[Congressional Record (Bound Edition), Volume 154 (2008), Part 17]
[House]
[Pages 23770-23774]
[From the U.S. Government Publishing Office, www.gpo.gov]




              A SKEPTICAL VIEW OF THE WALL STREET BAILOUT

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 18, 2007, the gentleman from California (Mr. Sherman) is 
recognized for the remainder of the time.
  Mr. SHERMAN. I thank the Chair. I have got 30 minutes, and I will 
share some with the gentlewoman from Ohio in just a second to describe 
the flaws with this bill. Believe it or not, 30 minutes is not long 
enough. But first I want to mention about the calls that are coming 
into our office.
  The calls used to be from people around the country. Now Wall Street 
firms have their employees unplugging those headsets to call investors 
and instead calling Members of Congress. So now the calls coming in to 
at least my office have shifted from 20-1 against this bailout package 
for Wall Street, down to about 3-1 or 4-1 against this bailout.
  I ask my colleagues not to be confused. Edit out some of those calls 
that are coming to you from folks who are being paid to make the call, 
and you will realize the country remains absolutely overwhelmingly 
opposed to this Wall Street bailout bill.
  I thank again the gentleman from Ohio, and I will make a few more 
points.
  We had a meeting of the Skeptics Caucus, which is now a bipartisan 
Skeptics Caucus, where we heard from Bill Isaac. Mr. Isaac was Chair of 
the FDIC, having first been appointed to that board by President Carter 
and then appointed by Reagan. You don't find very many people who have 
support on both sides of the aisle like that.
  Bill Isaac led the FDIC in solving the 1981 crisis, which was 
probably worse than the crisis that we have now. He

[[Page 23771]]

