[Congressional Record Volume 155, Number 15 (Monday, January 26, 2009)]
[House]
[Pages H510-H516]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        THE BANK BAILOUT DEBACLE

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 2009, the gentleman from Ohio (Mr. Kucinich) is recognized 
for 60 minutes as the designee of the majority leader.
  Mr. KUCINICH. Mr. Speaker, this evening I would like to have a 
discussion about what is going on in the American economy, how it is 
affecting the American people, the decisions that Congress made to make 
it possible for financial instruments to become so complicated that it 
furthered speculation in the marketplace, the decision that Congress 
made to bail out the banks and the impact on our economy, some 
solutions that may help us dig our way out of this financial mess, and 
some suggestions for restructuring some of the institutions of our 
government that would enable it to more effectively serve the public 
interest.
  Mr. Speaker, I would like to begin with a discussion of a news item 
which was published today in the New York Times with the headline 
``Pfizer to buy Wyeth in $68 billion deal.'' This deal, according to 
the Times, would create a pharmaceutical behemoth, the $68 billion 
deal. One of the most noteworthy parts of the report indicated that 
Pfizer's bid is being financed by four banks that received Federal 
bailout money, Goldman Sachs, JPMorgan Chase, Citigroup, and the Bank 
of America.
  It goes to say that such banks have been criticized for not doing 
more lending since they received government aid. Needless to say, most 
consumers will understand that if you see a conglomeration in the 
pharmaceutical industry, it can only mean higher costs for 
pharmaceuticals for the American people. But what is interesting is 
this is being facilitated with money from the American people, money 
that went to banks that claimed that they needed the money to survive, 
but now they are using the money instead to help finance acquisitions.
  And they are using the money instead to enable banks to be in a 
position of making direct investments in individual banks if they want 
to, but more specifically, banks have taken a

[[Page H511]]

no-strings-attached approach to the bailout which has enabled them to 
possibly pay down their debt, acquire other businesses, or make 
investments for their future.
  So the taxpayers of the United States, when we look around this 
country, they are suffering in so many ways, their jobs are at risk, 
their homes are at risk, their pensions are at risk, are financing a 
windfall for bankers. The Treasury Secretary said some time ago that 
the banks should use the money to help struggling homeowners stay in 
their homes and avoid foreclosure.
  But that isn't what has happened. Because whenever the banks went to 
Treasury, they were essentially told, look there are no strings 
attached and no conditions attached. We know that in the Cleveland 
area, one bank took $7.7 billion from the Treasury and used it to 
acquire National City Bank which will cost our Cleveland area thousands 
of jobs. National City was sold at fire sale prices. Their stock was 
driven down. The kind of financial double dealing and misconduct that 
went on that made it possible for one corporation to take over another 
corporation's asset, effectively reducing the value of the stock and 
the holdings of stockholders and driving a bank out of business that 
had been in business 162 years and should still be in business today, 
underscores what has been wrong from the beginning with this approach 
of the so-called Troubled Asset Relief Program.
  At the beginning, it was supposed to be about, and it should have 
been about, helping people avoid bankruptcy. That is what Congress had 
anticipated. But instead, what has happened is the banks have seen it 
as a windfall. The government should have looked at the mortgage-backed 
securities, taken a controlling interest and helped millions of people 
stay in their home by loan modification and by writing down the 
principal, perhaps lowering the interest and extending the terms of 
payment, the time of payment because after all, it was the meltdown in 
the subprime mortgage industry that resulted in banks being in so much 
trouble. So wouldn't it make sense that if you enabled people to pay 
their mortgages and stay in their homes that it would have a beneficial 
effect on the banks? But no. What has happened is that homeowners are 
still struggling to survive all around this country from East Coast to 
West Coast and looking at mortgage resets that are coming up in 2009 
with Alt-A and jumbo mortgages. People are in over their head on their 
mortgages because of misconduct in the industry and because of changes 
in the economy. And instead of getting help from their government, the 
government is helping the banks with a $700 billion bailout.
  Now it would be nice if this would be the end of it. In an article in 
the Times called ``The End of Banking As We Know It,'' we have this, 
``it's too soon to say how much taxpayers' money will be spent trying 
to rebuild banks hollowed by out by bank's lending practices.'' Paul 
Miller, an analyst at Friedman Billings Ramsey thinks that the Nation's 
financial system needs an additional $1 trillion in common equity to 
restore confidence and to get lending. It goes on to say that trillion 
dollars could come on top of the funds disbursed already through the 
Troubled Asset Relief Program, which has tapped $700 billion and on top 
of President Obama's stimulus plan clocking in at $825 billion. So, 
hold on to your hat, Mr. and Mrs. America, because the banks are not 
done with this Congress yet. They are going to be looking for even more 
money. And they are not talking about saving homes. They are not 
talking about saving jobs. They are using this opportunity to game the 
system.
  Tom Friedman, in another article in the Times headlined, ``Time for 
Shock Therapy,'' it's all about the banks, folks, quotes David Smick, 
author of ``The World is Curved,'' who says that the bankers are 
sitting on mountains of cash, including our bailout money, because they 
know their true balance sheets are a disaster, far worse than publicly 
stated. No one trusts the banks. And even the bankers don't trust each 
other. Smick goes on to say that bringing clarity to bank balance 
sheets is the first step to fixing America's bank lending problem. 
Friedman writes that only after we bring full transparency to bank 
balance sheets will we see private capital buying into banks again at 
scale.
  He quotes Stephen Eisman, a portfolio manager and banking manager at 
FrontPoint Partners ``the loss of confidence is just a symptom of bad 
credit and overleverage. The banks are not lending because they know 
their balance sheets are loaded with future losses and they don't have 
enough capital.'' Friedman concludes by saying that a stimulus package 
that does not also unclog the arteries of our banking system will never 
stimulate sufficiently.
  So there is a synergistic relationship between the way we are 
handling this situation on Wall Street and the way that we hope to get 
the American economy moving again with a fiscal stimulus. But we cannot 
keep giving away money to the banks and ignore the underlying crisis of 
failure to help Americans save their homes. There could be 10 million 
homes in jeopardy, and people are will say, well, look, if somebody 
didn't do the right job in financing their homes and didn't pay enough 
attention to what they needed to do to protect themselves financially, 
they're on their own. Well, wait a minute. This is affecting all 
Americans. There are neighborhoods in Cleveland where the values of 
property have dropped 25, 30 percent because of foreclosures in the 
neighborhood. Don't think for a moment that just because you haven't 
been foreclosed that you aren't paying a price with this foreclosure 
crisis because the value of your property is going down. All over 
America this is happening. And what does this mean? It means that there 
is a massive shift of wealth in this country going on. It's going on 
for the American taxpayers. It's going on for the American homeowners. 
And it's going right to the top, right to the top. The banks are 
cashing in. Forget moral hazard. It doesn't matter any more if someone 
doesn't do business in the right way. We're bailing them out. Today we 
see stories about nationalizing banks. That is not a proper function of 
the government, to run banks. And yet, we've already moved down that 
path. It's anti-democratic. It could lead to fascism. We have to think 
about the implications of what is happening in our economy.

