[Congressional Record (Bound Edition), Volume 154 (2008), Part 14]
[Senate]
[Pages 19652-19654]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              THE ECONOMY

  Mr. CORNYN. Mr. President, this week I witnessed the devastation and 
destruction of Hurricane Ike in Texas, and, of course, that destruction 
has extended beyond the State of Texas to other parts of the country as 
well, leaving thousands of people without homes, millions without 
electricity, and countless without water and the necessities of life.
  I traveled with the Secretary of the Department of Homeland Security, 
Michael Chertoff, the head of the Federal Emergency Management Agency, 
the Secretary of Health and Human Services, and the President of the 
United States over the past few days surveying this devastation and 
trying to do everything we could collectively, together with the 
Governor of Texas, the National Guard, the Red Cross, and many 
volunteers, to get people back to their regular routine, hopefully back 
in their homes, back to work with power restored and the necessities of 
life being provided as soon as possible.
  There are a lot of people working to make that happen, from private 
businesses to the electric utilities that are trying to get power back 
online to the oil companies. All are working as hard as they can to get 
life back to normal as soon as possible.
  I also witnessed firsthand the importance to the Texans who were 
personally affected by this catastrophe of a calm, reassuring response 
from the Government, a disciplined approach to the problems, and a 
sense of optimism from their leaders about the future. What people want 
from their Government is not panic, is not hyperbole, is not partisan 
attacks and the blame game. What they want is their leaders to talk 
about how we are going to methodically work through this challenge and 
find a solution to the problem.

[[Page 19653]]

  Unfortunately, in Washington, we are facing a very different but 
nevertheless very real storm in our financial markets. The problem is, 
we have witnessed the most recent string of failures that have not seen 
any precedent since perhaps the Great Depression.
  The collapse of companies such as AIG and Lehman Brothers, the 
purchase of Merrill Lynch by the Bank of America, the probable sale of 
Washington Mutual, all on the heels of a massive Government takeover of 
Fannie Mae and Freddie Mac, point to a financial system in serious 
trouble.
  Today we do not yet know where this will all lead, especially how far 
the fallout from the troubled subprime mortgage industry will reach. 
The irresponsibility of so many financial institutions has touched 
almost every segment of our economy, and the effects are far from over.
  While I have heard from many of my colleagues demand for quick 
Government action to counter this downturn, I would caution all of us 
that the most important approach is to take a deep breath, to consider 
the facts, and then to act carefully and deliberately, working together 
across the aisle to identify the actual causes of this crisis and what 
we might do to make things better.
  The first thing you need to do in a crisis is to take stock of the 
situation and identify the specific problems that need to be addressed 
so we can be sure or as much as humanly possible that we don't 
overreact or actually try to treat a problem that doesn't exist or to 
make something bad even worse, indeed.
  Now, if there ever were a time, is a time for level heads and 
bipartisan cooperation, not overreaction and not partisanship. Now is 
the time for an earnest and probing discussion.
  It is clear that many factors have contributed to this problem, and I 
have to say both political parties share part of the blame. In the 2 
years since our Democratic colleagues have taken over, Congress has 
failed to address the rising debt of the Federal Government, with 
deficits at record levels, important tax relief that has not been made 
permanent and which will expire in 2011, and all attempts at addressing 
American energy production and, of course, rising prices at the pump. 
All of those efforts have effectively been blocked.
  But rather than engaging in the blame game, which is a world class 
sport in Washington, and pouncing on this crisis as an opportunity to 
point fingers, the American people need for us to come together and 
have a serious, nonpartisan discussion, investigation, and resolution 
of these challenges.
  One thing that should be crystal clear, however, is that mixing 
public purposes and private enterprise in a quasi-governmental entity 
is a dangerous business, if not more so, than the free market itself. 
The unprecedented collapse of Fannie Mae and Freddie Mac has sent shock 
waves throughout our financial system.
  That is why 2 years ago I joined several of my colleagues in an 
attempt to reform government-sponsored entities. That is what these two 
entities, Freddie Mac and Fannie Mae, are called, government-sponsored 
entities. Unfortunately, folks on the other side of the aisle blocked 
every attempt at that time to reform this broken system. At the time, I 
suppose things seemed to be working pretty well. But as we know now, 
these institutions were rotten to their core and destined to ultimately 
fail. Looking back on those actions then, they seem even more urgent 
now than they did then.
  Now that these institutions have failed, my colleagues on the other 
side of the aisle are calling for investigations they rejected 2 short 
years ago. Representative Barney Frank at that time said:

       These two entities--Fannie Mae and Freddie Mac--are not 
     facing any kind of financial crisis. The more people 
     exaggerate those problems, the more pressure there is on 
     these companies, the less we will see in terms of affordable 
     housing.

  I have said things in the past that I have later on learned to regret 
or had cause to revise and correct. I bet Barney Frank wishes he could 
take those words back today. We have colleagues in this body who went 
so far as to ask the President to immediately reconsider his ill-
advised reform proposals. They are the reform proposals we have now 
enacted, unfortunately now that the horse is out of the barn and Fannie 
and Freddie have failed.
  It is difficult to think that we may have had a chance to head off 
the collapse of Fannie and Freddie and prevent a lot of turmoil we are 
facing now. But, indeed, with the benefit of hindsight, if we had acted 
2 years ago or even 5 years ago to implement the reforms we have now 
since implemented, we could have headed off this calamitous failure of 
these two huge quasi-governmental institutions.
  Then, of course, there is the fact that Fannie and Freddie faced 
increasingly well-documented corruption and mismanagement. In 2006, 
some of the very leaders of those entities paid huge civil fines for 
basically cooking the books to make the profit look better than it 
actually was in order to reap huge financial bonuses. Yet for some 
reason, the Department of Justice gave them effectively a slap on the 
wrist, a civil fine rather than prison time and true accountability.
  Because of the intertwining nature of these quasi-governmental 
entities, Fannie and Freddie, they developed ultimately a powerful 
lobby group and became institutionalized in the Government. They 
developed, in effect, a political shield that made them invulnerable to 
the kind of scrutiny that private enterprise ordinarily would have and 
that proper oversight would produce.
  I have sent a letter to the Attorney General of the United States 
asking for a full investigation into what happened with Fannie and 
Freddie and to find out how two institutions that are so central to the 
issuance of mortgages in the United States could have been so poorly 
managed that they had to be bailed out by the American taxpayers.
  Fannie and Freddie have proven that direct governmental involvement 
does not necessarily mean better management, nor does it preclude 
financial disaster. In fact, the Government involvement itself may have 
created a false sense of security that made it less obvious that these 
entities were, indeed, increasingly a house of cards.
  What was the result? The result is now at least an estimated $200 
billion tab for the Federal taxpayers, maybe higher in the end. All 
told, Reuters has estimated the Federal Government bailouts to date 
have totaled roughly $900 billion. Between Fannie and Freddie, Bear 
Stearns, the FHA, and an assortment of other programs, we will spend 
almost $1 trillion of the American taxpayers' money. This kind of 
spending on private entities and loans cannot protect the economy and 
will only result in higher taxes to pay for it and further dwindling of 
the value of the dollar.
  That is why rather than reacting hastily and increasing the cost to 
the taxpayers, we need to cool down, take a breath, and look at the 
economy more closely.
  No one suggests that regulation is not appropriate in the right 
circumstances, but the Democratic candidate for President, Senator 
Obama, used the word ``regulate'' or ``regulation'' or a variation of 
those words 26 times in a single speech this last week--26 times. What 
we need to ask ourselves is if we have the right systems in place to 
oversee and effectively regulate industry where necessary.
  Anyone who has studied corporate law can tell you there are plenty of 
laws and regulations governing the conduct of business entities. The 
question we ought to be asking is, are they working effectively or is 
the redtape and bureaucracy self-defeating? What can we do to improve 
the regulatory regime, not necessarily use it as an excuse to grow the 
size of Government along with an increase in the tab the taxpayers 
invariably will pick up?
  Rather than taking over businesses and guaranteeing against failure, 
how can we, working together in a nonpartisan fashion, create a more 
effective framework to help business succeed?
  The most important thing to remember is that the free enterprise 
system

