[Congressional Record (Bound Edition), Volume 154 (2008), Part 14]
[House]
[Pages 19184-19185]
[From the U.S. Government Publishing Office, www.gpo.gov]




         TAKING THE ``FREE'' OUT OF THE FREE ENTERPRISE SYSTEM

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
Washington (Mr. McDermott) for 5 minutes.
  Mr. McDERMOTT. Madam Speaker, this is a propitious day. The market 
dropped 500 points yesterday, the largest drop since 2001. The economic 
and regulatory policies of this President has certainly taken the 
``free'' out of the free enterprise system. Across America, the 
dominoes are falling.
  Bear Stearns fell a few months ago; Fannie Mae, Freddie Mac, a week 
ago; a distress sale of Merrill Lynch over the weekend; Lehman Brothers 
is looking for bankruptcy on Monday morning; and the auto industry is 
looking for another $25 million in bailout; and AIG wants a $40 billion 
bridge loan from the Federal Reserve. The stock market, as I say, went 
down 500 points yesterday. No one really thinks we can see the light at 
the end of the tunnel.
  Who's next? We can't answer that question of who is next, other than 
to say an awful lot of people in the financial industry are working 
nights and weekends to assess their exposure, and do damage control, if 
possible.
  What's next? This is a question we can begin to answer. What's next 
is that the American people are going to be on the hook for the Bush 
problem for the next generation, and in so many ways will have to pay 
much of the financial mess.
  The last 8 years of this administration, they did everything they 
could to eliminate, gut, stymie, and ignore responsibility for 
regulatory oversight by the Federal Government. This administration 
worshipped at the altar of the free enterprise system and the market. 
The President wanted the gold, but without a standard.
  Republicans did everything they could to let the financial industry 
do anything it wanted, regardless of consequence. At the same time, the 
administration made clear in its Federal appointments they wanted 
Federal regulatory agencies on the sidelines.
  Without government oversight watching out for the interests of the 
American people, the industry turned free rein into freewheeling, 
irresponsible policies. When the dominoes began to fall, the 
administration stepped in to charge billions for bailouts to the 
American people. And it's not over yet.
  The current financial crisis is the worst in decades, and yet the 
shell game goes on. The administration wants to hide the extent of the 
damage, the risk, and the burden on the American people.
  I would like to enter into the Record the lead Sunday editorial in 
the New York Times, called: Bailout Hide and Seek.
  The Federal budget deficit has swelled to more than $400 billion, and 
is headed for $500 billion, but the administration wants to keep the 
cost of the bailouts off the Federal books. They want to hide the 
magnitude of the crisis and their duplicity in making it possible for 
the last 8 years of economic abandonment.
  Things are so bad that no one can accurately predict what the cost 
will be or how much the American people have been saddled with. The 
only thing the administration keeps saying is, Charge it to the 
American people. Just like the Iraq war, which is adding up to a 
trillion-dollar tab.
  This President misspent the public trust and squandered the full 
faith and credit of the American people. The bills just keep coming due 
after the administration leaves office. They say in business: There's 
no such thing as a free lunch. What they don't say is that the 
President has arranged for the American people to pick up the tab.
  The American financial crisis is the culmination of Republican 
economic policies. Spend freely, lower taxes, and don't ask anybody to 
make any kind of sacrifice for a war. Just spend. They got what they 
wanted, and left the American people holding the bag, and the tab.
  The next administration will not only have to rebuild America's moral 
leadership in the world, we will have to rebuild America's economic 
system and the confidence here at home. The legacy of this President is 
clear. He took the ``free'' out of the free enterprise system, and 
instead billed it to the American people.
  Madam Speaker, we can't wait to have the change that Barack Obama 
will bring for this country.

               [From the New York Times, Sept. 14, 2008]

                         Bailout Hide and Seek

       On Friday, less than a week after the government took 
     control of Fannie Mae and Freddie Mac, the White House 
     announced that there is no reason at this time to account for 
     the companies in the federal budget. That is great news for 
     officials who prefer to hide the cost of the bailout since it 
     is due, in large part, to their failure to adequately 
     regulate the financial markets and steward the economy. But 
     it is an insult to taxpayers, whose money is at risk, and it 
     is a reckless gambit.
       The Congressional Budget Office reported on Tuesday that 
     the government's finances are deteriorating rapidly: the 
     budget deficit for this year is expected to reach $407 
     billion, more than double last year's shortfall, and to 
     exceed $500 billion in 2009. The takeover of Fannie and 
     Freddie, necessary though it is, will add to the 
     deterioration. Airbrushing that away will only open the door 
     to uninformed--or negligent--decisions on spending and tax 
     cuts.
       The White House says that the extent of the government's 
     control of Fannie and Freddie does not warrant including the 
     companies' operations in the budget. That is absurd. The 
     government has seized the companies, firing their executives 
     and installing new ones, offering to invest up to $200 
     billion in the companies if necessary, and most significant, 
     making an ironclad promise to pay their trillions of dollars 
     in obligations, if need be. The White House also claims that 
     the risk to taxpayers is not yet serious enough to require 
     that the costs be shown in the budget. But there is a very 
     real cost to guaranteeing the obligations of Fannie and 
     Freddie, even if the government never has to cough up a 
     penny. The taxpayer is on the hook while the guarantee is 
     outstanding--and the Treasury says that will last past Dec. 
     31, 2009, when its bailout authority officially ends.
       The Congressional Budget Office has said that it will 
     calculate the cost of taxpayers' risk and include it in its 
     version of the budget, which is separate from the White House

[[Page 19185]]

     version of the budget. Having conflicting budgets is hardly a 
     good way to restore confidence in the government's financial 
     management. But the C.B.O. accounting will prevent the White 
     House from saying, in effect, ``yes, bondholders, your 
     investments are fully guaranteed, but you, dear taxpayers, 
     don't worry, it costs you nothing.'' As the government (read: 
     taxpayers) assumes additional risks, it is more important 
     than ever to get the accounting right. Accurately reflecting 
     the budget cost of the Fannie and Freddie bailout would not 
     lead to an explosion in public debt. Prudent accounting, 
     accurately applied, would limit the amount that must be 
     counted against the nation's overall debt ceiling. Accurately 
     accounting for risk would limit the cost of making good on 
     the companies' obligations to a figure that reflects the 
     likelihood of taxpayers actually having to pay up.
       No one yet knows the ultimate cost of the bailout, but it 
     is already more than zero.

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