  We've seen the speculation driving this economy. An economy built on 
gambling and not real production is not sustainable. That, of course, 
means that moving to the financial sector as a source of profits is an 
unsustainable Ponzi scheme. It is based on the arrogant belief of those 
who know the math of the so-called Black-Scholes model, which is a 
mathematical model for pricing options and now nearly every income 
stream can never be wrong. But they were. And the result is not nice to 
see: Massive gambling debts that their formula said were nearly 
impossible and are truly impossible to pay without taking from those at 
the bottom of the economic pyramid. Remember, this time in our national 
experience is all about taking wealth from the great mass of the 
American people, from your paychecks, your wallets, your purses and 
pocketbooks and just moving it right to the top.
  The reason for the breakdown in the financial system is not complex. 
Because we no longer make stuff for a profit, we have to leverage up 
financial instruments, sometimes 30 to 40 times to one to get good 
returns. It is a game for the truly arrogant. It is another example of 
the ``smartest guys in the room'' like Enron. No one, unfortunately, is 
that smart or that perfect. And the bite of leverage, when the 
investment, homes, in this case, goes south, is terrible to behold. 
When all sectors are included, the total debt as a percentage of gross 
domestic product grew 151 percent in 1959 to an astronomical 373 
percent in 2007.
  This is a discussion that comes from an article written by John 
Bellamy Foster and Fred Magdoff in the December ``Monthly Review'' 
called the ``Financial Implosion and Stagnation: Back to the Real 
Economy.''
  So we are in a debt-based economy. We are creating more and more 
debt. The world of financial socialism, in which corporations join with 
the government to strip the remaining assets of the middle class, is 
upon us. Stark economic and political decisions offer a truly explosive 
political scenario over the next several years. The redistribution of 
wealth upwards has surged over

