April 2, 2008)]
[House]
[Pages H1964-H1971]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              THE ECONOMY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 18, 2007, the gentleman from New Hampshire (Mr. Hodes) is 
recognized for 60 minutes.
  Mr. HODES. Thank you, Mr. Speaker.
  I'm glad to be here tonight. I will soon be joined by a number of my 
colleagues in the historic class of 2006, the Majority Makers. And we 
are here tonight to talk about the economy.
  There certainly is a lot to talk about. We've come back recently from 
2 weeks at home in our districts where we've all made observations and 
talked to our constituents, talked to the people we represent. We've 
gotten out and visited people in their homes. We've been out shopping, 
we've been to the malls, we've been all over and hearing the way the 
sorry state of the economy is having an effect on middle-class families 
and working-class families, and things are not right.
  Hard times are here, and unfortunately, those hard times may be with 
us for a while. Some have been seeing this coming, and I would like to 
say that certainly my Democratic colleagues, including people I serve 
with on the Financial Services Committee, have been seeing this coming 
for quite a while. We have been working on it, talking about it, 
passing legislation to deal with these issues.
  Others have come a little bit late to the table and are just 
beginning to see that middle-class families in this country are facing 
rising costs, difficult times. We've had a feed-the-rich policy and a 
squeeze-the-middle class, and it's time that we did something about it.
  I recall that about a year ago, maybe a little more than a year ago, 
when I had just joined the Financial Services Committee, I had the 
opportunity to talk to the Federal Reserve Chairman, Ben Bernanke. He 
came before our committee and testified about the state of the economy. 
Now this was before we'd seen the mortgage crisis and the credit crunch 
and the bailout for Bear Stearns and all of the other things that are 
now making headlines in what are fairly arcane policy matters but now 
take up the front pages of our newspapers.
  And we asked Mr. Bernanke about the state of the economy and what he 
saw then, and it was very interesting. At the time, he was reporting 
that corporate profits were in good shape, that corporate productivity 
was in good shape. In other words, that corporate productivity was on 
the rise. Corporate profits seemed to be okay. It meant that people who 
were working were working a lot harder and helping the corporations 
earn profits, and their productivity was good.
  But we saw troubling signs. Back then, we saw that real wages in 
income for middle-class families were stagnant or had been slipping 
backwards in real dollar terms. We saw that we had had a record trade 
deficit, $758 billion. We've seen tax cuts for 7 years under this 
administration which mostly benefited the very wealthy. In fact, last 
year, the 500 top wage earners in this country

[[Page H1965]]

earned about $18.8 billion and paid about 17 percent of their income in 
wages. That's not what they were supposed to pay, apparently, according 
to the tax rates, but that's what they've ended up paying. They're 
doing pretty well.
  So while middle-class families were experiencing slippage in their 
real wages and income going backwards and facing ever-increasing costs, 
we had gasoline prices rising, home heating oil was about to start 
zooming up that winter, costs for education were going up. We asked Mr. 
Bernanke whether or not the increase in corporate profits and the 
higher rates of corporate productivity necessarily were the best 
indicators of the health of the economy. Because we also pointed out at 
the time there was a troubling issue on the horizon, and the issue was 
that there had been many loans made to people over the past few years, 
let's call them subprime loans, which meant loans that were given to 
people with rates that started out being very good but then kind of 
rose precipitously and that we saw a problem with these subprime 
mortgages which may not have been given with the right kinds of 
appraisals which had been given to people who couldn't pay them back, 
whose incomes weren't sufficient to own homes, whose assets weren't 
sufficient, for whom there were no requirements to put money down like 
there used to be in the old days.
  We took all of this in, and many of us had just come to Congress. We 
asked Mr. Bernanke whether or not that was a true measure of the health 
of our economy. And I do have to report that Mr. Bernanke is an expert 
economist and a very smart man who runs the Federal Reserve. He's the 
chairman, and his job, along with the other members of the Federal 
Reserve board, is to help control the money supply, among other things, 
in this country. It's like turning on the spigot for money that flows 
into the economy and helps make more credit available and deals with 
interest rates, and they deal with whether or not to cut interest rates 
or raise interest rates which then affect consumers who want to borrow 
money for mortgages on their houses or second equity lines, as many 
people have, also, on their houses or credit cards or to buy a car. So 
that credit and the flow of money, in large part, is controlled by the 
Federal Reserve.
  His answer was he thought things were in pretty good shape.
  Well, unfortunately, Mr. Speaker, today, the chickens have come home 
to roost on 8 years of this administration's fiscal policies. I just 
pulled this off of the AOL service before I came down here to speak 
about these matters, and today, for the first time, Federal Reserve 
Chairman Ben Bernanke acknowledged that the U.S. could reel into a 
recession from the powerful punches of housing, credit, and financial 
crises. Yet, he didn't have much to say at this time about what the 
Federal Reserve is going to do next.
  I have to tell you, after a couple of weeks at home, Mr. Bernanke 
doesn't have to tell us that we are in a financial crisis. There are 
neighborhoods in some of the cities in New Hampshire where you go on a 
street and we are seeing four and five houses foreclosed. We are seeing 
the ``bank owned'' signs. And what that means is there is nothing worse 
to a family than losing a home. And what happens when a family loses 
its home is not only are they in peril, are they in distress, but whole 
neighborhoods are in distress. Because when homes are foreclosed in a 
neighborhood, it puts pressure on the housing prices in the 
neighborhood, it puts pressure on the other financial indicators in the 
whole community. So there is a huge ripple effect from what has turned 
into a housing problem.

