[Congressional Record (Bound Edition), Volume 154 (2008), Part 17]
[Senate]
[Pages 22979-22980]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            THE PAULSON PLAN

  Mr. ALEXANDER. Mr. President, over the weekend bipartisan 
congressional negotiators worked hard to amend significantly what we 
have come to call the Paulson plan. The whole point of the work over 
the weekend--since last Thursday, in fact--was to do everything we 
could to protect taxpayers. We owe our thanks to Senators Gregg and 
Dodd and Senators McConnell and Reid, as well as Members of the House 
of Representatives and the administration and their staffs for working 
hard, sometimes during most of the night, to have this ready for us 
today. Actually, it was ready yesterday and was posted on the Internet 
so that not only we, but people across this country and around the 
world, could see what was proposed.
  Under the amended plan, the Secretary of Treasury will have authority 
to buy and sell troubled mortgage assets to get the economy moving 
again. Taxpayers will have authority to provide oversight, minimize 
losses, and make sure profits go to reduce the Federal debt. There will 
be restrictions on excessive executive compensation and reasonable 
efforts will be made to make adjustments to help keep people in their 
homes.
  People have been calling my office all week about it, as they have 
all Senators. They are angry about the need to do this. I am angry, 
too. But callers' opinions have been changing about whether we should 
do it, as I believe have the minds of most Senators.
  Most realize that the largest reason for this emergency legislation 
is mortgage loans that people cannot pay back and securities based upon 
those mortgages. This has derailed housing and created problems for 
banks. It has spread uncertainty and caused people with cash to be 
cautious.
  Most realize now that we are not spending $700 billion. The Secretary 
may buy up to $700 billion in troubled mortgage assets--enough to 
restore confidence--but he may buy much less. Over time, he will sell 
those assets, hopefully at a profit, sometimes at a loss. My guess--and 
it is only a guess--net cost to the taxpayer will be $100 billion or 
less, two-thirds of what Congress spent in January on the economic 
stimulus package of tax cuts and rebates. There might even be a profit, 
which under the plan, would go to reduce the Federal debt.
  Most now realize it is important for the Secretary of Treasury to be 
able to buy enough mortgage assets so that institutions are strong 
again, will start lending again, and people will stop hoarding their 
cash. Next week we can fix the blame. Today we need to fix the problem.
  Congress should approve the amended plan without delay--today. If the 
House can pass it today, there is no reason why the Senate cannot pass 
it today and send it to the President. Otherwise, there is a real risk 
that credit will freeze and Americans will not be able to get car, 
student, auto, mortgage, or farm credit loans--or even to cash their 
paychecks.
  This has come so fast and taken such an unexpected turn that it is 
hard for most Americans to know what to think about it. As Senator 
Domenici and Senator Gregg have suggested, think about it as a wreck on 
the highway.
  Think about it as someone who should have known better, dumping 
thousands of bad mortgage loans and other assets in the middle of an 
eight-lane interstate, threatening to bring a halt to all economic 
traffic. Stopped in one lane is your home loan. In the next is your 
auto loan. In the third lane is your student loan. In the next is your 
mortgage loan. Next, your money market account. Next, the money for 
your farm credit loan or even your payroll check.
  Vehicles carrying these essential credits that Americans rely on 
every day have ground to a halt on the economic highway, blocked by a 
big pile of bad mortgage loans. So we end up with this massive wreck in 
the middle of the economic highway.
  Think of the Federal Government as the salvage crew and Secretary 
Paulson as the driver of the wrecker. His job is to buy the salvage and 
get it off the highway as soon as possible so that traffic can start 
moving again.
  And think of yourself, the taxpayer, as the owner of the salvage 
company--doing everything possible to make sure the driver of the 
wrecker can get the pile of bad loans off the highway and sell them for 
at least as much as it cost him to pick them up. If he does this, then 
the lanes will open again, and the vehicles carrying your auto and 
mortgage and farm credit loans and payroll checks will start moving 
again. And the economic traffic will start up again. But that will not 
be the end of fixing the problem.
  The Federal Government's compassion several years ago got out ahead 
of its common sense when it made it possible for people to borrow money 
and buy homes who couldn't pay back their mortgage loans. Clever 
financiers created exotic instruments based upon these loans, some of 
which turned out to be worth less than the loans. People who should 
have known what was going on--both in their own companies and in 
regulatory agencies--didn't understand what was going on or they turned 
a blind eye to it, or worse, they misled people.
  As the New York Times described it yesterday in an article, what 
apparently has happened is that mortgage foreclosures set off questions 
about the quality of debts across the entire credit spectrum. These 
questions set off a spiral of claims against insufficient insurance, as 
in the case of AIG, and of insufficient capital in the case of banks. 
So we end up with this massive wreck in the middle of the economic 
highway.
  This week--today--we need to fix the immediate problem. Clean the 
wreck off the highway. But next week we need to begin to take steps to 
remodel our regulatory agencies--most of which were designed to deal 
with the calamities of the 1930s. I suspect it will be a matter of a 
different kind of regulation that suits these times rather than one of 
more regulation. And we need to find out if there was fraud or 
misleading actions so we can do our best to make sure this doesn't 
happen again.
  Next week we can fix the blame. Today we should unclog the economic 
highway and fix the immediate problem to make sure Americans can buy 
homes and cars and houses, go to college, get farm credit loans and 
cash their payroll checks.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Illinois is 
recognized.

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