[[Page H512]]

the last 28 years and will not be readily accepted by those at the 
bottom forced to accept structural adjustments to their lives while the 
plutocrats luxuriate.
  In the United States, the top 1 percent of wealth holders in 2001 
together own more than twice as much as the bottom 80 percent of the 
population. I want to repeat that. The top 1 percent of wealth holders 
in 2001 together own more than twice as much as the bottom 80 percent 
of the population. What does that say about a democracy? If this were 
measured simply in terms of financial wealth, that is, excluding equity 
and owner occupied housing, the top 1 percent own more than four times 
the bottom 80 percent. And this, again, is in the Foster and Magdoff 
article.
  From my own research based on the Congressional Research Service, the 
following exponential growth of wealth at the top is illustrative of 
the problem of our faltering consumer economy. The income from wealth, 
and that is interest, dividends, rent and capital gains, between 1979 
and 2003 for the top 1 percent of the population grew from 37.8 percent 
of the total pie to 57.5 percent in that 24-year time period. The 
wealth of America is accelerating to the top. We are in a cycle of debt 
deflation in which financial institutions and individuals see they must 
unwind, deleverage, their 20 to 41 bets, the bailout money was doomed 
to fail, because as Keynes said, it would be hoarded. The vicious cycle 
is that as banks and others sell their assets to reduce their exposure 
to the bursting asset bubble, the value of those assets drop. The 
result is the falling price of a deflationary cycle.
  Now, the pros who put us in this situation don't have any idea, or 
they refuse to examine the evidence, that massive debt imposed on 
families and society is the problem. Debt is the problem here. As wages 
were stagnant, the Fed intentionally created the housing bubble to lure 
people on to debt treadmills to keep the economy afloat. Americans own 
less and less of their homes. And the belief that asset inflation 
separate from wages is real wealth is ludicrous.
  Our economy has hit a massive debt iceberg. And what is the solution 
of the navigators who took us there? Steer north into greater ice 
floes. Using capital for casino games and not to increase production is 
a totally misguided policy. I'm calling for a manufacturing and 
industrial policy, an American manufacturing policy, which says that 
the maintenance of steel, automotive, aerospace and shipping is vital 
to our national economic security and it is vital to our ability to 
defend our Nation.
  If you look at Iceland, whose government is falling right now, and 
you look at Russia and the Baltic States, you get some idea of what 
these neo liberal economic policies would do to this country. The total 
asset of Iceland's banks grew from 96 percent of its gross domestic 
product at the end of 2000 to nine times its gross domestic product in 
2006. And as Magdoff, et al., states, now Icelandic taxpayers, who are 
not responsible for these actions, are being asked to carry the burden 
of overseas speculative debts of their banks resulting in a drastic 
decline in a standard of living. And it's exactly what we're looking at 
in this country, unless we change directions, unless we stop bailing 
out the banks, and unless we take a new direction in how we manage our 
economy.
  We know that the private sector is in a downward spiral that feeds on 
itself. Consumers and businesses are spending a lot less on goods and 
services. As a result, workers at businesses are producing fewer goods 
and services. That means that fewer workers are actually working and 
fewer businesses are working at their potential. Consumers are spending 
less because they have lower incomes. Businesses are not spending money 
on investments and expansion because no short-term profits can be seen.
  There is one unique feature of this recession that we need to keep in 
mind. Consumers are not just out of work and with a lower income but 
they are also highly indebted thanks to the subprime mortgage lending, 
the proliferation of credit cards, and payday lending. That is 
important to keep in mind because it will affect consumers' behavior 
when they receive money, either from the government as a rebate or at 
work. They use a lot of whatever they get to pay down the debt.
  I would like to ask the Speaker how much time I have remaining.
  The SPEAKER pro tempore. The gentleman has 40 minutes remaining.

  Mr. KUCINICH. Let's look at the current unemployment situation 
because we should not have any discussions in this Congress without 
talking about what is essential to the American people, and that is 
jobs. Unemployment in December rose to 7.2 percent. 524,000 full-time 
jobs were lost. December was the 12th straight month of job losses. 
Approximately 2.6 million jobs were lost in 2008.
  Let's get beneath the statistics here. Think of what happens when a 
mother or father comes home and says, I'm out of work. Think of the 
impact that has on a family, especially, as most Americans, they are 
living paycheck to paycheck. What does it mean? It means a whole way of 
life changes. Suddenly the home is in jeopardy because the mortgage 
can't be paid. Suddenly a child's college education is in jeopardy. 
Health care benefits suddenly become threatened. Pensions end up in 
trouble. Credit card debt cannot be paid. Tensions begin to build 
inside homes. We have to remember how this is affecting American 
families, the instability that comes about as a result of unemployment. 
We have to be in touch with the American family and how it is suffering 
right now, not only from the real loss of jobs, but from the 
instability of the potential of losing a job from cuts in wages and 
cuts in benefits. And of course there are 8 million people who are 
working part-time when they want to be working full-time. This is about 
13.5 percent of the American workforce. More than one in eight workers 
in the United States, over 21 million people, now are either unemployed 
or underemployed. In December, over 40 percent of unemployed workers 
had been out of a job for at least 3 months. And 23 percent had been 
out of a job for at least 6 months.