  At home in New Hampshire we are seeing it. In fact, by the end of 
2009, Mr. Speaker, we anticipate seeing more than 4,900 foreclosures in 
the small State of New Hampshire alone. That's a huge rise. In some 
places we are seeing a hundred percent foreclosures. We've seen mill 
closings up north. We are seeing the job market beginning to soften in 
New Hampshire and around the country. Things are getting tough.
  Rising costs, credit problems, home mortgage foreclosure crises, the 
war in Iraq goes on at the rate of $12 billion a month. Nobody has to 
tell the middle-class families of this country who have been squeezed 
by 8 years of this administration's policies that we are having hard 
times.
  So tonight we are going to talk about what those hard times are, how 
we got there, and what we are doing in Congress, what my colleagues are 
doing, what we are trying to do here, especially on the Democratic 
side, to deal with these crises, and how we got here; and we are going 
to hear about what is going on in some of the other parts of the 
country as well.
  I'm joined tonight by my other colleagues, as I said, from the 
Majority Makers, the class of 2006, Mr. Speaker, of which you are a 
part, which we are very proud of.
  And I would like to introduce now and turn it over to my 
distinguished colleague from the State of Florida, the Sunshine State, 
where things are, frankly, much warmer than they are back home for me 
in New Hampshire where there is still snow on the ground and people are 
still digging out from a record snowfall.
  So I will turn it over now to my distinguished colleague from Florida 
(Mr. Klein).
  Mr. KLEIN of Florida. Thank you very much, Mr. Hodes, the 
distinguished gentleman from New Hampshire, who really has been a great 
leader in our class. He was the first president of our class this year. 
And I am also joined by John Yarmuth from Kentucky, who is our current 
class President. That's an honor that's bestowed, elected by the 
members of our freshman class on both of you. So I'm glad to be here 
with both of you tonight. We are going to be joined by a few other 
people.
  Yes, I do come from the Sunshine State, and the sun does come out 
every day, and it's a wonderful place to live. My wife and I have lived 
there for many years, and a lot of people in your districts come down 
and eventually retire there. Maybe you will be part of my constituency 
some day. Although the sunshine is out and it is warm there and 
beautiful, we have also had our trials and tribulations as of late with 
the economy.
  We in Florida have actually been blessed for a number of years, 15 
years straight, until just recently with growth and appreciation of 
home values, expanding businesses, a lot of international trade and 
agriculture production and things like that. Yet, we now are facing the 
same problems that most other States in the United States are, and that 
is our real estate industry has just stopped. People are having a great 
deal of difficulty selling their homes. If they're trying to downsize, 
they're retired and want to move to something smaller, or if they're a 
family growing and want to get into something a little bigger. There is 
nothing that is selling right now. Despite the great efforts of our 
realtors and people who are in the development business, they're having 
a difficult time.
  And as a result of the real estate industry, which is a big part of 
Florida's economy, as a result of that having stopped, retail, and all 
of the service businesses and all of the businesses that relate to an 
economy which is growing and people are moving, coming and going, they 
have also stopped.
  So we are now facing a very, very difficult time in Florida, and our 
Florida legislature is meeting, as we speak, and deciding how they're 
going to take $3 billion-plus out of a State budget that funds 
education, health care, and all of the other things that our States do.
  So we obviously understand that up here in Washington because all of 
us live at home. We live in our districts. We go to church and 
synagogue with people and go to our local supermarkets, and neighbors 
and friends are telling us what they're dealing with right now. And 
what they're dealing with is what people all over the United States are 
dealing with.
  In Florida right now, gas prices are averaging about $3.40 a gallon 
despite the fact that we live very close to a port. As a matter of 
fact, I have Port Everglades right in my district. That's a fuel farm 
where large tankers come in, bring the fuel right there, and it's $3.40 
on average per gallon of gas.
  Food prices. Anybody who has been in the supermarket lately, and I 
know all of us have and our families have and people on the floor here 
have all been to the supermarket, a dozen eggs is $3.50. A dozen eggs. 
Milk prices. And it goes on and on and on. Things that are manufactured 
in your States, the cost

[[Page H1966]]

of transporting things, the oil prices. These things add to the cost of 
living in all of our communities and I know in Florida.
  I find it very interesting, and Mr. Hodes and I serve on the 
Financial Services Committee, which is a committee that deals with the 
economy, that deals with the Federal Reserve. It deals with banks and 
credit and insurance and housing. All of these things are part of this 
committee.
  So we have been hearing from Mr. Bernanke and Mr. Paulson, the 
Treasury Secretary and others. It's very interesting. When the 
information is presented to us and you hear this debate, is there a 
recession or is there not a recession; people back in my district are 
saying, What are you talking about? Who cares if there's a defined 
recession or not? We know what's going on. My job is not as secure as 
it was a year ago. I know what my food prices are, my energy costs, my 
insurance costs, my taxes. All of these things are weighing very 
heavily on me, and things are not good.
  People have lost that confidence, that swagger that Americans have. 
And, of course, we know we can get it back, but it is a question of 
what we can do about it.

