[Congressional Record Volume 155, Number 40 (Friday, March 6, 2009)]
[House]
[Page H3068]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     THE STOCK MARKET RECOVERY ACT

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Illinois (Mr. Kirk) is recognized for 5 minutes.
  Mr. KIRK. Madam Speaker, it is increasingly clear that the stock 
market is voting against many of the policies put forward by this 
Congress. With stocks falling to 12-year lows, we have to reexamine the 
policies that we are pursuing here and ask are they not helping and 
potentially actually hurting our future?
  In past years losses in the stock market hurt Americans indirectly. 
Most people in the middle class did not own stock or rely on it for 
their retirements. But today after the rise of the individual 
retirement accounts and the investor middle class, losses in the market 
directly affect the income and especially the retirement savings of 
many Americans.
  Now, in this Congress we have embraced a high-spending, high-
borrowing, high-tax future for the American economy. As the details of 
our plans became clear, America's long-term investments rapidly 
declined in value. If the losses sustained in recent days continue, 
then the market DOW increase would actually fall to zero by this 
summer.
  In my judgment, it's time to reassess, in a truly bipartisan way, the 
legislation that we need to improve our policies towards the long-term 
future of our economy, towards investors and especially equities on the 
stock market.
  Recently, I joined Congressman Gary Ackerman, Democrat from New York, 
to back legislation that would reimpose the uptick rule and suspend the 
current application of the mark-to-market rule. These two reforms, and 
a ban on issuing insurance to buyers who have no insurable interest in 
property, would do a great deal to reassuring our markets. These 
reforms would not directly confront the policies of President Obama or 
his current vision; they would actually add to his policies, and they 
would quickly act to reassure markets, right now on a downward asset 
spiral that is crippling both credit and equity markets.
  On the mark-to-market rule, look at what a typical transaction looks 
like today. We know that 90 percent of mortgages are being paid on time 
and in full. But any collection of mortgages right now, if bunched 
together, will have a market value of zero; even though 90 percent of 
the mortgages are paid; even though for the 10 percent of homes where 
mortgages are not paid, the mortgage owner would be able to foreclose 
on the property, taking control of land and potentially a house or 
buildings that do have a value. The current mark-to-market rule is 
generating the wrong answer, that these assets actually do not have 
zero value. But because the mark-to-market rule forces accountants to 
place a zero value on these assets, there is a downward spiral in 
banking and financial equities that is ruining our long-term retirement 
savings.
  We faced this problem in the past. President Roosevelt, when he faced 
this problem actually five times worse than the one we face today, put 
forward the Home Owners' Loan Corporation that looked at this problem 
in which half of all mortgages, not 10 percent, were in trouble. And 
what he said was this, through the Home Owners' Corporation: We would 
look at a more bureaucratic formula of the rental value of a property, 
of its underlying salvage value, or of a value of other properties that 
did have a market in recent days in which we looked at the sales over a 
longer period of time. The answer that was generated by the Home 
Owners' Loan Corporation showed that the asset actually did have a 
value and stopped the downward spiral of the market.
  Right now we need to impose a formula well understood in the 1930s 
that would generate the correct answer, that a collection of mortgages, 
90 percent of which are paid, do not have zero value and therefore 
should suspend the mark-to-market rule to prevent the attack on 
equities today.
  Likewise, with the mark-to-market rule generating the wrong answer, 
calling assets which actually have a value being valueless, we should 
reimpose the uptick rule to prevent the sustained negative attack on 
equities that are going on, driving a number of public companies who 
have substantial values into bankruptcy.
  Lastly, we should look very carefully at credit default swaps, 
engineered and put forward most strongly by AIG. We need to prevent 
anybody from buying insurance on an underlying asset of which they have 
no interest whatsoever.
  Next week I will introduce the Stock Market Recovery Act. It will 
include these reforms to stop this downward spiral. We have spent 
enough. We have added $2 trillion in debt. Now we need these 
commonsense, bipartisan reforms to send a different signal to the stock 
market.

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