[[Page 19654]]

will weather any storm and will bounce back if we let it. But if we use 
this as an excuse to grow the size of Government, to create new 
bureaucracies, to create more redtape, and to create an increase in the 
cost of Government, then it will crowd out the new job creation we need 
in order to keep this economy strong.
  So instead of trying to box in our economy and control it from 
Washington, DC, how it works in every minute detail, we should be 
creating the most fertile environment for the economy to grow. 
Overregulating the economy is like planting an oak tree in a flower 
pot. Even if it survives, it will never get very big.
  There are some things Congress can do and can do quickly. We can 
reassure the American worker that we will keep taxes low rather than 
allow them to grow and increase. We can keep taxes low for individual 
Americans, for corporations, for small businesses. We can make sure the 
capital gains rate is low. We can do what Senator McCain has proposed 
and lower the corporate tax rate, which is the second highest in the 
world.
  Does it make sense to increase corporate taxes because we can stand 
up here and rail against corporations and excess of the market or does 
it make sense to make it more likely that these corporations will 
actually create jobs in America because of a more favorable tax regime 
rather than go abroad and create those jobs because the cost of doing 
business is too high here?
  Another thing we can do is we can help cut out-of-control Federal 
spending. That would help the economy. Spending more Federal dollars 
will only take away from the people the resources we need to strengthen 
the economy--the small businesses that innovate and drive competition, 
the workers who make industry run, and the consumers who return money 
to the economy.
  Another thing we can do is commit to free trade. Free trade creates 
jobs in America from the agricultural produce we grow to the products 
we manufacture that we have new markets for in other parts of the 
world. If we make a commitment to open new markets to fair and equal 
trade, we give new outlets for American goods and produce. Trade has 
always helped businesses grow, and it creates new jobs and higher wages 
right here in America. That is why one thing we could do to help 
stimulate our economy and get the economy back on track is to pass the 
Colombia Free Trade Agreement, something that Speaker Pelosi has 
blocked for many months now.
  We can open America's energy resources for more domestic exploration 
and production.
  Mr. President, I ask unanimous consent for an additional 3 minutes.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. CORNYN. Mr. President, we can open America's energy resources 
right here at home so that we would have to spend less money buying 
that oil from the Middle East or from Hugo Chavez in Venezuela.
  Americans are feeling the pinch of high gas prices, and not just when 
they fill their gas tank. They feel it at the grocery store, and in the 
cost of fuel for the schoolbuses run by the school districts around the 
country, even for our law enforcement officials who drive police 
cruisers. These high gas prices affect all of us, and we could do 
something about it today, right here in Congress, by our being part of 
the solution and eliminating the moratorium on offshore exploration and 
development of the oil shale out in the Midwest and up in the Arctic, 
where we could produce as many as 3 million additional barrels of oil a 
day right here at home, and reduce the amount of money we send to the 
Middle East to buy that oil. We know also that it would create jobs 
here in America to produce it.
  So there are a number of things we can do right here in the United 
States at this time that do not result in overregulation and 
strangulation of an already struggling economy.
  We have seen financial institutions, such as the Bank of America, 
stepping in and shoring up the market and preventing some of the 
losses. And while there is no doubt this consolidation of the financial 
markets is painful for many, we have to focus on long-term solutions 
that will put the economy back on track. Again, this situation calls 
for a calm, nonpartisan discussion that looks for the real root of the 
causes of this crisis and the best ways to recover from it. We should 
remember the old carpenter's adage to measure twice and cut once. We 
can't afford to make hasty decisions that may in the long run hurt our 
economy.
  We may never be able to foresee every crisis that our country or our 
economy will face, but I do know that America is built to weather any 
storm. American ingenuity and the engine of capitalism will always 
rebound, if we will let it.
  Mr. President, I yield the floor
  The ACTING PRESIDENT pro tempore. The Senator from Ohio.

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