                              {time}  1945

  Well, in the discussion with Financial Services, when they present 
the inflationary numbers to us and say, well, inflation is in check, 
that maybe it's moving a little and we have to watch it but it's in 
check, guess what the inflationary factors do not consider: energy and 
food prices. And they say that the reason they're not considered is 
because they fluctuate wildly and they are really not a determining 
factor of whether there's an inflation. Well, you know something? They 
certainly are a big factor on my budget and my neighbor's budget and my 
parents' budget and everyone else who lives in the United States 
because those two factors are things that affect us. Every time you go 
to the gas station and you spend $50, $60, $70 for a tank of gas, 
that's a lot of money. And whether you can afford it or not, you feel 
like something's wrong here. We're sending money overseas to countries 
that are not our friends and are supporting our enemies or these oil 
companies are creating the largest profit in American company history. 
And nobody's out there criticizing the entrepreneurial system, but 
let's have a little fairness here, a little investing in renewable 
energy, which is what this Democratic Congress has been focusing on, 
which is a good thing. And food prices, our farmers and people who 
produce, this is a big factor to American families when they go to the 
supermarket. When all of a sudden it costs $175 for your weekly bill 
instead of $130, that adds up. People that are on fixed incomes, we 
have a lot of seniors that have retired to my community that are on 
fixed incomes. These are real issues that I think we are concerned 
about.
  And the good news is there are some things coming out of this 
Congress that are going to begin to help deal with everything from 
energy prices, both short and long term; food prices, of course. And 
nobody's looking to control the economy, but we are saying we need to 
work together to help reduce the costs of the materials that make up 
these products. And, of course, the mortgage crisis and the credit 
crisis, and I know we're going to talk about that as we get into our 
discussion tonight. Fortunately, we have some great people. Congressman 
Barney Frank, chairman of Financial Services, probably one of the 
smartest people, he's working every day with Mr. Bernanke and Mr. 
Paulson to try to find things that we can do to help people stay in 
their homes. We're not talking about land speculators. We're not 
talking about people who have five homes. We are talking about the 
families that got in a little bit over their heads here, and they need 
some help and those communities need some help so you don't have this 
cascading of foreclosures in any one area.
  So I'm looking forward to being with our colleagues here tonight to 
talk about some of these things. And with that if I can yield to the 
gentleman from Kentucky, I will do that.
  Mr. YARMUTH. I thank my good friend for yielding.
  And you raised a very important point, and that is that while much of 
the headlines today talk about a recession and the debate over whether 
we are technically in a rescission, those of us who campaigned in 2006 
and were talking to our constituents at that point knew that this was 
on the way. We saw the gathering storm, if you will. We saw the ripples 
in the ocean that became the tsunami. We talked to our constituents. We 
knew that they were hurting. We knew that their standard of living was 
not increasing even though they were working harder and harder. We knew 
they were scared about their retirement and scared about their ability 
to afford health care. That's what I heard throughout my campaign in 
2006.
  Yes, people were concerned about the war in Iraq. But, Mr. Speaker, 
that wasn't really what they were talking about on a day-to-day basis. 
It was, ``I'm really having a hard time.'' And while the President 
wasn't talking about it at that time and the majority leaders and the 
majority party in the Congress weren't talking about it, they were 
talking about it. They were saying, My friend, his company just went 
out of business or his plant was moved overseas and he had a pension 
that had accumulated $150,000 and now it was down to $30,000 because 
his company hadn't adequately funded it; so now what's he going to do? 
So we heard these problems day after day after day.
  And I'm proud to say that when we came to the Congress in January, 
2007, we didn't wait for somebody to declare that there was a 
recession. We started immediately. We said the middle class is hurting. 
We have people at the very lowest ends of the income scale who are 
working very hard, who are working at or near minimum wage, and we 
haven't raised the minimum wage in 10 years in this Congress. That's an 
outrage. And within the first few days of this 110th Congress, we 
raised the minimum wage. We put it on track to get to the point where, 
hopefully, there will be a living wage for everyone who works in this 
country.
  And we set about looking at college costs. We said that college costs 
have been inflating at a very, very dramatically high rate, in my State 
8 or 9 percent each year for the last 4 or 5 years. People trying to 
put their kids through college or people trying to put themselves 
through college are having a harder and harder time. No increase in the 
amount of financial aid that was available. No increase in the Pell 
grants. We passed the College Cost Reduction Act, $21 billion in 
additional aid to help college students get their degrees. So we 
understood the problem. We were dealing with it early on.
  It has not been an easy fight. It has not been an easy fight because 
we have an administration that has this theory that the marketplace is 
sacrosanct, that it's infallible, that nothing ever goes wrong, that 
everything will even out, and that we just need to get out of the way. 
We just need to get out of the way and let these big corporations do 
whatever they want to do because the marketplace will force them into 
doing the right thing. And we now, of course, know that's not the case. 
We now, of course, know that, as we looked at, in kind of the aftermath 
of the Bear Stearns situation, an astounding fact coming from Wall 
Street that one-third of all the income in New York City was on Wall 
Street. One-third. The average wage, including all of the clerical help 
and all of the support staff on Wall Street, was $380,000 a year. Those 
are enormous salaries. And when something goes bad to deflate that 
bubble, it doesn't just hurt those people, as we have seen; it ripples 
through the entire economy.

  So, yes, we have some problems that have just hit us now because, 
again, the bubble has burst. But it wasn't that we were asleep at the 
switch because, again, we heard these complaints, we sensed these 
signals 2 years ago when we were out in the campaign trail. I certainly 
did in my community, a wonderful community that never quite experiences 
all the booms but never has the busts. We have two Ford plants making 
vehicles that consume a lot of gas. There's a lot of stress on those 
because sales are down for those vehicles. We knew that then. We knew 
that they were negotiating constantly, the company with the union, 
trying to drive those wages down. People who were making $25, $30 an 
hour negotiated down so that they were making $15 an hour because they 
said that they're having hard times, that the company is

[[Page H1967]]