                              {time}  2000

  This job situation cuts across all sectors. Manufacturing lost 
791,000 jobs. Construction job losses reached 899,000. Job losses in 
professional and business services totaled 490,000. And there were 
522,000 job losses in retail trade.
  You only need to think about the past holiday season. There weren't 
as many employees in those retail establishments, and people weren't 
buying as much. They were just looking.
  We need a comprehensive and an ambitious response that addresses 
every sector of the economy and cuts to the epicenter of the financial 
crisis that brought us to this point.
  In my own State of Ohio, the unemployment rate hit a 22-year high 
last month, 7.8 percent. And 2 weeks ago, so many Ohioans attempted to 
file unemployment claims that the Website crashed. The phone lines were 
also down because they couldn't handle the call volume, over 10 times 
the normal call volume.
  Later this week we are going to consider the American Recovery and 
Reinvestment Act. And that, of course, is only a beginning.
  I want to applaud President Obama, Speaker Pelosi, Chairman Obey, and 
everyone who has worked to craft a package that essentially is going to 
be a downpayment on economic recovery. But we have to remember it is 
only that.
  The Federal Government must spend. The government cannot, as in 
recessions past, rely on the American consumer to spend the money out 
of a downturn. Americans have no cash to spend and no credit to access. 
The government must be the employer of last resort and the spender of 
last resort, and the government must spend enough to create demand for 
the goods and services of a full employment economy.
  America has come a distance since the era of Ronald Reagan who saw 
government as the problem. Today in 2009, government is not part of the 
problem, government is the only solution. And if you don't believe me, 
ask those banks who are getting $700 billion and want another trillion; 
from whom, the government.
  Businesses will respond by spending on investments to meet the 
demand, and consumers will be earning money as workers, making the 
goods and services the government is paying for.

[[Page H513]]

  Now we need a broad-based response to the unemployment situation. 
Former Secretary of Labor Robert Rice advocates at least temporarily 
lifting the 60-month limit on welfare benefits. As the nature of work 
changes, we must modernize the safety nets that assist individuals and 
families in time of distress.
  This should include expanding funding and access to Food Stamps, 
women, infants and children's benefits, as well as food banks and 
emergency food providers. There is no reason for us to go back to those 
images of the Depression where people were waiting in bread and food 
lines trying to survive.
  The stimulus bill increases social safety net spending, $43 billion 
for increased unemployment benefits and job training. But you can't 
train people for jobs that don't exist. There is $20 billion to 
increase Food Stamp benefits, $200 million for senior nutrition 
services, $726 million for after-school meals, $150 million for food 
bank assistance, and $1 billion for community services block grants, 
but it is just the beginning.
  We must also modernize the way we provide unemployment benefits and 
measure the ranks of the unemployment because, as we know, many people 
are not even measured in the unemployment statistics. Most States have 
requirements that preclude many people who are losing their jobs from 
receiving benefits. For example, a person working two part time jobs 
who loses both those jobs would be ineligible for benefits in a State 
that requires dislocation from full-time work.
  All levels of government should temporarily relax the rules for 
providing unemployment benefits. We must make sure that all dislocated 
workers, full time, part-time, contract workers, Congress needs to make 
sure that such workers are not falling through the cracks.
  Let's speak about housing. An $8 billion housing bubble has burst. 
That is home equity. That will never return in the lifetimes of 
American homeowners.
  In some areas in Cleveland, my community, housing prices have 
deflated by as much as 75 percent. Some neighborhoods in my community 
in Cleveland still average two foreclosures a day. Foreclosure filings 
increased 303,000 in December, a 17 percent increase from November. 
Foreclosures have increased a staggering 41 percent in the last year. 
Almost every economist and policymaker acknowledges that subprime 
mortgages initiated a foreclosure epidemic that is the epicenter of our 
current financial crisis. The American economy will not begin to 
recover unless we address this core problem of foreclosure. We must 
begin with a massive campaign of mortgage principal modifications to 
make loans available to homeowners. This would solve the problem of the 
borrower as well as the investor. The homeowner can afford to stay in 
his or her home, and the investment stabilizes and regains its 
potential to return a profit, albeit at a smaller margin.
  Mr. Speaker, when I grew up in Cleveland, my parents didn't own a 
home. We were renters. And as our family grew from one to seven 
children, we kept moving. Some people will remember that in the 1950s, 
there were ads in newspapers that said one child only, two children, 
and if you had more, you were out of luck if you were a renter.

