Feeney Response and Alternative to Paulson/Frank "Rescue Plan"
Tom Feeney Opposes Bailout of Wall Street Speculators
(Washington, DC) - Tom Feeney (R-Oviedo), member of the House Financial Services Committee, released this statement regarding his opposition to the largest intervention in financial markets since the Great Depression. In 2005, Rep. Feeney and Rep. Jeb Hensarling introduced an amendment in the Financial Services Committee that protected taxpayers from crushing bailouts of Fannie Mae and Freddie Mac. Rep. Feeney also introduced the Taxpayer Bailout Protection Act to require executives of publicly traded companies who are bailed out by taxpayer funds to repay any bonus from the year of the bailout and the two previous years to the U.S. Treasury. Tom Feeney's economic plan and concerns with the Paulson/Frank "rescue" plan are below this release.
"Last week, I said that I will vote against a bailout unless a free market approach is taken that puts the burdens of rescuing Wall Street on the private sector, not taxpayers. This $700 billion bailout is touted by Treasury Secretary Paulson and Chairman Barney Frank, as once again, the cure all for America's economic woes. Yet it fixes none of the fundamental structural problems that American government is responsible for. While I believe that intervention is needed, the Paulson plan's broad alteration of our free market system is not the answer and we need proposed market solutions to the credit crisis. Buying troubled assets on Wall Street balance sheets does NOT stimulate American banks in Central Florida, but it does create a huge new bureaucracy which may control lending in America and become the largest leap toward socialism in my lifetime.
"I fear that this rushed plan mirrors the populist-socialist responses that lengthened the Great Depression during which 50% of American banks collapsed and unemployment stayed over 10% during a dismal decade. While we cannot turn back time and undo decades of government actions that allowed Fannie Mae and Freddie Mac to swell to unsustainable financial heights, we can move forward and ensure that hardworking Main Street Americans do not foot the bill for past speculation by Wall Street executives or liberal politicians who browbeat lenders to make loans to people without adequate credit ability.
"Finally this bill increases the amount of federal debt to $11.3 trillion, a 26% increase in the two years since Democrats took control of Congress. That is an additional $8,000 of debt for each American man, woman and child," said Feeney.
Feeney Response to Paulson/Frank "Rescue Plan"
"The free market failed, it's up to government to fix the problem"
Democrat Financial Services Chairman
Barney Frank, author of the Bailout Bill.
Who/what caused subprime bubbles and the current economic crisis?
Treasury Secretary Alan Greenspan in 2005 said:
If Fannie Mae and Freddie Mac "continue to grow...they potentially create ever-growing potential systemic risk down the road ... we are placing the total financial system of the future at substantial risk."
During a Financial Services Committee legislative markup on May 24, 2005, the Hensarling/Feeney Amendment was offered to protect taxpayers from crushing bailouts of Fannie Mae and Freddie Mac.
The Hensarling/Feeney Amendment established a new regulator to:
1) repeal the Congressional charters of Fannie Mae and Freddie Mac
2) create a bank-like secondary mortgage market, and
3) establish new charters for limited purpose mortgage securitization entities that could be auctioned off competitively.
Feeney voted YES but the Democrats unanimously voted NO and killed reform and taxpayer protection.
Why?
Leading Democrat Barney Frank said in 2003:
These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
After billions in accounting scandals at both Fannie Mae and Freddie Mac, Barney Frank said in 2004:
"I don't see anything in your report that raises safety and soundness problems."
"I have seen nothing in here that suggests the safety and soundness are an issue. And, I think it serves us badly to raise safety and soundness as kind of a general [inaudible] when it does not seem to be an issue."
Democratic leader Maxine Waters said:
"Through nearly a dozen hearings that we were, frankly, trying to fix something that wasn't broke. Mr. Chairman we do not have a crisis at Freddie Mac, and in particular Fannie Mae under the outstanding leadership of Mr. Frank Rains."
Feeney also voted in 2005 to cut off a $2 billion line of credit from U.S. taxpayers to Fannie Mae and Freddie Mac.
Today, the same people who protected Fannie Mae and Freddie Mac are proposing a $700 billion bailout of Wall Street speculators.