suffering. Well, yes, we know the company is suffering. But, meanwhile, 
the same people doing the same hard work day after day with the same 
expenses, the same obligations in their life, and now their income has 
been cut by 10, 20, 30 percent.
  So we have been at this battle for now 15 months, since we have been 
in Congress, and we are going to stay in this battle because this is a 
battle for the very essence of American society. And I'm very proud to 
be part of a Congress that is committed to making sure that this 
economy works for every American and not just for the very elite 
Americans. And that's why I came to Congress. That's why my colleagues 
came to Congress. And I think over time, given the commitment that we 
have, we are going to make a difference for the American people.
  Mr. HODES. Thank you, Mr. Yarmuth. I really appreciate hearing from 
both of you about your perspectives about what's going on.
  And the discussion we've had brings to mind a quote that I read by 
Abraham Lincoln, who was a good Republican. Today he might not be a 
Republican. Today he might be a Democrat. And it really addressed some 
of the fundamental underpinnings of the debates that we are having 
about how to fix things. What Abraham Lincoln said was that ``the 
purpose of government is to do what the free markets cannot or will not 
do so well for themselves.'' And today in Congress and around 
Washington and around the country, we are beginning a debate at one 
level about what kind of changes we need to make and what kind of help 
we need to offer to struggling middle-class families. And those are two 
separate questions really.
  One of the questions is, what kind of changes do we need to make to 
the regulation of our financial systems? That integrated big financial 
system that, as Mr. Klein pointed out, deals with banks. It deals with 
stocks. It deals with housing. It deals with real estate. It deals with 
insurance. It's a complex system that is now regulated in Washington. 
It's regulated at the State levels because there are regulators in the 
States who regulate all these industries. And Washington, what we are 
now seeing is that we've had Depression-era regulatory systems that 
really took their eye off the ball over the past 8 years certainly. 
While things for the middle class were squeezing tighter and tighter 
and tighter and those at the very top were doing okay, the regulators 
didn't seem to notice. And a lot of people are asking questions: Well, 
why not?
  The interesting thing here is to hear how the tunes of some people in 
this Chamber have changed. It used to be that some of our colleagues 
across the aisle who were saying don't regulate, deregulate, and that 
was a huge push for this administration and many of our colleagues on 
the other side of the aisle, and, in fact, many have said just let the 
free markets take care of it. Well, what we are seeing in this boom-
bust cycle is that the free markets need some control from government. 
It's got to be balanced, of course, because you don't want to go too 
far with the free market. But what we have seen, for instance, just in 
the housing crisis is this: When I go home to talk to my community 
bankers in New Hampshire, what they tell me is that their foreclosure 
rates aren't really any different than they were before we got into the 
crisis we are in. They're not seeing a huge spike in foreclosures. They 
are regulated very closely. They have to follow strict standards. And 
they have been making loans the way they always have. They've been 
requiring down payments. They've been asking people what are their 
incomes? They've been verifying those incomes. They have been 
appraising properties accurately. They have been making sure that the 
loans they make in their communities are the kinds of loans that a lot 
of people are familiar with. Unfortunately, there were a lot of lenders 
who weren't regulated in the same way and they were making loans to 
people who probably shouldn't have loans, maybe people who were 
speculating. And then what was happening was those loans were being 
packaged. And they were going to Wall Street where they were being 
packaged into huge kinds of packages of loans and sliced and diced into 
securities with very odd names and securities that many of us don't 
even understand: ``Credit Default Swap Exchange Opportunities,'' not 
listed on any stock exchange, traded sort of desk to desk on Wall 
Street, essentially where people were taking air and risky loans and 
slicing them up and selling them around the globe because we're in a 
global economy. There are global markets, especially on the financial 
side. So I read articles where pension funds from municipal employees 
in towns in Norway were going underwater because of the mortgage crisis 
here.
  And so one of the fundamental questions that we have got to ask is 
how are we going to fix this regulatory scheme? Because really if you 
think about it, over the past 8 years, we have had the Bush tax cuts, 
which advantaged the very rich; and as you said, Mr. Yarmuth, pay for 
CEOs has gone through the roof, 350, 400 times what the average person 
is making. So while we had tax cuts that were advantaging the very rich 
and the middle class was being squeezed, we were spending $800 billion 
on the war in Iraq. And while that was going on, the Federal Reserve 
was keeping interest rates very low. And mortgages were being handled 
in a different way, packaged, sliced and diced into stocks, and sold by 
unregulated lenders. So with very low interest rates, what people were 
lulled into thinking was that the prices of their houses would just 
keep going up and up and up and up, and people began to treat their 
houses like it was a revolving ATM machine.
  I know that I got calls from people offering to rewrite my loan. I 
have a 30-year fixed loan. I'm very glad about it now. They were 
offering to rewrite my loan. They gave me all kinds of incredible 
deals. They were so incredible that I couldn't understand them, and I 
figured if I can't understand them, thank you very much but I'm going 
to stick with something simple. They were talking about a rate here and 
then in 3 years the rate would go there, and don't worry, when the rate 
goes up and if it goes up, you won't have to worry. Don't worry because 
your house will be worth more, and when your house is worth more, you 
will be able to refinance it again. So for the past 8 years we have 
seen that spiral. What happened was when the housing market crested and 
began to come down, everything began to unravel down the line, not only 
housing prices but then the credit crunch. It meant that people 
couldn't borrow for their businesses. They can't borrow to get out of 
their problems with their housing prices. We have seen at the same time 
a huge rise in energy prices. Jobs are now under real pressure in terms 
of people losing their jobs. And this has exploded into a crisis that 
we now have to deal with in Congress.

                              {time}  2000

  But we haven't been silent about it. Some of the things we have done, 
I am just going to talk really briefly, then hand it over to you, Mr. 
Klein, we took action. One of the things we did was we expanded 
affordable mortgage loan opportunities through the Federal Housing 
Administration for families who are in danger of losing their home by 
increasing the loan limits that the Federal Housing Authority 
administration could make to help with the fact that house prices have 
gone up. It's a very important part of the economic stimulus package 
which this Democratic Congress passed to put money into the hands of 
consumers through rebates that will come when people file their tax 
returns this year. Instant money. We address the housing piece, and we 
also helped small businesses in lots of significant ways.
  So we haven't been sitting around. We are working on helping people. 
That was just a one-time shot, a shot in the arm for the economy. We 
are going to do other things because this is really once in a lifetime, 
in some way, kind of a problem.
  People are using words like recession and other words like that. But 
as Mr. Klein said, let's just say that hard times are here. They are 
hard times that we haven't really had to face in this country in this 
way in a long, long, long time. And we are going to take action to make 
sure that we are helping squeezed middle-class families and hurting 
working families to get on their feet. We are going to offer a hand up. 
It's not going to be a handout, but it's going to be a hand up of the 
kind that the American people expect.

