The United States is Now in a Recession

September 20, 2008

Statement by Secretary Henry M. Paulson, Jr. on Comprehensive Approach to Market Developments

Federal Reserve Chairman Ben Bernanke, SEC Chairman Chris Cox and I had a lengthy and productive working session with Congressional leaders. We began a substantive discussion on the need for a comprehensive approach to relieving the stresses on our financial institutions and markets.

We have acted on a case-by-case basis in recent weeks, addressing problems at Fannie Mae and Freddie Mac, working with market participants to prepare for the failure of Lehman Brothers, and lending to AIG so it can sell some of its assets in an orderly manner. And this morning we've taken a number of powerful tactical steps to increase confidence in the system, including the establishment of a temporary guaranty program for the U.S. money market mutual fund industry.

Despite these steps, more is needed. We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses.

The underlying weakness in our financial system today is the illiquid mortgage assets that have lost value as the housing correction has proceeded. These illiquid assets are choking off the flow of credit that is so vitally important to our economy. When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans and investments that create jobs. As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to have significant effects on our financial system and our economy.

As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford. We are seeing the impact on homeowners and neighborhoods, with 5 million homeowners now delinquent or in foreclosure. What began as a sub-prime lending problem has spread to other, less-risky mortgages, and contributed to excess home inventories that have pushed down home prices for responsible homeowners.

A similar scenario is playing out among the lenders who made those mortgages, the securitizers who bought, repackaged and resold them, and the investors who bought them. These troubled loans are now parked, or frozen, on the balance sheets of banks and other financial institutions, preventing them from financing productive loans. The inability to determine their worth has fostered uncertainty about mortgage assets, and even about the financial condition of the institutions that own them. The normal buying and selling of nearly all types of mortgage assets has become challenged.

These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. As a result, Americans' personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment, and job creation has been disrupted.

To restore confidence in our markets and our financial institutions, so they can fuel continued growth and prosperity, we must address the underlying problem.

The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy. This troubled asset relief program must be properly designed and sufficiently large to have maximum impact, while including features that protect the taxpayer to the maximum extent possible. The ultimate taxpayer protection will be the stability this troubled asset relief program provides to our financial system, even as it will involve a significant investment of taxpayer dollars. I am convinced that this bold approach will cost American families far less than the alternative – a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.

I believe many Members of Congress share my conviction. I will spend the weekend working with members of Congress of both parties to examine approaches to alleviate the pressure of these bad loans on our system, so credit can flow once again to American consumers and companies. Our economic health requires that we work together for prompt, bipartisan action.

As we work with the Congress to pass this legislation over the next week, other immediate actions will provide relief.

First, to provide critical additional funding to our mortgage markets, the GSEs Fannie Mae and Freddie Mac will increase their purchases of mortgage-backed securities (MBS). These two enterprises must carry out their mission to support the mortgage market.

Second, to increase the availability of capital for new home loans, Treasury will expand the MBS purchase program we announced earlier this month. This will complement the capital provided by the GSEs and will help facilitate mortgage availability and affordability.

These two steps will provide some initial support to mortgage assets, but they are not enough. Many of the illiquid assets clogging our system today do not meet the regulatory requirements to be eligible for purchase by the GSEs or by the Treasury program.

I look forward to working with Congress to pass necessary legislation to remove these troubled assets from our financial system. When we get through this difficult period, which we will, our next task must be to improve the financial regulatory structure so that these past excesses do not recur. This crisis demonstrates in vivid terms that our financial regulatory structure is sub-optimal, duplicative and outdated. I have put forward my ideas for a modernized financial oversight structure that matches our modern economy, and more closely links the regulatory structure to the reasons why we regulate. That is a critical debate for another day.

Right now, our focus is restoring the strength of our financial system so it can again finance economic growth. The financial security of all Americans – their retirement savings, their home values, their ability to borrow for college, and the opportunities for more and higher-paying jobs – depends on our ability to restore our financial institutions to a sound footing.