used the emergency powers of the FDIC. He was able to solve that credit 
crisis without significant cost to the taxpayer.
  We ought to hear from Bill Isaac. And I look forward to us defeating 
this bill tomorrow so we can have hearings and all my colleagues, not 
just those who came to the Skeptics Caucus, can hear from Mr. Isaac and 
so many others, because the starting point is this testimony that we 
didn't hear before any hearing, because there have been no hearings on 
this bill, but rather a letter sent to Members of Congress by hundreds 
of eminent economists, including three Nobel Laureates. And they said, 
we ask Congress not to rush, to hold appropriate hearings, and to 
carefully consider the right course of action.
  So, Nobel Laureates, economists eminent in their field, say the sky 
will not fall if we take some time. The only way to pass this bill is 
to keep up the panic. The panic has to be calmed down. We have got a 
few days. We have got a week. We have got 10 days, and that is more 
than enough time to write a much better bill.
  But let me summarize some of the other things that Bill Isaac told 
our Skeptics Caucus. A vote ``no'' on tomorrow's bill is not a vote to 
do nothing. It is a vote to defeat that bill and to start writing a 
much better bill.
  Under the bill that comes before us tomorrow, in Mr. Isaac's belief, 
half of all the money is going to be used to bail out foreign investors 
who made dumb business decisions. Now, I am not real sure that I want 
to use taxpayers' money to bail out American investors who made bad 
business decisions. But why are we bailing out the Bank of China? Why 
are we bailing out the Saudi royal family? We are doing so because they 
demand it. They communicate those demands at the highest level to our 
administration.
  After I yield to the gentlewoman from Ohio, I will describe how the 
bill clearly provides that we can send as much money as Treasury wants 
not to bail out American investors, but to bail out foreign investors. 
And when I say foreign investors, I don't just mean companies here in 
the United States that happen to have foreign owners.
  I have sought at the Rules Committee to simply put an amendment in 
this bill to say that we are not going to buy any toxic asset that 
wasn't demonstrably owned by an American on September 20. That 
amendment will not be allowed. It was not allowed last time; it won't 
be allowed this time.
  Why? Because they think they can hide from this Congress and from the 
American people the fact that hundreds of billions of dollars are going 
to overseas investors. And there are transparency provisions in the 
bill on a lot of things, but the one thing that will never be revealed, 
when Goldman Sachs sells a bond on December 1 to Treasury, what will 
not be revealed is whether Goldman Sachs bought it from the Bank of 
China two or three days earlier with intention to sell to Treasury. We 
are going to be buying bonds that are currently in vaults in Beijing 
and London.
  What Mr. Isaac also pointed out is that this bill is not going to 
solve the problem. People think that if you act in a panic and you 
throw $700 billion at something, you are going to solve it. Hardly. In 
his estimation, the credit markets will not be appreciably working any 
better than they are today. They may loosen things up for a week or 
two, but you are looking at a December that is no better than it would 
be if we did not pass this bill.
  The FDIC could solve this problem under their existing powers. If 
they are a little shy to use those powers to the hilt, we can and 
should pass a bill that outlines that, yes, indeed, we do want them to 
use their powers. What should they do? They should provide for a 
temporary time a total guarantee on all of the general credit debt of 
banks, so the regulated commercial banks would be places where people 
know their money is safe.
  They are subject to regulation, and the main part of this crisis is 
that the banks are unwilling to lend to each other as they 
traditionally do because no one bank is sure that the other bank is 
safe. We have got to say the commercial banks of America are safe and 
tell investors around the world that is where they can put their money 
with total safety.
  Now, this leaves out some Wall Street entities that are desperate for 
that $700 billion. They can just taste it. But it allows us to solve 
this problem without appreciable cost to U.S. taxpayers. And the FDIC 
collects an insurance premium from the banks so it would be the 
financial system, not the American taxpayer, paying the cost of taking 
care of this risk.
  Now, I would hope that every Member of Congress has received my blue 
paper. I have sent it out today via e-mail, I have handed it out on the 
floor, but I know there are a few that haven't received it. Please 
contact my office and read these seven pages. Learn how this bill will 
send half the money to foreign investors. Learn how this bill bails out 
firms that will continue to pay $1 million a month salaries, and could 
raise those executives to $1.5 million a month, should they choose to 
do so.
  Please, read the paper. Read about the key provisions of the bill. 
Then you will be armed with the information necessary to deal with the 
fearmongers that tell you, well, you had to pass that bill. You had to 
dump $700 billion from a helicopter onto Wall Street, because somehow 
that was going to take a terrible economy and turn it into a great 
economy.
  Such an action will indeed, will indeed, make things better for a few 
Wall Street executives, and they are very determined, and their 
employees on company time are calling our office.
  With that, I yield to the gentlewoman from Ohio.
  Ms. KAPTUR. I thank the gentleman, the chairman of a subcommittee on 
International Relations, who has just dedicated himself, his great 
intelligence and great fervor, to helping to explain to the American 
people and our colleagues what is really at stake, and to try to move 
this institution, the House of Representatives, the closest body left 
at the Federal level to the American people, to move us to the right 
decision tomorrow.
  Tonight, so many of us, we are praying for our American republic, and 
we ask the American people to pray with us and to pray for this House, 
and to pray without fear. Franklin Roosevelt said, ``All we have to 
fear is fear itself.'' We need to make wise decisions; not decisions 
made in haste or in panic.
  If we vote ``no'' tomorrow, that is not a vote for no action. A 
``no'' vote tomorrow will signal we want a better answer, and we will 
work here until we get it.
  The other night the Senate voted to pass their version of a bill, and 
the stock market went down. Explain that to me. They passed the bill. 
It goes down.

                              {time}  2000

  I don't think there is any relationship between day-to-day trades, 
what is happening in the markets and what is happening here. We know 
that there is a serious issue in our financial system because credit 
markets are seized up. As others have said, what we can do there is to 
ask the FDIC to employ its emergency powers, which are already law, and 
agree to cover all creditors, bondholders and depositors in those 
institutions and that that will take the fear out of that system 
because they're scared, too, because they don't know, if they borrow 
from bank X in another city, whether that bank will be around the next 
day. Those banks are liquid. In other words, they have money to lend, 
but they're afraid, too. So we've got to get the fear out of the 
system. Let us pray to not have fear.
  If we pass the bill the administration has sent us, one of the things 
that's going to happen, plus what they did over in the Senate, is that 
we're going to add 870 more billion dollars to our debt. We can't 
afford to do that right now. That is a very bad decision because we are 
in debt. We will be over $12 trillion in debt. The value of our dollar 
is already going down. This will push it down more, and our deficit is 
going up, which is not such a good position to be in. So we need a 
solution that doesn't raise our deficit by any more.

