[Congressional Record Volume 155, Number 49 (Monday, March 23, 2009)]
[House]
[Pages H3711-H3712]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          WALL STREET BAILOUTS

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
California (Mr. Sherman) for 5 minutes.
  Mr. SHERMAN. I thank the gentleman from Florida for his remarks, 
where he refers to AIG as ``too big to fail.'' The latest from Wall 
Street is, well, it's not so much too big to fail, but too 
interconnected with the rest of financial institutions. ``Too 
interconnected to fail'' is the new line. The fact is this: AIG was too 
well-connected to fail. AIG should have been in receivership, but that 
would have disadvantaged the richest, most powerful interests in the 
world.
  Now let us look at the new public-private partnership plan being put 
forward by the Treasury. It involves a thousand times as much money as 
AIG executives received in bonuses and it would make the American 
people a thousand times as angry, except for the fact that it is so 
technical that the American people may not fully understand it.
  Here is how it's supposed to work. The taxpayer puts up 94 percent of 
the money. The taxpayer takes 94 percent of the risk that the assets 
purchased will end up being worth nothing. Ninety-four percent. And the 
taxpayer gets 50 percent of the profits. The private

[[Page H3712]]

Wall Street interests put up 6 percent of the money, maybe less, and 
they get 50 percent of the profits. What this will mean is that this 
new entity that's created, the public-private partnership, will go out 
and buy these extremely difficult-to-value assets. They're going to 
overpay for some. They're going to underpay for others. They're going 
to make money on some. They're going to lose money on others. When they 
make money, half the profit goes to Wall Street. When they lose money, 
94 percent of the loss goes to the taxpayer.
  These entities are going to be 94 percent government-owned and 
financed. At least we're putting up 94 percent of the money. AIG was 80 
percent government-owned and when they paid a million-dollar bonus, the 
country was angry. Well, what about an entity that's 94 percent 
government-owned? You can be sure this entity will be paying out 
million-dollar salaries, million-dollar bonuses. I wonder whether the 
American people will focus on it.
  What we have had is a circumstance where so far this government has 
transferred hundreds of billions of dollars of wealth to Wall Street. 
But all that money has gone to the big, well-known, publicly traded 
companies on Wall Street. Well, there is another important tribe on 
Wall Street, and that is the hedge funds. Now with this new program, we 
can transfer hundreds of billions of dollars to the right side of Wall 
Street and hundreds of billions of dollars of taxpayer equity, taking 
hundreds of billions of dollars of taxpayer risk, for the benefit of 
the left side of Wall Street. Apparently some people think that's what 
fairness is--massive wealth transfer to both sides of Wall Street.
  Now last week we passed a tax bill. That bill has been criticized by 
Wall Street and the administration. But they've ignored the statements 
of Lawrence Tribe, the foremost expert on constitutional law, the 
professor at Harvard Law School, who outlines step by step why that law 
was constitutional. Now I had problems with the law because it had 
loopholes in it. It will allow the Merrill Lynch executives to keep 
their bonuses. It allows million-dollar-a-month salaries. And I will 
introduce tomorrow what I think is a much more comprehensive effort to 
say that those who work for bailed-out firms shouldn't get more than a 
half million dollars a year, that whatever they get in excess to that 
they ought to return to their companies, and I hope we will have some 
cosponsors for that bill. But it is very plain from Lawrence Tribe's 
analysis that the approach we took in this House yesterday is fully 
constitutional and that the flimsy constitutional arguments that are 
being made against it hold water only because they're repeated over and 
over and over again in somber tones by Wall Street and the 
establishment.
  Let me give you another example. Congress, the Republican Congress in 
1996, passed a 200 percent excise tax which is now law, and that excise 
tax falls on excess bonuses and excess salaries to executives, and it 
was retroactive, 6 months retroactive from when it was passed and it 
took effect 6 months earlier. Why does nobody know about this code 
section with a 200 percent tax on excess compensation? Because it 
didn't affect Wall Street, so it was not controversial. It affected 
those who received excess compensation from charitable organizations.
  I look forward to working with my colleagues to pass reasonable 
limits on executive compensation and to make sure that the taxpayer 
gets more than half the benefits when we put up 94 percent of the 
equity.

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