Luke_Wilbur · September 22, 2008

Here is a statement by G-7 Finance Ministers and Central Bank Governors on Global Financial Market Turmoil

The Group of Seven Finance Ministers and Central Bank Governors released the following statement today:

The G-7 held a conference call today to discuss global financial markets. We reaffirm our strong and shared commitment to protect the integrity of the international financial system and facilitate liquid, smooth functioning markets, which are essential for supporting the health of the world economy.

We strongly welcome the extraordinary actions taken by the United States to enhance the stability of financial markets and address credit concerns, especially through its plan to implement a program to remove illiquid assets that are destabilizing financial institutions. We also strongly welcome the measures taken by other G-7 countries. Major central banks have been coordinating to address liquidity pressures in funding markets, which has been critical in addressing disruptions in global financial markets. Several regulators have taken decisive actions to combat market manipulation and stabilize financial markets, including a temporary ban on short selling of financial stocks.

We recognize the importance of making regulation more effective and bringing investors back into a liquid and stable marketplace. We remain committed to full and rapid implementation of the Financial Stability Forum (FSF) recommendations to enhance the resilience of the global financial system for the longer term. We look forward to the FSF report this fall on progress made in strengthening prudential supervision and regulation, improving firms' risk management practices, enhancing disclosure and transparency, and strengthening accounting frameworks.

We pledge to enhance international cooperation to address the ongoing challenges in the global economy and world markets and maintain heightened close cooperation between Finance Ministries, Central Banks and regulators. We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system.

Edited September 22, 2008 by Luke_Wilbur

September 22, 2008

THIS MAKES SENSE TO ME

Speaking Monday on NBC's "Today" show McCain said, "We are in the most serious crisis since World War II."

He also said that despite the ballooning national debt he would not raise taxes if elected president.

McCain said "history shows us that if you raise people's taxes in tough economic times that makes problems worse."

September 22, 2008

Treasury Provides Further Clarity For Guaranty Program for Money Market Funds

Washington – The U.S. Treasury Department is continuing to develop the specific details surrounding the temporary guaranty program for money market funds that was announced on September 19, 2008.

While these details are being finalized, Treasury is making the following clarifications:

1. All money market mutual funds that are regulated under Rule 2a-7 of the Investment Company Act of 1940 and are publicly offered and registered with the Securities and Exchange Commission will be eligible to participate in the program.

2. Eligible funds include both taxable and tax-exempt money market funds. The Treasury and the IRS intend to issue guidance that will confirm that participation in the temporary guaranty program will not be treated as a federal guaranty that jeopardizes the tax-exempt treatment of payments by tax-exempt money market funds.

3. The temporary guaranty program will be designed to provide coverage to shareholders for amounts held by them in such funds as of the close of business on September 19, 2008.

September 22, 2008

The Treasury Department has submitted legislation to the Congress requesting authority to purchase troubled assets from financial institutions in order to promote market stability, and help protect American families and the US economy. This program is intended to fundamentally and comprehensively address the root cause of our financial system's stresses by removing distressed assets from the financial system. When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans and investments that create jobs. As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to significantly damage our financial system and our economy, undermining job creation and income growth. The following description reflects Treasury's proposal as of Saturday afternoon.

Scale and Timing of Asset Purchases. Treasury will have authority to issue up to $700 billion of Treasury securities to finance the purchase of troubled assets. The purchases are intended to be residential and commercial mortgage-related assets, which may include mortgage-backed securities and whole loans. The Secretary will have the discretion, in consultation with the Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to effectively stabilize financial markets. Removing troubled assets will begin to restore the strength of our financial system so it can again finance economic growth. The timing and scale of any purchases will be at the discretion of Treasury and its agents, subject to this total cap. The price of assets purchases will be established through market mechanisms where possible, such as reverse auctions. The dollar cap will be measured by the purchase price of the assets. The authority to purchase expires two years from date of enactment.

Asset and Institutional Eligibility for the Program. To qualify for the program, assets must have been originated or issued on or before September 17, 2008. Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.