                              {time}  2015

  By the time I was 17, we lived in 21 different places, including a 
couple cars. I can understand what it's like for Americans who are 
worried about where they're going to live, about parents who are 
worried about having a shelter over their children's head. I can 
understand that. I can tell you that when I bought my first home, a 
home that I still live in, I bought it in 1971, it was one of the 
proudest days of my life. Think of how many Americans had that same 
feeling, and now we see that there's no hope for them. We have to 
change that.
  It's said that the stimulus package could include anywhere from $50 
to $100 billion. But unless we direct loan modification in the language 
of the legislation, there's no guarantee that when Treasury hands that 
money over to the banks there's going to be any relief at all for the 
American people.
  Now, in the last 30 minutes I've talked about the banks and the 
bailout, I've talked about the plight of the American people, 
unemployment, housing foreclosures. I want to speak about health care 
as a stimulus.
  Today, this day, H.R. 676, the Expanded and Improved Medicare for All 
Act was reintroduced. Medicare for All, H.R. 676, a bill that is the 
Conyers bill, a bill that I helped to write with John Conyers, is one 
of the best ways we can help boost our economy. It eliminates billions 
of dollars in bureaucratic waste that are being funded by everyone who 
receives health care and allows money to be channeled into the economy. 
In fact, it saves so much money that it will be able to cover everyone 
in the U.S. for all medically necessary services.
  We pay almost twice as much for health per person than the average of 
other industrialized nations, yet the World Health Organization ranks 
our health care system 37 in the world. The situation is worsening as 
costs continue to increase, employers continue to scale back coverage, 
and the number of uninsured--now 46 million--continues to rise.
  Four out of five, 82 percent, of the uninsured are in working 
families. Think about it. You are working and you still can't afford 
health insurance. What's happened in America? How many people are not 
getting the care they need because they can't afford to pay their 
hospital bills, in this, a country where by the end of this year I 
predict we will have given $1.7 trillion to the banks.
  The inefficiency of privately administered health care is especially 
stark. Between 1970 and 1998, total health care employment in the 
United States grew 149 percent while the number of managers in health 
care grew 2,348 percent. Managed care has failed to control costs and 
reduce the number of uninsured and underinsured. Employer-based 
insurance is failing and dragging down American businesses. Insurance 
companies make record profits. How? They make money by not providing 
health care. What a business.
  We need to control costs by addressing the real inefficiencies, not 
by continuing to subsidize the financially unsustainable insurance 
industry. And we know exactly how to do it. Traditional Medicare enjoys 
consistently higher satisfaction ratings than private insurance. Its 
overhead costs are about 3 percent compared to overhead costs of 
private health plans, which average about 31 percent. Medicare's rates 
of cost increase have been significantly lower than private insurance 
plans. We need such a time-tested, rock-solid model like Medicare to 
address our health care crisis. In fact, by addressing the 
inefficiencies, we would bring everyone in the U.S. under Medicare and 
they would pay no premium, no deductible and no copayments.
  So, how would H.R. 676 boost our economy, since that is the question 
of the moment? First, it would lower out-of-pocket costs for a vast 
majority of Americans by well over $1,000, enabling them to spend that 
money. And of course it would provide insurance for the 47 million 
Americans who currently are completely without insurance. But it would 
also eliminate about half of all bankruptcies in the United States by 
addressing the enormous problem of the underinsured. Let me explain.
  About half of all bankruptcies, Mr. Speaker, in the United States are 
related to medical bills. Of those who are bankrupted by medical bills, 
three-quarters had some kind of insurance before they got sick. I 
cannot stress enough the importance of this statistic; half of all 
bankruptcies in the U.S. related to medical bills. Of those who were 
bankrupted, three-quarters had some kind of insurance before they got 
sick. Three-quarters of all medical bankruptcies happened to people who 
already had insurance. It tells us in very stark terms that too many 
Americans think they're getting full health insurance when in reality 
they're getting only partial health insurance.
  Health insurance is full of holes. Insurance companies make money by 
denying care. In this case, that means selling plans that have limited 
coverage, and you don't find that out until you actually need it. In 
other words, you have great health care unless you get sick. But under 
H.R. 676, there are no more out-of-pocket costs and everyone is covered 
for all medically necessary services. That means that at least half of 
all bankruptcies are history. Imagine what families could do

