Taking the right action on the economy
Our economy is sick, let’s make sure we prescribe the right medicine.
By Congresswoman Virginia Foxx
Today our economy is facing serious difficulties, mainly as a result of untold billions of bad assets clogging the balance sheets of financial institutions and greed by some on Wall Street.
This week a $700 billion government bailout plan to buy assets from distressed banks did not pass the House. I was among the 228 members of Congress who voted in opposition to this bailout plan.
While I believe strongly that Congress must take action to remedy our economic situation, I voted against this bailout plan because it is fundamentally flawed. Simply voting to pass this bailout bill will not get to the core of our problems.
But please let me be very clear: I am in favor of Congressional action. What I do not favor is action that disregards the American taxpayer and rewards reckless decision-making by big-time financial institutions.
I understand that while many constituents have called and emailed to voice their opposition to the bailout, some people may disagree with my decision to oppose the bailout package. That is understandable. We are in a period of economic tumult and uncertainty and, frankly, many of our nation’s leaders have done little else than stoke America’s economic fears.
Rather than jumping on that fear-stoking bandwagon I am taking a serious look at this financial crisis. The more I learn about the economic situation, the more I’ve become convinced that the plan proposed by the Bush administration is the wrong plan. But congressional leaders have forcefully pushed this plan on the American people, trying to give you and me the false impression that this is the only way to deal with the
current crisis.
I disagree. The Bush/Paulson plan would have fundamentally changed our marketplace by rewarding financial companies that made bad decisions and placing those who exercised prudence at a serious disadvantage. Even worse, this plan ignored a major factor in the subprime mess that precipitated our current financial crisis: poorly regulated government-sponsored enterprises.
Freddie Mac and Fannie Mae (both government sponsored enterprises) were ringleaders in the subprime circus, heading up the charge into risky lending and even backing much of the financial industry’s shaky mortgage loans. In fact, Fannie Mae purchased 44 percent of banks’ subprime loans in 2004.
By backing the excesses of subprime lending, Fannie and Freddie fed the monster that today threatens our economic strength.
Congress can no longer ignore Fannie and Freddie gone wild, where profits went to shareholders and then billions in losses were passed along to unsuspecting taxpayers. We can do better.
I support a sensible compromise that dramatically reforms Freddie and Fannie and puts them on track to privatization. America simply can’t afford to have these giant government-backed firms running roughshod and unregulated through the marketplace.
Additionally, I support permanently ending the practice of “naked” short selling. This practice allows high-rolling stock traders to drive down stock market prices by buying and selling stocks that they don’t even own. This is the height of excess and greed.
Another proposal that would help get our credit markets moving and our economy back on track would be to create a temporary capital gains tax holiday. This tax break would apply to investors, small and large, who agree to participate in the purchase of the financial industry’s so-called “toxic debt”. This would help get capital off the sidelines and into the game.
Right now our economy is dealing with a serious illness. Treasury Secretary Henry Paulson has proposed a very risky, experimental treatment that has zero track record of success. We’ve all been told, “it’s the only option,” even though many respected economists, bankers, and policy makers have cautioned that very viable alternatives exist and should be pursued instead.
America is faced with a very real economic illness, and I’m asking for a second opinion. Because what Doctor Paulson ordered seems to be aimed at treating only part of the sickness and may end up making the disease worse. Make no mistake, our economy needs medicine. I believe we must make sure we prescribe the right medicine.
Editor’s Note: Virginia Foxx a United States Representative from North Carolina’s Fifth Congressional District, is a member of the House Committee on Oversight and Government Reform. You may contact her office toll free at 1-866-677-8968 or e-mail her from her website, www.foxx.house.gov.
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