[[Page 23772]]

  By declaring that emergency at the FDIC, it gives the FDIC and its 
bank examiners enormous powers to go around and to try to make the 
loans that are necessary, to work out real estate loans where those 
need to be worked out. They can even get into executive compensation, 
and they can look for fraudulent accounting throughout the country. 
That's what bank examiners do, and they're really good at it. Ask any 
banker. We need to enliven that system and make it function.
  Then we need to ask the Securities and Exchange Commission, which has 
moved along this week and has been doing better than it has in the 
past, to help these banks within their accounting systems give a true 
value to the real estate assets on their books and not to some 
artificial index that bears no relation to reality, to what has 
happened in Cleveland or in Toledo or anywhere else, and to use the 
private sector as we did back in the 1980s--to heal the system and to 
use its power and to do it with discipline and rigor, not to take $870 
billion and reward those who have had very bad behavior on Wall Street.
  I'm sure my dear colleague from California and Congressman Kucinich 
from Ohio, who has been such a stalwart in fighting for the people of 
Cleveland and of our country, would agree that the bill they're sending 
over from the Senate has had no hearings in this House. When we sent 
our bill over there, it was about that thick. The bill that came back 
to us today is about that thick. It was so heavy I couldn't even carry 
it over here to the floor. We have had not hearing one on that bill 
here in this Chamber. We are not following regular order, and that is 
not in the interest of the American people. At a minimum, there ought 
to be regular order with the committees of jurisdiction.
  They've stuffed tax issues in that bill over on the Senate side. I 
understand there are Exxon Valdez provisions. There is even something 
for wooden arrows for children. There are trade provisions in there, 
and there is even Puerto Rican rum. How about that one? They've put the 
Alternative Minimum Tax in there, which sounds great except they didn't 
have any offsets, so it increases the deficit even more.
  We haven't had hearings, so we'll have to do a better job of due 
diligence here. Really, our leadership should allow us to do that. One 
day or two days or five days isn't going to make that much difference 
in what is happening in the markets.
  Let me give a point of view here as to one of the things that, I 
think, is happening in all of this. Why is the Treasury moving this in 
this way so fast now?
  I think it has to do with the fact that so much of our debt has been 
financed by foreigners and by foreign banks that the Treasury is a 
little bit worried about that as we begin a new fiscal year and that 
rather than presenting a balanced budget or a budget that moves us to a 
balance over the next few years that they're giving us more debt on top 
of old debt, which is a backwards way to help this economy.
  This past week, it was announced in Reuters news service that seven 
banks in China had lost over $700 million because of what happened at 
Lehman Brothers with its implosion and that the National Bank of China 
was paying attention to that and that the debt dealings that they were 
having with the United States, particularly at the beginning of the new 
fiscal year, which is October 1, had created a bit of tension in that 
system and that it is actually our deficit and our difficulty in 
financing that--because we have a President who conducted two wars 
without paying for them--that our credit situation is not as good as it 
should be.
  There are instruments, we've been told, such as credit default swaps 
and collateralized debt obligations that have to be covered. Well, 
let's be honest with one another. If that's what we're going to be 
doing, then let's tell the American people, and let's get it done the 
right way. We understand, in this $870 billion that they want to take 
from the taxpayers, that over half of that money will go to foreign 
creditors. Doesn't this Congress and don't the American people have a 
right to know to whom and how much and what this all means and how we 
got into this situation? Because, if we really don't understand what 
we're getting into, we can't get out of it. If only a few people know--
and this is an inside trade, inside of Washington--and the American 
people don't understand it and we don't do this together as a people, 
then how are we really going to make it better unless we all walk 
together and get through this together?
  I have a great deal of confidence in our banking system, and I would 
encourage and would hope that Secretary Paulson and the chairman of the 
Federal Reserve, Chairman Bernanke, and the head of the Federal Deposit 
Insurance Corporation, Chairman Bair, and the head of the Securities 
and Exchange Commission, Christopher Cox, eat lunch tomorrow. I hope 
you figure out how to advise the President of the United States because 
I really do think those emergency powers at the FDIC would give great 
confidence to the system. When you do that, you will get an inflow of 
foreign funds into this country rather than the kind of policy you're 
following now, which is making those credit markets tighter and tighter 
and tighter in a banking system that is fundamentally sound and liquid.
  So pay attention to the booking of those assets through the 
Securities and Exchange Commission. Help our banks weather this period. 
Give them some confidence, and help us to heal this in the full 
sunlight, not in a quick vote that is rushed through here tomorrow.
  I want to thank my dear colleague from California, Brad Sherman, who 
has been a true, true leader in this effort to try to do this the right 
way, not the fast way. I thank the gentleman.
  Mr. SHERMAN. Thank you. I thank the gentlelady from Ohio.
  The only way they can pass this bill is by creating and by sustaining 
a panic atmosphere. That atmosphere is not justified. Many of us were 
told in private conversations, if we voted against this bill, that, on 
Monday, the sky would fall and that the market would drop 2,000 or 
3,000 points the first day and another 2,000 the second day. A few 
Members were even told that there would be martial law in America if we 
voted ``no.'' That's what I call fear mongering--unjustified, proven 
wrong.
  We've got a week; we've got 2 weeks to write a good bill. The only 
way to pass a bad bill: Keep the panic pressure on.
  Now, what has the Senate done to this bill? First, they've added pork 
to it in the hope that that would buy off some votes. Second, they've 
created a double hostage situation. Now, we already know that the first 
bill was a hostage situation. When Paulson announced this crisis, he 
basically sent a ransom note, and that ransom note read, ``We've got 
your 401(k), and you'll never see it alive again unless you send us 
$700 billion in unmarked bills.'' So we had one hostage situation.
  There's the AMT patch, a necessary tax provision that Congress passes 
every year. Without this patch, the AMT tax, which is designed to fall 
only on the wealthy, will hit another 20 million American households. 
Everyone knows we have to pass this. We sent it to the Senate for them 
to pass. Instead of passing it, they created a hostage situation. They 
refused to pass it. They put it on this bill. So now we're being told, 
if you don't send $700 billion to Wall Street, we're going to tax 20 
million American families in a way no one in Congress wants to do. 
That's totally phony. If we vote down this bill, the Senate will pass 
the AMT patch bill that we sent them just like they do every year.
  There has been some attempt to tell the American people that this 
bill isn't going to cost anything permanently because, in 2013, we're 
going to get the money back from the financial services industry. 
Nothing could be further from the truth. All the bill says is that the 
President has to send us a proposal to tax the financial services 
industry. Now, keep in mind, if the President has any good ideas in 
2013, he'll send them to us or she'll send them to us. If the President 
is only sending us revenue ideas because they have to send them and 
they don't want to send that proposal, well then, they're going to send