[[Page H514]]

with the money when they don't have to worry about climbing out of 
bankruptcy.
  Families would save money in a host of other ways as well; for 
example, car insurance rates would go down because there are no more 
disputes over who pays for health care. Everyone would already have 
health care. The same goes for medical malpractice. Under H.R. 676, not 
only will doctors drastically reduce the amount of defensive medicine 
they practice in order to avoid lawsuit exposure, but they will also 
pay so much less for medical malpractice insurance. Why? Because 
everyone's covered and there is no need to go to court over who will 
pay doctor bills.
  H.R. 676 would provide immediate and substantial relief for American 
businesses large and small. American businesses currently bear the 
burden of the vast inefficiencies in our health care system because 
they provide health care to most Americans lucky enough to have it. But 
all other industrialized countries have universal health care that 
costs less. The result is that our businesses are losing competitive 
advantage. Ontario now makes more cars than Detroit. Canadian GM, Ford 
and Daimler Chrysler signed a letter in support of their single-payer 
health care system specifically because of the competitive advantage it 
gives them.

  These are only some of the reasons that H.R. 676 now has a national 
movement behind it. It's been endorsed by 479 union organizations in 49 
States, including 118 Central Labor Councils and Area Labor 
Federations, 39 State AFL-CIOs, 14,000 physicians and thousands of 
nurses. The deans of Harvard and Stanford medical schools, the former 
editor of the New England Journal of Medicine, two former Surgeons 
General now support national health insurance. Nobel Prize winning 
economist supports a single-payer system like H.R. 676. Public surveys 
consistently place support for Medicare for All approach to health care 
at about 50 percent.
  The legislature in the State of California has twice passed a single-
payer health care plan. States, counties and municipalities all over 
the country have endorsed the bill. In the last Congress, the bill had 
93 cosponsors.
  We have to regard health care as an opportunity for creating not just 
a stimulus, but part of a long-term restructuring of the American 
economy since about 16 percent of our gross domestic product deals with 
health care. It's a great opportunity for us.
  It's a great opportunity to look at a universal prekindergarten 
program, which would, in the long term, pay for itself because it would 
be an investment in our youngest citizens--children ages three, four 
and five--that would enable them to be able to have access to full-time 
day care, would enable their parents, who are now paying a premium if 
they're able to afford childcare, would enable them to be able to have 
solid childcare for their child and not have to pay the premium that in 
many cases is choking family budgets.
  Last week, I introduced legislation to accomplish that. It has broad-
based support among children's advocates. The number of the bill is 
easy to remember, it's H.R. 555--picture three children's hands with 
their stamp on the legislation. This is a bill which also can 
contribute to changing the pyramid which is causing wealth to 
accelerate to the top and enabling more middle class taxpayers to have 
some benefits in this economy, and enabling stabilization of family 
income.
  The Congress is going to have to take quick action to protect the 
savings and pensions of Americans from the cascading failure of the 
entire financial system. It's good that we increase the kind of 
protection that people needed in their deposits, that's a good step in 
the right direction. But even with the action that we've taken, there 
is no guarantee that our country is not headed into the worst economic 
slowdown since 1933. The bailout is having little or no impact on the 
looming municipal bond meltdown and a host of other financial crises 
coming from the slowdown in tax receipts and consumer spending.
  The hemorrhaging brought about by our addiction to debt is far too 
great for simple solutions. The growth of our private and public debt 
from $10.5 to $43 trillion during Alan Greenspan's tenure from 1987 to 
2006 gives us some sense of the real magnitude of the problem. But 
there is a danger in acting rationally with recognizing what we're 
doing. And I will say that I think that Congress acted rationally in 
helping to facilitate a $700 billion bailout without putting any 
restraint on the banks, enabling banks to have, as the New York Times 
reported a Sunday ago, ``a blank check,'' use the money any way they 
want. Taxpayer money should not be expended to line the pockets of 
those who drove the economy into a ditch nor provide them with new 
wheels to drive off the road in another month or two. Money must not be 
frittered away to guarantee the shareholders of financial institutions 
when the American family and pensions may well need direct hope in the 
immediate future.
  I believe in capitalism and market discipline. And I think that we 
need to look at the direction that we take in this country. We have to 
have regulatory and supervisory reform. If you look at the Fed, the Fed 
knew what was happening with these banks and the subprime meltdown that 
was coming, but yet we saw Alan Greenspan pretend that he didn't have a 
clue. What's happened is that the Fed didn't do its job. Now, under 
those circumstances, would you want the Fed to have greater power? 
Remember, the Fed is not run by the Federal Government; it's no more 
Federal than Federal Express. It is a collection of private bankers 
that was established in 1913 by the Federal Reserve Act.
  We have to get control of this Federal Reserve. And we have to make 
sure that the government and the Treasury Department and the Securities 
Exchange Commission, with the Treasury Department, develops the 
regulatory and supervisory reform that will match the changes that were 
created in the Financial Modernization Act of 1999 that took down the 
Glass-Steagall protections of 1933.