Barney Frank and other Democratic leaders revised the Community Reinvestment Act in 1995, forcing Fannie Mae and Freddie Mac, and all American lenders to make risky loans to people in poor communities. Loans were given regardless of the borrower's ability to pay.
And, ACORN, a corrupt left wing "community group" engaged in extensive voter registration fraud across this country, was given taxpayer money to extort banks and lenders into making more bad loans.
Taxpayer money was used to browbeat lenders to make non-creditworthy loans.
Since the economic credit crisis began, we were told by Secretary Paulson and Barney Frank that:
1. The $152 billion "stimulus" package would resolve the American economic problem. (Feeney predicts it is a silly "rain dance," having no long term stimulus)
2. The Bear Stearns taxpayer bailout would resolve the credit crisis
3. The Fannie/Freddie bailout in July would totally resolve the financial crisis and the U.S. Treasury would not have to take over Fannie Mae and Freddie Mac. (Feeney votes no and predicts bigger problems for America)
4. The federal government takeover of AIG, the largest insurer in America, would end this global crisis.
The current $700 billion bailout, touted by Treasury Secretary Paulson and Chairman Barney Frank, fixes none of the fundamental structural problems the federal government is responsible for.
Buying troubled assets on Wall Street balance sheets does NOT stimulate American banks on Main Street in Central Florida to increase lending and credit.
It adds short term money, which banks will HOARD, as they are required to increase reserves and make fewer loans to healthy consumers and businesses.
It does NOT privatize Fannie Mae and Freddie Mac.
It does not repeal the Community Reinvestment Act.
It creates a huge new bureaucracy which may control lending in America and become the largest leap toward socialism in my lifetime.
What Congress must do to save American freedom and our economy.
1. Stop naked short selling of bank stocks -- Predatory investors, including foreigners, sell stocks they donât own to drive down the price of the stock, which they can later buy cheaper and profit. This kills bank equity and forces banks to stop making loans in order to meet material reserve requirements. (In September of 2006, Tom Feeney sends a letter to the SEC with his concerns over naked short selling)
2. Guarantee bank deposits in excess of $100,000 and bank creditors -- This will bolster bank share prices and lead to more immediate lending to families and small businesses.
3. Issue guaranteed network certificates in exchange for bank promissory notes --This will get banks to save lending restrictions and give them time to work through the real estate mess.
4. End "mark to market" accounting rules -- Banks and institutions that hold packages of securitized mortgages cannot sell those packages because in this environment there are NO buyers. But those mortgages are secured by real estate worth some value, even if it is not 100% of the loan value.
These mortgages are not worth zero, just because there is no market to buy them during this crisis. Banks have to count such mortgage holdings as ZERO asset reserves. Every dollar a bank counts as reserves would result in $10 in lending ability today.
Mark these assets at "fair market value."
5. Jump start private purchase of mortgage securities -- Don't buy $700 billion in troubled mortgage securities with taxpayer money. Have an auction for private investors using private money to make such purchases. To start buyer activity, grant buyers a zero percent capital gains tax - not the 28% tax Senator Obama proposes, but 0%.
Most mortgages will be purchased without any taxpayer exposure.
6. Establish a privately funded insurance model for mortgage backed securities -- Holders of these securities would pay risk-based premiums to fully fund a guarantee of asset values, without taxpayer exposure.
7. Unleash the American Economy -- Immediately pass comprehensive energy policy that will put hundreds of billions of dollars into the American economy overnight.
Congress should pass free trade legislation including agreements with Columbia, Panama and South Korea to help American exporters.
Without delay Congress should kill the built-in Democrat tax increases which are scheduled to raise taxes on Florida families by $3,040 a year.
Finally, the Paulson/Frank bailout bill raises the federal government's debt to $11.3 trillion -- a 26% increase. In the less than two years Democrats have controlled Congress, the national debt has jumped over $8,000 for every man, woman and child in America. Can we afford 2 more years of that behavior?