Management and Disposition of the Assets. The assets will be managed by private asset managers at the direction of Treasury to meet program objectives. Treasury will have full discretion over the management of the assets as well as the exercise of any rights received in connection with the purchase of the assets. Treasury may sell the assets at its discretion or may hold assets to maturity. Cash received from liquidating the assets, including any additional returns, will be returned to Treasury's general fund for the benefit of American taxpayers.

Funding. Funding for the program will be provided directly by Treasury from its general fund. Borrowing in support of this program will be subject to the debt limit, which will be increased by $700 billion accordingly. As with other Treasury borrowing, information on any borrowing related to this program will be publicly reported at the end of the following day in the Daily Treasury Statement. (http://www.fms.treas.gov/dts/)

Reporting. Within three months of the first asset purchases under the program, and semi-annually thereafter, Treasury will provide the appropriate Congressional committees with regular updates on the program.

September 23, 2008

Here is a summary of Chairman Dodd’s proposal in response to the Treasury Department’s plan.

The breadth of the Treasury proposal is extraordinary: the Department is asking for $700 billion to purchase any asset without any transparency as to the process; without any oversight by any court or administrative agency; and without any commitment to helping homeowners with troubled mortgages. Senator Dodd has offered a number of proposals that will address these concerns, as follows:

A. Transparency and Accountability

1. Establish an Oversight Board: We intend to establish an oversight board to make sure that the Treasury Secretary is not acting completely alone.

2. Require Program Transparency: We would require the Treasury to lay out its program, policies and procedures to ensure that the new authority is not used on a completely ad hoc basis. The Congress, the markets, and the American people deserve to understand how the Treasury is using these funds.

3. Significantly Improve Reporting Requirements: We add a strengthened reporting provision to require monthly rather than semi-annual reports to Congress regarding the exercise of authority under the Act. The provision requires financial statements describing all agreements and transactions entered into. Again, transparency is good for the markets and the economy.

4. GAO Audit: In order to ensure proper use of funds, and prevent waste, fraud, and abuse, we add a new provision to require the Office to annually issue financial statements prepared in accordance with generally accepted accounting principles and to require the Government Accountability Office to annually audit the Office and to assess internal financial controls.

5. Warrants: In the case of AIG and the GSEs, the government took warrants in the companies in exchange for our assistance. We include a provision to ensure the federal government gets warrants from companies that sell their bad assets to us.

6. Minimize Conflicts of Interest: Treasury intends to hire large asset management firms to organize the purchases of the “toxic” assets as well as their sale. However, many of these firms, such as PIMCO and Blackrock, have large positions in the same assets. Those positions could be affected by the way they manage the federal government’s portfolio. The Treasury proposal largely ignores this issue. We would add a provision to require the Secretary to issue rules on conflicts of interest that may arise in connection with the administration of the authorities provided in the Act. The conflicts include, but are not limited to hiring contractors or advisors, management of assets, bidding or purchasing of assets, and employees leaving the Office to work for an institution that has benefitted from the program.

7. Integrity of Deposit Insurance: This week the Treasury Department announced that it was offering temporary, unlimited deposit insurance for funds in participating money markets. This has caused considerable concern among banks (especially smaller banks) that it will precipitate a run on the banks by large depositors, who can now access unlimited deposit insurance in money markets. We add a provision to create parity between banks and money markets in terms of insured deposits during the period in which Treasury offers the insurance.

8. Executive Compensation: We add a provision to require the Secretary to have executive compensation standards for entities that seek to sell assets through the program. Such standards shall include limits on incentives and severance and a requirement for a claw-back provision.

B. Assistance for Homeowners

1. Court-Supervised Loan Modifications: After a year of efforts to get servicers and lenders to modify loans, the industry’s voluntary HOPE Now program has fallen far short of what is needed. This is because of the extreme complexity surrounding the securitization of mortgages. The only way to really help homeowners keep their homes is to allow borrowers to get the mortgages on their first homes reduced to the market value of those homes through bankruptcy. Second homes already have this benefit. We expect that very few homeowners will actually have to go into bankruptcy; however, this provision will finally give homeowners and servicers some leverage so that real modifications can move forward.