[[Page H1968]]

  The last thing I will say before I turn it over to you, Mr. Klein, is 
that so far, the administration at the other end of the mall on 
Pennsylvania Avenue has set up an 800 number for homeowners. But so 
far, I am not sure that the administration really understands and is 
really feeling the depth and breadth of what our folks are facing back 
at home. I would say Mr. Bush ought to get out a little more and maybe 
he would see that some steps are necessary to help the middle-class 
families and working families. Because we are going to have to soften 
the hard landing that's coming.
  With that, I will turn it back over to Mr. Klein.
  Mr. KLEIN of Florida. Thank you for laying out as you did. It's very 
easy to understand the way you just explain it. I will just mention 
another item that we did pass last year as we saw this coming on. The 
question is what is Congress doing. What are we doing to help our 
neighbors and friends. This is a community issue. Sure, it's a national 
issue. But it boils down to what is happening in my community in Delray 
Beach and Boynton Beach and Lauderdale by the Sea and places that are 
close-knit communities and close-knit families that have lived together 
for a long time and they are seeing house after house after house with 
a sign that says Foreclosure, that notice on the door. It's not very 
troubling. It's not just that homeowner him or herself, it's the 
community that gets affected. It has a downward pressure on home 
values, which is what we want to avoid.
  Another thing that is very important that this Congress, the two 
gentlemen here and others supported, and we are all very proud to do 
this, it was a bill called the Mortgage Forgiveness Debt Relief Act. It 
did something which is very important. It prevents homeowners from 
facing a tax bill at the same time they are losing their homes. Here's 
how it works. This is a problem with the current Internal Revenue Code. 
Basically, it says if you have a debt, a mortgage, and somebody 
releases you from that debt, they cancel the debt, or they reduce the 
amount, that is considered income to you. You actually have to pay tax 
on that, which is pretty ridiculous. But that is the way the current 
tax law is set up. It's not just for homes, it's for other things as 
well. It's called ``phantom income.'' It's the worst kind of income you 
can have because there is no cash in your pocket to pay for it.
  So this Congress under the leadership of Nancy Pelosi and others, in 
a bipartisan way, it was the right thing to do, we passed a law that 
said no, that is not going to be the case. If you're foreclosed on or 
there is a problem and there is a release of this debt, that is not 
going to be income to you, and you don't have to pay tax on it. It's 
bad enough your losing your home, but you certainly shouldn't have to 
add insult to injury by paying income on that as well.
  We also passed a bill which expanded financial counseling for 
families in danger of losing their homes. A lot of it is information. 
If you're getting this notice and you can't afford that mortgage 
payment, what can you do? As Mr. Hodes correctly said, this isn't the 
old days when you went to your local banker, in many cases, and it was 
a man or woman you knew, it was someone in the community, and they took 
down your application, they knew where you worked and what your income 
was and everything else, and that bank was going to hold that mortgage.
  Today, that is not the way it works. Many banks, not all banks, but 
many banks, they take that mortgage and it's sold within 30 days in the 
package that Mr. Hodes mentioned. Packaged and sold again and again, 
and most people don't even know who's holding their paper. They send a 
mortgage payment to some P.O. box somewhere. They won't even know who 
to call if they were late on their payments.
  One of the things this Congress said is let's help people, get them 
information, and this counseling process is one which you bring people 
together and say listen, maybe I can't afford this, but I can afford 
this. It's not in the bank's best interest to foreclose on a piece of 
property. They lose all the way around. It's certainly not in the best 
interest of the homeowner. So we are very proud that that was the right 
thing to do. But there's so much more to do.
  This past week, the Treasury Secretary, Mr. Paulson, released a 
series of proposals. He called them short, intermediate, and long-term 
views on the financial markets. Unfortunately, the short-term really 
wasn't much of anything. The way I read it, it was sort of we are going 
to reinstate this commission, put some new people on it, and study it.
  Well, time for study is over. People are in real need right now. We 
are not into bailouts. We are not into bailouts of banks or investment 
groups that made bad investments, and we are not into bailouts of land 
speculators. But there is a narrow group of people that are homeowners, 
family owners. It's their primary home, their only home. It's where 
they live. They are raising their kids, or they are senior citizens. 
This is the group of people that may have got caught short. This is the 
group of people that I think there are some strategies being discussed 
right now in Congress just to give them some relief to encourage the 
lenders to work with them and create some ways that the financing can 
be stabilized.
  So I think that is a very good thing. But, again, it's not in the 
President's proposal. I am not saying that he is not prepared to work 
with us, but I think the ideas are going to come out of this Congress.
  The second thing I will mention quickly and turn it over to my 
colleague from Kentucky is the notion that these organizations at the 
Federal level, SEC, Securities Exchange Commission; CFTC, another group 
that regulates commodities, and the groups go on and on in evaluating 
and regulating banks. They call it the alphabet soup of regulators.
  It's pretty clear that these organizations have failed or not had the 
legal authority to do what they need to do. I think what this means to 
all of us, and the President and through the Treasury Secretary has 
said let's merge some of these together. That may be a good idea for 
efficiency purposes and it may be a good idea in term of creating a 
better form of regulation. But it's like reorganizing the chairs on the 
Titanic, or even creating the Department of Homeland Security by 
putting Immigration and FEMA in there. It isn't always necessarily a 
better idea to just merge everything together.
  I am all for efficiency, I am all for saving money, I am all for the 
better regulatory side without, as Mr. Hodes, said over regulating. But 
I think there has to be a mission clarification here to understand that 
a whole lot of things that were being sold on Wall Street are not 
understandable, not only to the average investor, like any American 
that buys stocks or investment vehicles, but even to the most 
sophisticated people.
  There are a lot of things being traded that nobody real understood 
what they were trading, and the result of that is no transparency and a 
whole lot of businesses and a lot of people have lost a lot of money. 
Again, I think I am mostly concerned about the average investor and our 
markets being creative and innovative. That is all a good thing. But at 
the same time, we want to make sure that there's a regulatory scheme 
that doesn't stifle innovation, but it's that side of capitalism, that 
capitalism unregulated results in the Depression, as we had in 1929, 
and certainly there have been pitfalls along the way. This is obviously 
a pitfall, and we need to fix it and learn from the mistakes of what 
got us here in the first place.
  So I am hopeful that this Congress in a bipartisan way with the 
leadership of Chairman Barney Frank will be able to come up with some 
good ideas, work with Federal Reserve Chair, work with the Treasury 
Secretary, work with the Bush administration. America is depending on 
us. Our families are depending on us, our neighbors are depending on 
us. We are all optimists. That is why we are here. As Americans, we are 
optimists. Let's not repeat these mistakes again.
  With that, Mr. Hodes, if it's okay, I will turn it back to you.
  Mr. HODES. It's very interesting to think about. One of the great 
things about the Financial Services Committee under Mr. Frank is that 
very often we are able to work in a bipartisan way in the kind of 
spirit that the people of this country really are hoping that we will 
take to deal with these complex financial matters. Because

