[Congressional Record (Bound Edition), Volume 154 (2008), Part 17]
[House]
[Pages 23378-23379]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    SECRETARY PAULSON'S BAILOUT PLAN

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Oregon (Mr. DeFazio) is recognized for 5 minutes.
  Mr. DeFAZIO. Madam Speaker, just a week ago, Secretary Paulson sent 
an insult down to Congress, an insult to the American people, an insult 
to the Constitution, an insult ultimately to the economy of the United 
States. He sent down a bill that said, in 3 pages, give me $700 billion 
and suspend all the laws, and I will do with it as I see fit and I will 
fix this problem.
  Now, one problem with that is, of course, Mr. Paulson reigned as the 
head of Goldman Sachs while these financial weapons of mass destruction 
were being created, and he amassed tremendous wealth, taking a bonus of 
$39 million in 1 year, accumulating $750 million when he left Wall 
Street to go into public service. So people would say, oh, that's just 
Hank, he's a tough negotiator. That was an absurdity. And it's based on 
a premise that if the American tax borrows money, $700 billion, and we 
take their junk--some pundits called it ``cash for trash''--that 
somehow this would create liquidity on Wall Street and then from there 
it would ultimately trickle down to Main Street, to car loans to small 
businesses to student loans. I never believed that premise, and I think 
the House of Representatives rejected that premise today.
  We have, I think, credible alternatives before us. Mr. William Isaac, 
appointed by Jimmy Carter but reappointed by Ronald Reagan as head of 
the FDIC during the previous worst financial crisis in the United 
States, the savings and loan crisis, Mr. Isaac addressed a number of us 
in the skeptics caucus and a number of Republicans yesterday and others 
and said there's a regulatory way to get at this. There's a problem 
right now. A lot of the banks are actually in pretty good shape. In 
fact, a lot of these subprime assets, 75 percent of them, are still 
paying their bills. But they are basically being required to value them 
at zero right now because of an accounting rule. Change the accounting 
rule, he said, and suddenly a lot of banks that look like they're 
insolvent would not be insolvent and they would have money to lend. 
That would take care of the so-called liquidity crisis, the credit 
crisis that's out there. Further, he goes on with another technique 
that was used by him when he was head of the Federal Deposit Insurance 
Corporation to basically help the banks get through this period with an 
exchange of documents and a subordinate position on their fair value, 
not their fair market value when a market doesn't exist, on all their 
assets after bank examiners looked at it. He used that technique, and 
he solved a $100 billion problem with the potential of 3,000 banks 
going into receivership with the Federal Government, ultimately only at 
a cost of about $2 billion. That's a lot better than the Paulson plan, 
the Paulson premise. We should listen to Mr. Isaac and look at that 
approach as we revisit this issue.
  Further, if we were going to go down the Paulson path, and I don't 
want to, if we really felt we had to throw money at the top on Wall 
Street and buy their bad assets, then we shouldn't put the taxpayers on 
the hook. I proposed something this week and I was told the Street 
wouldn't like it. ``The Street wouldn't like it.'' The street is coming 
to us hat in hand. The Street moguls who hate government are on top of 
their mansion roofs crying for the government to come get them with a 
financial helicopter. ``The Street wouldn't like it.'' A \1/4\ of 1 
percent fee on every security transaction, something that we levied 
from 1914 through the Great Depression. In fact, Congress, over the 
objections of ``the Street,'' doubled the security transfer fee during 
the Great Depression, and we kept it until 1966 when it just lapsed in 
the beginning of this deregulatory era. That would raise $150 billion a 
year, more than enough for our regulatory institutions to engage in a 
very active form of assuring the liquidity of Wall Street firms, more 
than enough to pay for Mr. Paulson's misbegotten plan.
  And then there's another approach, a Democratic approach, used by 
another President, FDR, in the Great Depression. Instead of dumping 
money on the

[[Page 23379]]

failures on Wall Street, FDR said, I'm going to rebuild the economy 
from the bottom up. He invested in roads and bridges. He invested in 
hydroelectric systems, jobs, the WPA program. He put America back to 
work. And as they began to consume and the banks and everyone and small 
businesses did better, guess what. The wealth percolated up to Wall 
Street. Trickle down isn't working real well for average Americans day 
in, day out when you see the disparities in this country that are 
growing and growing and growing, and Democrats should not engage in 
financial trickle down, which is what Mr. Paulson proposed.
  So a simple regulatory approach paid for, if you are going to do the 
Paulson approach, by Wall Street itself; or, even better, something to 
solve the underlying parts of the problem with the economy, an FDR-type 
approach.

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