[[Page 23773]]

it with a note, saying, ``I'm required to give you this proposal, but I 
think it's a bad idea.'' What do you think we're going to do with a 
Presidential proposal that is disparaged by the President?
  Furthermore, it would be absolutely impossible and contrary to the 
intent of the bill, contrary to the logic of the bill and contrary to 
the statutory provisions of the bill to construct a tax that hit only 
those companies that got bailed out. Instead, the tax is going to hit 
the entire financial services industry, and a proposal like that is 
highly unlikely to pass the House. If it passed the House and if it got 
over to the Senate, 41 Senators could block it, and Wall Street could 
have enough money to hire 4,100 lobbyists.
  Now, why is it that we can't tax the individual companies that are 
bailed out on some sort of proportional basis?
  Well, first, many of those firms aren't going to exist in 2013. 
Second, we're not even keeping track of how much money we lost on the 
assets we're buying from Goldman Sachs versus how much money we're 
losing on the assets we're buying from Citibank. We'll know how much we 
bought from each of them, but we might buy really toxic assets from one 
and only mildly troublesome assets from the other. We'll mix them 
together. Then we'll sell them off and we'll suffer a loss, and we 
won't know how to attribute that loss. How much are we going to tax 
Goldman Sachs? How much are we going to tax Citibank? We'll never know 
how to tax those we'll have bailed out.
  Some of these companies we're bailing out are just going to be shell 
companies, so you know they're going to disappear before 2013, and you 
know that a tax bill is going to hit similarly sized banks with the 
same rate of tax: the banks that got a big bailout, the banks that got 
a small bailout, the banks that didn't get a bailout, the banks that 
sold us kind of bad assets, the banks that sold us assets that turned 
out to be worthless.
  Such a controversial tax bill submitted under duress by a President 
is not going to pass this House, let alone pass the Senate, which can 
stop it with 41 votes. Wall Street gets their money now, and we get it 
back: never.
  Now, as I said, hundreds of billions of dollars are going to be used 
to bail out foreign investors. That is why my amendment, which easily 
fixes that problem, has been rejected, because the White House demands 
that we bail out these foreign investors. That's what they want to do. 
That's what they promised the Saudi royal family. That's what they 
promised the Bank of China. Those promises will be honored with the tax 
money squeezed out of the American people.
  They talk about executive compensation being controlled in this bill. 
They do put some controls on some bonuses being given to some departing 
executives--great--but they allow $1-million-a-month salaries. If some 
executive says, ``well, you know, you wanted to pay me a good bonus on 
top of my $1-million-a-month salary and now the bonus formula is being 
changed a little bit,'' the company can say, ``You know, you're right. 
We wanted to give you more money. We'll raise your $1-million-a-month 
salary to $2 million a month.''
  Now, if that qualifies as limits on the executive compensation of 
companies that need and get a bailout under this bill, please explain 
to me how that is. Look, Bill Gates is running a great company. He 
doesn't need a bailout. I hope he gets paid a whole lot. But if your 
company has been run into the ground, if you need a bailout, if you're 
part of the reason for this panic situation, why do you need to pay 
over $1 million a year to any executive? That ought to be the limit. 
Frankly, it strikes me as a generous limit.
  We're told that there's going to be oversight under this bill. There 
is a good, Democratic-dominated board that is created. It is a critique 
board, not a control board. It is a board that will issue press 
releases and reports, but it will not halt and it will not reverse and 