[[Page H1969]]

while we are dealing with try to fix the regulatory scheme and figure 
out exactly what measures, which we will talk about, are the kind of 
measures are going to help people on the ground who are losing their 
homes, it's really important that we are able to come together.
  So there may be different philosophical approaches. My colleagues on 
the other side of the aisle on the Republican side, Mr. Bush in the 
White House may say, no, no, no. They may say to keep hands off. Let 
the free markets do everything.
  But now people I think are beginning to come along and see that this 
is exactly the kind of situation where some appropriate government 
intervention to fix fundamental problems in the financial schemes and 
help with this mortgage crisis are going to be necessary. I am hoping 
that the President is going to come along. I am hoping that he is going 
to come on out of the Rose Garden. I am hoping that he is going to see 
that we need more than a 1-800 number, 1-88 I AM IN TROUBLE.
  I am hoping that Secretary Paulson will continue to have what I think 
has been a pretty good dialog with the White House about what we have 
to do and that we are going to see the cooperation between the 
regulators, Mr. Paulson, the House of Representatives, the Senate, and 
the President to move things forward.
  Mr. YARMUTH. Will the gentleman yield? We have been joined by another 
colleague. But I just have to follow up on something that Mr. Klein 
said because I almost thought he was telepathic there when he talked 
about the Great Depression.
  None of us wants to be alarmist here. But when I was in college, I 
did my senior thesis on speculation in the 1920s. In fact, there is 
some remarkable parallels between the situation today with the housing 
crisis and what happened in the 1920s that led to the Great Depression.
  The similarity is that back in the 1920s, if you wanted to buy stock, 
you only had to put up 10 percent of the price of the stock. You could 
borrow the rest of the money. The theory there, because the stock 
market was going higher and higher and higher, and everybody thought it 
was going to continue to get higher, happy days are here again, before 
they disappeared, and that was the psychology. So nobody ever thought 
about regulating that. Everybody thought that was an endless gravy 
train. So people would keep buying stock, paying 10 percent down, 10 
percent down.
  When the stock dropped 10 percent, their equity was gone. This 
happened time after time after time. The same thing has happened now 
with the housing market when people are lured into markets with low 
interest rates and then they borrowed against the equity and then when 
the value started to slip a little bit, they were in a negative equity 
situation, and that is what precipitated this crash.
  I am hoping, and I don't believe that the situation in terms of the 
overall economy is as threatening as that situation was. The parallels 
are the same. After that situation in the 1920s, we created the SEC, we 
went to an environment, because the pendulum had swung over to the side 
of absolutely no regulation, and we saw the problems with that.
  I listened to Senator Obama today on the campaign trail, and he made 
I think a very profound statement, and that was: Things go wrong when 
nobody is looking. That is what we have had over last 8 years, maybe 
more than that. We decided we didn't need to look at all that stuff. We 
found out now we need to pay attention. We need to hold all these 
institutions accountable. We need to set up certain rules.
  We don't want to swing the pendulum to the other side, as my good 
friend Mr. Hodes said, but there is a happy medium. In order to avoid 
the pitfalls that we have experienced in the past, this is the time. I 
think this Congress is committed to that.
  I yield back.
  Mr. HODES. Thank you for that really important point. I know my 
mother and others who lived through the Great Depression and its 
aftermath would be very interested to hear the analysis and the 
parallels, because they are not lost. Our job is going to be to try to 
deal with the 21st century realities and make the landing softer than 
it was then.
  I would now like to turn it over to a distinguished colleague and an 
extraordinary leader, Mr. Ellison, from Minnesota, who serves on both 
the Judiciary Committee and serves with us on the Financial Services 
Committee, someone who has been a leader in his commitment to 
protecting consumers, dealing with the problems that people are facing 
every day in their lives, who understands that hard times demand from 
the Congress imaginative action, and has a way of addressing things in 
a head-on way that has been a great example for all of us here in 
Congress.
  With that, I am very happy to yield to the distinguished gentleman 
from Minnesota (Mr. Ellison).

