[Congressional Record (Bound Edition), Volume 154 (2008), Part 16]
[House]
[Pages 21861-21862]
[From the U.S. Government Publishing Office, www.gpo.gov]




      IT IS IMPRUDENT FOR CONGRESS TO RUSH TO BAIL OUT WALL STREET

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from New Jersey (Mr. Garrett) is recognized for 5 minutes.
  Mr. GARRETT of New Jersey. As the gentleman just explained, the 
dilemma that we are in and where the proper recourse or result should 
go to at this point and what the solution that has been presented us is 
not the correct solution, and that alternatives such as allowing the 
free market to develop, lowering taxes on capital gains and the like, 
allowing the private sector to develop an alternative, which has 
already occurred through the RSC and other forms here in the Republican 
Conference, is perhaps the better avenue to pursue.
  Let me, though, take the next 3 or 4 minutes to answer the question 
that many in the American public are asking tonight, how in the world 
did we ever get here?
  Well, many financial analysts will tell you that the underpinnings of 
the problems that we are facing today in the credit markets on Wall 
Street that

[[Page 21862]]

are affecting the homeowners on Main Street go back a number of years 
and apply to the situation with the GSEs, that is Fannie Mae and 
Freddie Mac. And the suggestion is that had they been appropriately 
regulated over the years, we would not be in this severe financial 
crisis that we are in today.
  So who was raising those red flags years ago to say what should have 
been done? Well if we go back, let's see, 1, 2, 3, 4, 5, 6 years to 
2001, in fact it was the Bush administration that began raising some 
red flags. In 2002 in their budget request they declared that the size 
of Fannie and Freddie is ``a potential problem'' and could cause 
financial trouble and either one of them could cause strong 
repercussions in the financial markets. That was back in 2002.
  2003 is when I joined Congress and served on the Financial Services 
Committee. I immediately began to call for a step-up in regulations of 
Fannie and Freddie. The White House was at the same time doing the same 
thing. They said in 2003, the White House was warning about Fannie Mae 
and Freddie Mac that they needed an upgrade in what we call world-class 
regulation to address something called systemic risk, a risk that could 
spread beyond just the housing sector. In the fall of 2003 the 
administration was pushing Congress hard to create a new Federal agency 
to regulate and to supervise both Fannie and Freddie, these government-
sponsored entities. They and I and other Members from our side of the 
aisle said that we need a strong world-class regulator to oversee their 
operations of their safety and soundness.
  As a matter of fact, I recall a hearing when the then-Secretary of 
the Treasury, Secretary Snow, came in. And he made that point as well. 
But I also remember him getting a lot of pushback from both sides of 
the aisle, but also from the gentleman who is now the chairman of the 
Financial Services Committee. It was back on September 25, 2003, when 
he was in the minority at that time, but he is now the chairman of the 
Financial Services Committee today, Barney Frank said ``there are 
people in the country who are prepared to lend money to Fannie Mae and 
Freddie Mac at less interest rates than they might get elsewhere. I 
thank those people for doing that. I must tell them that I hope that 
they are not doing that on the assumption that if things go bad, I or 
my colleagues will bail them out. We will not.''
  Well the legislation that has come through in July did exactly that, 
bailed them out to the tune of over $200 billion. The legislation that 
the gentleman who just came before me just spoke about will be bailing 
out the financial industry to the tune of $700 billion.
  Mr. Frank goes on to say, ``I think it is clear that Fannie Mae and 
Freddie Mac are sufficiently secure so they are in no great danger.''
  Well of course we see what has happened to them. We just had a 
hearing on them today. And they are now in conservatorship. They were 
in great danger. They were in danger of systemic risk, which has 
eventually brought them down.
  He also said on that day, ``I don't think we face a crisis. I don't 
think we have an impending disaster.'' We all just heard the President 
of the United States on TV last night. He described the crisis that the 
United States is in right now. Whether you call that an impending 
disaster, whether we take action or not, I don't know whether Mr. Frank 
would say or those who pushed back to Mr. Snow, who pushed back to the 
administration, who pushed back to those of us on this side of the 
aisle that said we need to move forward and try to address the issue of 
systemic risk.
  Unfortunately those efforts did not come about. We never got the 
world-class regulator in over the GSEs until it was too late. And now 
we are left with the situation at hand.
  The gentleman who came before spoke of the dilemma that we are faced 
with, a Hobbesian choice of sorts is the way it was presented last 
night: Either you do this or everything will fall apart. Well we 
suggest that there is an alternative to the proposal that the 
administration has proposed. We humbly suggest that alternative should 
be considered in a thoughtful and thought-out process, not one that is 
a rush to judgment, not one that would put the American taxpayer on the 
hook, one that would ask the private sector to take their lead and take 
their step in the process as well.
  We would ask for the time in order to engage in the process.

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