it will not delay any decision that will be made by the Secretary of 
the Treasury, which brings up another thing:
  Why are we having Paulson run this thing? I thought he already had a 
job. The Secretary of the Treasury ought to be a full-time job if we're 
in a period of an unparalleled, sky-is-falling economic crisis. 
Furthermore, he is temporary. He is leaving Washington in January. Why 
doesn't this bill provide for an administrator selected in a bipartisan 
way and with bipartisan support who is willing to stick around for 2 or 
3 years? Because this is a Paulson-Bush power grab. Paulson doesn't 
want somebody else to do it. He wants to be up on Wall Street, handing 
out the money to the companies he likes and ignoring the phone calls 
from the firms he doesn't like.
  I want to point out that, if another Member comes to the floor in the 
next couple of minutes, he can claim the next hour. Otherwise, for 
better or for worse, this speech and all of the pontificating on this 
floor will be over soon. So I hope Members will come to the floor. 
We've got a lot to discuss.
  The board is just a critique board. Paulson's power is undiminished, 
and we're having a part-time, temporary employee run this because 
that's what Paulson really wants. Homeowners are not going to get any 
relief under this bill. All $700 billion can easily be spent.
  I see the gentlelady from Ohio (Ms. Sutton), and I hope that she 
claims the next hour of time. I thank her for coming here and for being 
here so quickly. I will use the remaining 3 minutes of my time, and I 
will look forward to being part of her Special Order, right up until 
the Vice Presidential debate starts.

                              {time}  2015

  We are told in 2009 we are going to pass really good legislation to 
make sure that this never happens again--corporate governance reform, 
regulatory reform, we are going to get it done. What is really going to 
happen? We may write a really good bill in the House, something Wall 
Street really hates. Then it goes over to the Senate where 41 Senators 
out of 100 is all it takes to block it. I don't think they will defeat 
reform legislation in the Senate. They will delay it and then they will 
dilute it. And by the time it passes, it will be so diluted, Wall 
Street will drink it down with a smile on its face knowing that no 
effective reform is really being imposed upon them.
  So we are not going to see meaningful regulatory reform; although we 
will pass something and Wall Street will tell you it is a big deal. We 
will see million-dollar-a-month salaries, or one-and-a-half million or 
$2 million a month salaries paid to the executives of these firms while 
they are getting a bailout with our taxpayer money.
  We are going to see a very large percentage of this money going to 
buy securities, bad paper, and toxic assets currently in safes in 
Shanghai, Beijing, London and Riyadh, Saudi Arabia.
  We will see all of the power in the hands of the Bush administration 
and in the hands of a part-time temporary administrator, namely the 
Secretary of the Treasury.
  Under this bill, if it passes, we don't really know what is going to 
happen to the economy. No one knows. The only thing that is certain, 
two things: Wall Street executives are going to get huge amounts of 
money and our children and grandchildren are going to get stuck with 
hundreds of billions of dollars of additional Federal debt. And we as a 
country, having just done a bad $700 billion program, will not be able 
to do anything to help homeowners because we won't have the money. We 
won't be able to bail out local governments because we won't have the 
money. We won't be able to deal effectively with the real banking-
lending crisis because we will have shot our entire wad on a bill that 
is guaranteed only to do one thing, and that is to help the truly 
wealthy on Wall Street.
  My time has expired, and I look forward to the Speaker giving 
unanimous consent to the gentlelady from Ohio controlling the next 
hour.

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