                              {time}  2015

  Mr. ELLISON. Let me thank my friends from New Hampshire, Kentucky and 
Florida.
  My dad likes to say, ``people respect what others inspect. If you 
don't inspect, you are not going to get any respect.'' So it is 
important that we have oversight. It is important that we have a 
regulatory system.
  The market and the public sector should work in a balanced way, 
should compliment each other. That has not happened, and, as a result 
of the lack of regulation, as a result of deregulation, Gramm-Leach-
Bliley in 1999, and I would like to talk about that in a moment, we 
have got ourselves into quite a situation.
  Let me share with you what the Center on Budget and Policy Priorities 
issued recently. You probably would not be surprised to know that 
between 2005 and 2006, the average income of the top 1 percent of 
households increased by $73,000, after adjusting for inflation, while 
the average income of the bottom 90 percent, that is us based on our 
pay here, increased by $20. I am talking about a twenty-spot. You know, 
bam, that is your pay increase between 2005 and 2006 if you are in the 
bottom 90 percent of the income distribution.
  Now, you might be thinking, gee, that is not good. But let me just 
tell you, what this means is that the share of the Nation's income 
flowing to the top 1 percent has increased sharply, as a matter of fact 
rising from 15.8 percent in 2002 to 20.3 percent in 2006. That means 
that people in the top 1 percent of our income distribution make one-
fifth of the money. That is not good.
  Now, you might be thinking, that is kind of bad there. But the fact 
is that it hasn't been this bad since.
  Mr. Yarmuth, when was the last time the top 1 percent were making 
this much of the money in America? It did happen before, Mr. Yarmuth. I 
want to ask you if you know?
  Mr. YARMUTH. I will defer.
  Mr. ELLISON. I know you have an idea, because you were already 
talking about the era.
  Mr. YARMUTH. Obviously in the Robber Baron Era of the 1920s.
  Mr. ELLISON. The 1920s. It starts with ``Great.'' In fact, Mr. Hodes, 
your mother was born and lived during this era. When was the last time 
the top 1 percent made 20 percent of the money in America?
  Mr. HODES. 1929.
  Mr. ELLISON. The Great Depression. I am telling you, the signs are 
not good. We need bold, decisive action which puts the public sector 
and the private sector in a partnership to look out for the American 
consumer. This is what we have to do.
  You know, Mr. Yarmuth, let me talk to you a little bit about some 
things you inspired me to think about.
  When we had Chairman Frank out to Minnesota, we had a hearing on the 
foreclosure crisis. One of the pieces of testimony that came out is 
that a lot of folks actually could not find rent at the amount that 
they could buy into a subprime mortgage. In other words, they could get 
into a 228 or a 327, which means you have a low rate for 2 or 3 years 
and then it jumps way up. The teaser rate was lower than the market 
rent they could find. Since nobody was checking income, they got into 
that. Then when the 2 or 3 years expired, they were in a mess. The 
mortgage jumped up, there was not enough equity in the house even to 
refinance it, and they were foreclosed upon.
  Now, that speaks to another thing we have done in this 110th 
Congress, and that is invested in a National Housing Trust Fund so we 
could truly invest in affordable housing, which is part of the equation 
here.
  In America, we need an overhaul of our economic system. We need real 
progressivity in our Tax Code. We need

[[Page H1970]]

real regulation in the financial housing markets, we need to have a 
real aggressive attempt to support affordable housing, and we need to 
make sure that people have livable wages to live on. We need a new 
vision for an economy which puts economic prosperity at the very center 
dot of what we do around here.
  So I yield back at this time.
  Mr. HODES. Thank you very much for that perspective.
  Before I introduce another colleague from the class of 2006, The 
Majority Makers, I do want to point out that we have not been quiet 
about what we think is necessary. Some of the things that we have done 
here in the House of Representatives, back in November we saw what was 
coming. We have been ahead of the curve.
  We saw what was coming on this mortgage crisis and we passed the 
Mortgage Reform and Anti-Predatory Lending Act to strengthen consumer 
protections against risky loans. We wanted to make sure that going 
forward, the kind of lending practices that we have seen causing this 
mortgage and housing crisis would not be repeated.
  That bill is sitting now somewhere across Statuary Hall, across the 
Rotunda on the other side of this building in the United States Senate, 
hopefully going to be passed by the United States Senate. But it is 
being held up there, like much legislation that we have passed here in 
the House to help middle-class families, to help working families, 
which has been held up in the Senate.
  So I am hoping our colleagues are going to see the wisdom of making 
sure that we have loan standards in this country that really help to 
ensure that people who shouldn't get loans aren't getting the loans, 
that lenders who are taking advantage of people aren't taking advantage 
of them when they make the loans.
  It goes along with what we have done to expand affordable mortgage 
loan opportunities for families in danger of losing their homes through 
the FHA reform. That is also being held up over in the Senate by 
Senator Shelby, who apparently is upset about the economic stimulus 
package and has taken it out by refusing to deal with that loan.
  We have strengthened Fannie Mae and Freddie Mac to increase their 
loan limit size. We are hoping that that goes through. And we have 
increased the supply of affordable rental housing to address the 
current shortage with the bill you talked about, the National 
Affordable Housing Trust Fund, which we have to get through the Senate, 
across the way. It has to go up the Mall to the President. We have got 
to pass these kinds of measures.
  We have done our job here in the House on those kinds of measures to 
help middle-class families and working families and people who are 
being struck. There are some other things that are coming from Mr. 
Frank and the Financial Services Committee in a couple of days as we 
hold hearings and pass things through.
  But now what I would like to do in about the last 10 minutes that we 
have got is to introduce another colleague and turn it over to my 
esteemed, distinguished colleague from New York, a gentleman who 
understands small business, a gentleman who has been working hard for 
veterans, a gentleman who understands the problems that he is seeing in 
his community in Upstate New York, the distinguished gentleman from New 
York, John Hall.
  Mr. HALL of New York. I thank my colleague.
  Madam Speaker, the last few months has certainly seen severe damage 
done to our economy and have left many Americans battered. As a parent, 
I wonder how many other people have had the experience that I have had 
of watching my daughter when she was in high school getting credit card 
offers from banks, or when she was in college, with me and my wife 
paying for her expenses, getting credit card offers from banks, and 
wondering how many college students or young adults are taking those 
offers and not realizing the interest rates that come with them?
  Signs of economic turmoil are multiplying, and I don't think anyone 
doubts that we are either in or headed for a recession. Some academic 
economists may quibble over the technical terms, but the bottom line is 
that our economy is headed in the wrong direction, and for many 
Americans, tough times are either here or lie ahead.
  Stock markets around the world have behaved as if they are a roller 
coaster, alternating huge increases and dramatic declines. Wall Street 
traders don't seem to know what to make of each contradictory economic 
indicator. As a musician and songwriter, and now a Member of Congress, 
I have had hedge fund traders and stock market advisers and financial 
experts come to me and say, what do you think is going to happen, and 
that is a sign I think of the confusion and the general uncertainty 
that we see in the market.
  While the cost of everyday expenses like food and fuel continue to 
rise, most people have seen their wages stagnate. People in my district 
make little more than they did a decade ago, yet their costs continue 
to rise dramatically.
  People I represent in the Hudson Valley have been particularly hard 
hit. Oil has long passed the $100 a barrel mark, making it more 
expensive than ever for people to heat their homes and drive their 
cars. In suburban communities in the Northeast, like the area I 
represent, home heating bills increased more than 30 percent just 
between last winter and this winter.
  While personal debt has skyrocketed to a record level, investment for 
the future has become all but nonexistent. As a result, families 
struggle to pay their everyday costs, more people have made 
incalculable personal sacrifices, lost their homes, and went hungry. As 
necessities become outrageously expensive and more and more employers 
are moving overseas to take advantage of the cheap labor and complacent 
regulations in places like India and China, as always, it is the 
American families who pay the price.
  Ultimately I believe these troubles are a direct result of President 
Bush's disastrous economic policies. After years of the President and 
his enablers in the previous Republican Congress mismanaging the 
economy, more Americans are looking for work than ever before, 
the housing crisis has caused millions of Americans to risk losing 
their homes, and the price of gas has hit an all-time high. Clearly it 
is up to this Congress to act soon and act decisively. If we do not, it 
may well take years for the country to recover from the last 7 years.

