[Congressional Record Volume 155, Number 50 (Tuesday, March 24, 2009)]
[House]
[Pages H3791-H3792]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      INVESTORS PARTNERING WITH TAXPAYERS TO BAIL OUT WALL STREET

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Oregon (Mr. DeFazio) is recognized for 5 minutes.
  Mr. DeFAZIO. We have been told this would be the most transparent 
administration in history. And in many areas, they are infinitely 
better than the Bush administration. Their single greatest failing 
comes in the area that, unfortunately, is foremost with most Americans 
today, which is the economy and the bailouts on Wall Street.
  Treasury Secretary Geithner has now proposed a new plan. It is a 
pretty good deal. Taxpayers will put up 95 cents of every $1, investors 
will put up, well, between 5 and 7 cents. And it is called a 
nonrecourse loan; that is, these speculators will put down 5 cents on 
the dollar to bet on certain packages of so-called toxic assets from 
the banks, buying them from the banks, and they will share evenly in 
the profits with the American taxpayers, except the American taxpayers 
put up 95 cents, and the speculators put up a nickel.
  It is certain to perpetuate what has been going on on Wall Street, 
which is making a few people very rich and impoverishing average 
Americans, and this time through the tax system and putting taxpayers 
on the hook.
  The program is reported, according to the Washington Times, to have 
been designed by two prominent Wall Street firms, Blackstone, a 
secretive private equity group, and a company called Pimco, both of 
whom apparently have very large positions in these so-called ``toxic 
assets.'' It is reported by the Washington Times that they suggested 
this to some of their insider buddies in the administration, and the 
insider buddies presented this to Secretary Geithner, who has been 
floundering around trying to put details to his program, and now he has 
found them. So Wall Street has written the details.
  Also, according to the Times, Pimco and Blackstone are not only in 
line to be able to wash some of their toxic assets and to gamble mostly 
with taxpayers' money on other people's toxic assets, but they are 
going to be hired by the government to manage the program. What a 
beautiful sort of circular little system this is.
  We need some accountability and transparency. We need a commission 
akin to the commission named after the collapse in the Great Depression 
to investigate every aspect of what has gotten us to this point, who 
has been involved, what laws have been broken, with subpoena power so 
that some of these people can enjoy, instead of Federal handouts, they 
can enjoy Federal hospitality in a maximum security prison somewhere.
  Plain and simply, I believe the American people are being taken to 
the cleaners yet again with this particular plan. What is wrong with 
actually taking AIG and winding it down? It is a so-called ``zombie.'' 
We are told in vague terms ``it is too big to fail.'' When I asked 
Secretary Geithner, just about 10 days ago, I read in the Wall Street 
Journal, Mr. Secretary, that, in fact, we are shoveling money in the 
front door of AIG because it is too big to fail, the taxpayers are on 
the hook for over $150 billion to AIG, and now we are 80 percent 
owners, and they are still paying bonuses to the people who created the 
problem, and apparently they are shoveling money out the back door to 
some of the firms who are getting money in the front door, most notably 
Goldman Sachs. Goldman Sachs has been getting direct infusions of cash 
from the Federal Government, and now they are going to be made 100 
percent whole on their bets with AIG. They were gambling with AIG, 
betting against other people's securities with these so-called ``credit 
default swaps.'' So instead of saying, ``tough, we will give you back 
your bet, but we are not going to give you 100 percent of the amount 
you were betting on,'' they are getting 100 percent of the amount they 
were betting on, and meanwhile we are subsidizing them on both ends 
here through this black box that is called ``AIG'' that is too big to 
fail, that, gee, it is just way too complicated to explain to you why 
it is too big to fail and why we couldn't unwind this zombie 
corporation in an orderly way. Had we done that last fall or earlier 
this year, then we wouldn't have had to pay the bonuses because it 
would have been clear the company was bankrupt, and it could have been 
taken care of and unwound in a much more orderly way. But we are not 
being given the information about why it is too big to fail and why 
this is the way to do it.
  And when I asked Secretary Geithner, is it true we are giving money 
to AIG that then they are giving to Goldman Sachs for bad bets they 
made? I asked if there was something call a ``naked credit default 
swap?'' He said, ``oh, don't believe everything you read in the Wall 
Street Journal. It is not true.''
  The Treasury has revealed that what I read in the Wall Street Journal 
was indeed true. These same huge firms that are benefiting from a 
direct bailout from the government are also getting a second-level 
indirect bailout on their bad bet. And some of these firms are foreign 
banks. We are not only bailing out the likes of Goldman Sachs. We are 
bailing out Deutsche Bank and other foreign interests.
  This is outrageous. We need a full investigation, an explanation of 
what has gone on and what is going on. We need to take legal steps to 
prosecute any of

[[Page H3792]]

those who broke the laws. And we also have to have stiff new regulatory 
reforms to make sure this doesn't happen again. And none of that is 
happening, sad to say.

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