Tom Feeney in the Wall Street Journal
Wall Street Journal
POTOMAC WATCH
SEPTEMBER 19, 2008
http://online.wsj.com/article/SB122178430722754827.html
How to Campaign
In a Financial Crisis
By KIMBERLEY A. STRASSEL
"I come today to speak on behalf of the forgotten man, and that includes some 50% of Americans that either own their home, or are renting . . . the 95% of homeowners that are making their payments on time . . . the 99% of Americans that did not behave irresponsibly . . . that ultimately will pay the price for this bill."
John McCain? Dream on. Those were the words of Florida Rep. Tom Feeney in May, as the House considered a housing bailout. If the flustered McCain campaign is looking for pointers on how a principled conservative can politically weather a financial storm, it might make a study of this Sunshine State Republican.
Especially given Sen. McCain's misguided response to this week's financial meltdown. Taking a cue from Hillary Clinton, he's gone populist, railing against "failed regulation, reckless management and a casino culture on Wall Street." He's offered no other explanation for how the U.S. got into this mess. He's signed on to pretty much every Washington bailout.
Mr. McCain has, in short, yielded to every temptation faced by a Republican in a financial crisis. Government largely created this mess, yet in a bid to look proactive he's calling for more government. Markets by necessity have winners and losers, yet he feels the need to offer aid to Americans who made bad bets. Voters are intelligent enough to have a serious financial story explained to them, yet Mr. McCain blames Wall Street.
Mr. Feeney might well be tempted to also indulge in this game. The three-term congressman, one of the most conservative members of the conservative Republican Study Committee, is fighting one of the toughest re-elections in the country. House Democrats have targeted his central Florida district for their "red-to-blue" program, and are pouring money into the campaign of former state Rep. Suzanne Kosmas. Mr. Feeney may be outspent 3 to 1, in a district with a rising number of independent and Democratic voters.
It's a district acutely sensitive to today's crisis. It has only 4% of the state population, but 7.5% of the Floridians who have called the government's mortgage hotline are Mr. Feeney's constituents. The area's many retirees are watching the plunge in the stock market with dread.
Yet on the stump, in speeches and on the floor of the House, Mr. Feeney strives to provide voters with a narrative for how the U.S. reached this crisis. It begins and ends with government. He explains it was the Federal Reserve that eased interest rates, which led to easy money and inspired banks and mortgage firms to borrow more and take riskier bets. He notes it was politicians who created beasts like Fannie Mae and Freddie Mac, pressured them to provide more credit to subprime borrowers, passed legislation allowing them to ramp up their liabilities, and guaranteed their mistakes. Easy-money Fed policy led to a weak dollar and today's inflated cost of groceries and gas. "This isn't a free market collapse," he says. "Most of this was caused by mismanagement of government."
Which leads naturally to Mr. Feeney's other theme, that today's rush to government action will make things worse. He voted against the housing bailout, using his "forgotten man" speech to redirect attention to the many responsible Americans who would have to pay for the mistakes of housing speculators and imprudent borrowers. Yesterday, he joined RSC members in a press conference to warn that more government bailouts will only encourage companies to continue excessive risk-taking, prolong the agony, and leave taxpayers to pay the bills.
Mr. Feeney's narrative has meanwhile laid his groundwork for the broader economic debate. Nothing would hurt the economy right now more than growth-stifling tax hikes, yet Mr. Feeney notes that's what his Democratic opponent would do. He has railed against Democrats' protectionist opposition to more free trade, given trade's outsized role in sustaining today's economy. He warns that excessive regulation will further drive capital out of the country, just when we need it most. He is pushing for offshore drilling, even as fellow Florida Republicans duck the issue.
So what fate awaits the politician who refuses to pander? Who doesn't attack industry, or argue for sweeping government action? Mr. Feeney has suffered no calamitous drop in the polls. His favorability ratings remain consistent. In fact, despite Ms. Kosmas throwing everything and the kitchen sink at him -- including an age-old trip with Jack Abramoff -- the Republican is highly competitive, and feeling optimistic.
Mr. Feeney says that even if he were spooked, he'd take the same course. "Demagoguery is good short-term politics, but terrible long-term policy -- and bad economic policy will ultimately catch up with you."
Camp McCain?
Write to kim@wsj.com
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