[Congressional Record Volume 155, Number 51 (Wednesday, March 25, 2009)]
[House]
[Pages H4003-H4004]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              THE ECONOMY

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
  Ms. KAPTUR. Mr. Speaker, I join with the President in expressing hope 
that our economy will begin to recover soon. No one should 
underestimate the pain and worry that the American people are 
experiencing during this economic crisis.
  Every weekend when I am back in Ohio's Ninth Congressional District, 
I hear more worried stories from people about the trouble they are 
having making ends meet and planning for their futures with confidence. 
For the sake of our country, we simply have to get the economy right.
  Thus, I am troubled by several aspects of the most recent financial 
stability plan that Treasury Secretary Geithner unveiled this week. I 
am most concerned by the fact that the American taxpayers once again 
are shouldering far, far too much of the risk that was created by 
unscrupulous traders on Wall Street in the biggest mega banks and 
investment houses. And the plan does not place rigor and market 
discipline to correct what faces us.
  By committing taxpayer dollars to leveraging minimal private 
investment in the private banking system, a private system that is now 
substantially owned by the public, the Geithner plan once again places 
taxpayers on a very large hook. Why should we use taxpayer dollars to 
eliminate discipline and most risk for private investors to purchase 
the bad loans in order to clean up the banks' books? Taxpayers didn't 
create this problem.
  In this new deal, private investors may put up as little as 3 percent 
while government--which means our people--put up 97 percent of the rest 
as a loan, and a nonrecourse loan at that, which means if something 
goes sour, they pick it all up. And guess who gets the profits on the 
upside if there is any? That's not a good deal.
  This is what should be the focus of our concern. According to an 
Associated Press investigation reported recently, these bailed-out 
banks sought to hire 21,800 foreign workers in the past 6 years. Major 
U.S. banks sought government permission to bring thousands of foreign 
workers into our country for high-paying jobs even as the system was 
melting down last year.
  So, as Americans were getting laid off across our country, according 
to an Associated Press review of visa applications, these mega banks 
were hiring foreign workers.
  Dr. Peter Morici, an economist at the University of Maryland, 
described the Geithner plan as ``structured to create more risk for the 
Federal Government.'' Why? Because ``it is going to be the fund manager 
who raised the private money and then borrowed with a government 
guarantee who is going to be paid on the number of loans he or she buys 
and he or she will have the temptation to bid whatever it takes. There 
is going to be real incentive here for people to overbid.''
  Again, the proposal has no market discipline. Price setting will be 
taken out of the normal market process. That is never a good idea.
  ``As a result,'' says Dr. Morici, ``the Geithner plan creates the 
potential for another bubble. You have created the potential for a 
synthetic bubble inside the government,'' inside the public coffers, 
``which could cost the government'' and, in turn, the American 
taxpayers, a whole lot more money down the road.
  Doctor Morici describes the plan as low risk and high reward for the 
private investor and high-risk and high-

[[Page H4004]]

reward for everybody else, the taxpayer.
  I have said all along that the solution to this crisis lies in using 
the existing full authority of agencies such as the Federal Deposit 
Insurance Corporation and the Securities and Exchange Commission. I was 
outraged by the failure of the Bush administration to use these 
existing instruments of the Federal Government, and I am baffled by 
this administration's failure to do so as yet. I am concerned that the 
Geithner plan will actually place at risk the FDIC's insurance fund.
  Dr. William Black, a law professor at the University of Missouri, 
Kansas City, who was a key player in resolving the savings and loan 
crisis in the 1980s and 1990s has pointed to one explanation: The Bush 
administration, in its zealous pursuit of deregulation, ``gutted the 
FDIC and its sister agencies' staffs. The FDIC is trying to staff up, 
but it has put some absurd limits on hiring the best bank examiners. 
The FDIC shortages are critical in examination, not in the use of 
receivership.''
  Mr. Black goes on to say: ``We didn't resolve the S&L crisis by 
appointing `political commisars' to govern failed S&Ls. We hired 
competent bankers with records of integrity to run the receiverships.
  The academic literature concludes that they did an excellent job. It 
is bizarre that (President) Obama and (Secretary) Geithner are 
channeling President Reagan and claiming the government can't do 
anything and the market is all knowing.''
  We have learned that the market is not all knowing, especially when 
it is distorted by greed and avarice and government complicity. We have 
learned the hard way the costs of ``too big to fail.'' We have learned 
not to trust the right-wing ideologues who peddled a devil's brew of 
deregulated and free market fundamentalism.
  We have learned a hard lesson about free market fundamentalism. Just 
as we have learned a hard lesson about free trade fundamentalism. This 
snake oil was peddled by the big banks and the big corporations. You 
can see the effects by walking down the main street of almost any city 
or town in any state surely in the State of Ohio.
  We need to learn the lessons of history and apply them. We need to 
use the proper government instrumentalities. The proper use of the 
market to resolve this economic crisis. Otherwise we will make the same 
mistakes. And again the American people will again be left holding the 
bag of bad debts for generations to come, throttling economic growth 
and compromising our future.
  In the end, we must do what is right, not what might be politically 
expedient.

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