  I am proud that this Congress has already begun to take steps to do 
what we need to do. First we enacted the 2008 Economic Stimulus 
Package, which provided tax rebates for most Americans to go out and 
spend, and raised the loan limits for mortgages backed by FHA, Fannie 
Mae and Freddie Mac, to make it easier to get a mortgage with better 
terms. Both of these measures have already begun to help.
  But I hope none of us are naive enough to think that that alone will 
be enough. We still have a lot more work to be done, specifically 
targeting working and middle-class families, the true lifeblood of our 
Nation's success. Relief for these people will only come from a clear 
commitment to increasing assistance for unemployment insurance, food 
stamps, Federal Medical Assistance Percentage payments and Federal 
housing programs.
  I am proud of the steps we have taken here in the House, but I know 
we have much farther to go. As you say, my friend, Congressman Hodes, 
we need to not only pass these progressive and family oriented middle-
class steps in the House, we need to persuade our friends in the Senate 
to approve them as well and then persuade the President to sign them. I 
hope together we can do that.
  Mr. HODES. I thank the gentleman for his cogent and eloquent remarks.
  I am going to turn it over to the distinguished gentleman from 
Kentucky for some closing thoughts.
  Mr. YARMUTH. I thank the gentleman. It is good to see our colleague 
Mr. Hall here as well, and I thank him for his comments.
  You know, it becomes almost a cliche, and actually an overly used one 
these days since we have a big presidential campaign, to talk about the 
contrasts between Wall Street and Main Street. But it has never been 
more apt, and particularly with the situation we have seen on Wall 
Street very recently.
  We have a very serious orientation problem in this country. For many

[[Page H1971]]

years, going back probably three decades now, we have taken the 
position in this country that we are going to let companies get as big 
as they can get because they say ``we need to get big so we can 
function in the global economy.'' But the ramifications of letting them 
get so big with no regulation has been that if they make a mistake, 
then it doesn't just affect their stockholders and their employees, it 
affects the rest of the country. Now we have seen that. As you said 
early on in the opening remarks, the chickens have come home to roost. 
That is where we are.
  This Congress, this government, has to start standing up for Main 
Street, not for Wall Street, understanding that Wall Street provides 
great benefits for this country at times. But we have to make sure that 
ultimately we protect the average American working family. That is what 
this Congress I think has been committed to doing since day one, and we 
will continue to be committed to that as we move forward.
  I yield back, and thank you for your leadership, Mr. Hodes.
  Mr. HODES. Thank you, Mr. Yarmuth.
  I appreciate the time we had, Madam Speaker, to talk about the 
economy. In the coming days, the Financial Services Committee will be 
presenting two very important proposals to help more on the mortgage 
crisis. One, we will provide some loan-ability and guarantee-ability 
through the Federal Housing Administration to lenders who are willing 
to write down loans and help people who are facing foreclosure and who 
may be in distress on their homes in order to make more money available 
to prevent foreclosures, and to help those, say at least 1 million, 
perhaps up to 2 million people who have been in foreclosures.
  The second thing is we expect to propose a program of loans and 
grants to help States and cities acquire properties that have been 
foreclosed and facilitate returning them to the rolls as owner-occupied 
or rental units.
  Taken together, these initiatives are going to be very important. 
They are going to allow millions of families to avoid disasters, they 
are going to help hard-pressed jurisdictions avoid the cascade of 
deteriorating neighborhoods and abandoned houses that follow the kind 
of crises we have seen, and they are going to help stem the steep and 
destabilizing decline in house prices that led to and is intensifying 
the financial crisis, because we cannot allow this crisis to continue 
unabated.
  This Congress is ready to act. We are going to help middle-class and 
working families out of this hole.
  I thank my colleagues for joining me tonight, and I thank Madam 
Speaker for her indulgence in allowing us to go over a short amount of 
time.

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