                              {time}  2030

  Under Franklin Roosevelt we know that Glass-Steagall prohibited 
intermingling of commercial banks with investment banks, but those 
protections were eroded. Some at the time, and I was one of those, who 
argued against the Financial Services Modernization Act by saying we'd 
end up with lack of transparency, conflicts of interest, mega-banks, 
every one of us who voted against it, we know we were right, but it's 
little comfort to the American taxpayers who are being stuck with this 
$700 billion and maybe another trillion dollar debt as a result of the 
Ponzi scheme that was enabled by the Financial Services Modernization 
Act. The same people that took us into that situation may be in a 
position to do it to us again, but someone has to stand up for the 
American taxpayers and say stop it. Stop these bailouts.
  Federal regulation was lax, and the Federal Government has to stand 
up for the American people as regulators. Taxpayer money must end up 
helping to facilitate credit flowing, but that's going to be up to the 
Treasury to take that responsibility. American pensions must be saved. 
The best way to do that is to buy the companies at a deep discount and 
then prop up the Pension Benefit Guaranty Corporation. Wasting hundreds 
of billions by propping up financial assets of well-to-do Americans 
might be acceptable in less troublesome times; however, at the present 
time, precious money can't be frittered away bailing out those with 
plenty of discretionary income. As David Cay Johnston points out in 
``Perfectly Legal,'' the top 13,400 families in our country have more 
yearly income than the bottom 96 million Americans.
  The financial sector has built an economic system that rewards 
gamblers with lower tax rates and insurance while subjecting the 
American family to growing job insecurity, deteriorating wages, 
evaporating savings, vanishing pensions, disappearing health care.
  This isn't a matter of blaming another political party, by the way. 
This has been a bipartisan debacle. The obscenity of hedge fund 
managers paying a tax rate of about 15 percent for most of a billion 
plus in income while some who clean our bedpans pay a higher tax rate 
must be recognized for what it is: greed and a repudiation of the merit 
of hard work.
  But the middle class has one thing that is growing, and that's debt. 
More

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and more Americans have been maneuvered onto debt treadmills by the 
``banksters,'' as President Franklin Roosevelt called them. Greed 
evolved into a civic virtue and not a cardinal sin until the market 
collapsed.
  But we could take a new direction, and that direction, Mr. Speaker, 
must include monetary reform. As Stephen Zarlenga writes, the bulk of 
our money supply is not created by our government but by private banks 
when they make loans. Through the Fed's fractional reserve process, the 
system creates purchasing media when banks make loans into checking 
accounts. So most of our money is issued as interest-bearing debt.
  Under the Constitution, Article 1, Section 8, our government has the 
sovereign power to issue money and spend it into circulation to promote 
the general welfare through the creation and repair of infrastructure, 
including human infrastructure: health and education.
  It's no secret that our Nation's infrastructure is an unprecedented 
need of upkeep, repair, and replacement. It would take more than $1.6 
trillion to bring our country's roadways up to speed. The Department of 
Education found that we need $127 billion to bring schools nationwide 
into adequate conditions. A study by the Water Infrastructure Network 
found that it would take $1.3 trillion over 20 years to build, operate, 
and maintain needed drinking water and wastewater facilities.
  It's rapidly becoming cliche that crisis and opportunity are 
synonymous. We can turn these difficult times into an opportunity by 
creating millions of new jobs in infrastructure projects. The U.S. 
Conference of Mayors released a report last month that found a $73 
billion investment in infrastructure would yield about 850,000 jobs in 
the next 2 years, would go a long way to meeting our infrastructure 
needs.
  A good start would be to invest in the maintenance and repair of 
roads, bridges, tunnels that are in greatest need. In particular, we 
should invest in a section in the TEA-LU called MEGA Projects. It was 
designed to fund projects that cost $500 million or more and have some 
national significance. These projects are not necessarily ready to go 
today. States could compete to build special projects. States could 
even team up together on high-speed rail or build new bridges. A 
perfect example is the need for a new inner belt bridge in Cleveland.
  Now, infrastructure has to be part of and it is part of our stimulus 
package, but we have to go far beyond what we have in this first 
stimulus package. We have short-term fixes, which a stimulus is, but we 
have to look at long-term restructuring in order to get to where we 
want to go, which is financial stability for all Americans. And so long 
term, we're looking at monetary reform. Monetary reform is achieved in 
three parts which must be enacted together for it to work.
  We are at a time in our country's history where the immediate 
response has been to pour money into the banks who are hoarding it, who 
are not lending it, who are using it for other acquisitions or helping 
to fuel other purchases, and we have an economy that is stagnating. But 
it's time that we asked about some deeper structural questions, about 
the nature of our monetary system, and now is the perfect time to begin 
that discussion.
  So once again I want to bring this before the Congress because if 
we're looking at economic stimulus alone, down the road we may ask why 
that didn't work because if we have a monetary system that still exists 
to accelerate the wealth to the top, God forbid under the 
nationalization of banks, we are all going to wonder what happened to 
the money. You achieve monetary reform in three parts. Any one of them 
or two alone won't do it and could actually harm the monetary system. 
Because of this monetary crisis, we have an opportunity here, and I 
want to make these suggestions:
  First, instead of giving the Federal Reserve even greater power, 
private bankers, giving them greater power, we should incorporate the 
Federal Reserve into the U.S. Treasury where all new money could be 
created by government as money, not interest-bearing debt, and spent 
into circulation to promote the general welfare. The monetary system 
would be monitored to be neither inflationary nor deflationary.
  Second, halt the banks' privilege to create money by ending the 
fractional reserve system. I mean banks essentially create money out of 
nothing. We take out a loan, they take that money, and then they 
leverage it perhaps nine times or more through a system of fractional 
reserve. Past monetized private credit would be converted into U.S. 
Government money. Banks act as intermediaries accepting savings 
deposits and lending them out to borrowers. They would continue to do 
what people think they do now under this new approach. And what would 
the government do? Well, we wouldn't have to borrow money from the 
banks and then own the banks money to continue to finance the needs of 
this country. We could instead spend money into circulation on 
infrastructure, including the crucial human infrastructure of education 
and health care needed for a growing society.
  Now, as Zarlenga points out, the false specter of inflation is 
usually raised against suggestions that our government fulfill its 
responsibility to furnish the money supply for the Nation. He says 
that's a knee-jerk reaction, the result of decades, even centuries, of 
propaganda against government because when one actually examines the 
monetary record, it becomes clear that government has a better record 
of issuing and controlling money than the private issuers have.
  We are at a moment of change in this country. It's a change that 
millions of Americans celebrated last week. I had the opportunity to 
join Members of Congress and watch that incredible moment of the 
inauguration. We saw millions of people coming together in celebration 
of this great Nation. And whether we are Democrats, Republicans, or 
independents, we could not help but be moved by that moment, not just 
the transfer of power but a reaffirmation of who we are as a Nation. A 
government of the people, by the people, and for the people, as Lincoln 
stated at Gettysburg. A government which has the dream to keep 
unfolding to adapt to an undreamed of future. We are at a moment of 
crisis, but that crisis has created new opportunities. It's an 
opportunity for us to reset the pointer of where we go as a Nation and 
try to get control of our Nation again.
  We have lost a lot of control with the $700 billion bailout to the 
banks. We will lose even more control if we give the banks another 
trillion dollars. We will lose even more control if we permit the Fed 
to have total control over supervising corporate conduct in the United 
States.
  But if we take a new direction, if we see government having the 
capability to prime the pump of the economy; if we see government 
having the capability to create jobs where the private sector isn't 
creating jobs; if we see government having the capability of creating 
health care, which will be a tremendous help to the private sector, 
which is laboring right now under tremendous costs for health care; if 
we see government creating possibilities to invest in technology at 
NASA and in other areas of our Nation where we can help to serve as the 
incubators for investment in the private sector, we don't even know the 
kind of growth that we are capable of, by moving towards a works green 
administration, towards wind and solar and micro technologies that 
would enable us to move in a new era of energy and a new era of 
cleaning up our environment. There is a role to work together with the 
private sector, but we're at a moment where the government has to take 
the initiative.
  And it's very clear. I don't want the government running the banks. I 
would like to see the government take control of the monetary supply 
and system. I don't want the government bailing out the banks. I want 
capitalism to have a fair chance to succeed or not. We have a moment 
where we could come together, Democrats and Republicans alike. So as we 
get ready to address, as we will, this American Recovery Act, we need 
to look at how we cannot just recover as a Nation but how we can begin 
anew to restore our country to fiscal integrity, restore the American 
family to health, restore the American family to prosperity, and once 
again restore people's faith in their government.
  Mr. Speaker, I thank all those who have listened for this past hour.

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