2. FDIC-Management of Mortgage Assets: The FDIC has shown a commitment to modifying mortgages both to ensure long-term affordability and to protect the taxpayer. FDIC staff estimate that performing loans are worth about 87% of par, while non-performing loans are worth only about 36% of par. Modifying loans to ensure affordability increases the value of the loans. For that reason, we would require the Treasury to shift the whole mortgages and residential MBS it purchases to the FDIC to manage, and add the requirement that the FDIC modify those loans where possible. We also require other federal agencies that hold or control mortgages or residential MBS to modify whenever possible. In addition to FDIC, this includes FHFA, which controls Fannie and Freddie’s portfolios, and the Federal Reserve Bank of NY, which owns a portfolio of mortgages acquired from Bear Stearns.

3. Affordable Housing Funds: The Housing and Economic Recovery Act of 2008 (HERA) created two important housing funds – the Affordable Housing Fund and the Capital Magnet Fund. These entities were to be financed by the GSEs. Given the uncertainty of that source, we include a provision that requires that 20% of the profit of any assets purchased and sold by the Treasury through this program go to these two funds.

4. Expansion of HOPE for Homeowners: The HOPE for Homeowners program passed as part of HERA should help about 400,000 families keep their homes. However, it includes some restrictions that narrow the eligibility for the program. We propose to loosen the criteria modestly, so that more distressed homeowners can participate.

September 23, 2008

The Wall Street Meltdown combined with severe economic risks(hyperinflation and loss of funds to CEO's and other crooks)of the Bush bailout package have led mainstream media like CNN to start using the "D word"-DEPRESSION. This is without ever stopping to admit we're in a recession!

Before this show could even be made, the stocks dumped another 200 points-and finished the day down 372 points while oil shot up to a peak of over $130 a barrel before sliding back to slightly under that mark.

Secretary of the Treasury Paulson is being reported by CNN as saying that failure to pass a bailout package will trigger a depression.

Here's how thois depression would start, according to CNN's 1 PM broadcast today:

1: banks stop lending overnight funds to each other. They did this last week-and scared the crap out of everyone(on purpose, perhaps?)

2: Banks lack funds and cannot lend

3: Businesses can't expand-and some can't even meet payroll as loans they rely on dry up.

4: Jobs disappear-like they already HAVE for millons, and welcome to the breadlines for everyone but the few.

Capitalism can't operate without expanding, and can't expand without credit. In fact, both businesses and consumers are so addicted to credit they can't even go steady-state anymore without it.

The proposed $700 Billion dollar bailout of failed banks and investment firms is supposed to prevent this, but it is so full of opportunity for golden-parachute seeking CEO's that even Bush's lapdogs(like Pelosi-remember her war votes?) in Congress are getting indigestion about it.

For the US government to take on $700 Billion worth of bad debt would add to the US budget a new item larger than even the Pentagon's total budget, with benefits going to people essentially in proportion to how much they had at risk in investment accounts.

That $700 B has to come from somewhere-either taxing the rich, taxing the public, or "increasing the money supply" or essentially paying off depositors in newly minted currency.The last approach is the easiest politically-but could spark hyperinflation. Even a one-time inflation from this could mean $6 a gallon gas, $4 for a loaf of bread-and so on.

Taxing the rich seems unlikely from a Congress full of rich people, and taxes on the middle

FYI-I had classes in both macro and microeconomics when I was in college, so I do now a few basics aobut this class would be huge, though less damaging than hyperinflation.

Many Dems want to amend the bailout bill to cap executive pay and limit "golden parachute" severance packages. otherwise, billions of taxpayer dollars could go down a CEO compensation and junk stock/bond toilet.

Robert Scheer is calling for a moratorium on foreclosures and adding other consumer relief measures to blunt the impact of this crises, focusing relief on the public at large. He went so far as to call for criminal charges against CEO's of investment firms over this ***brown trout***, which he compared to a "Ponzi Scheme."

In my opinion, extending bank-style insurance to investments ought to be limited to thing like retirement accounts and exclude risky "aggressive growth" funds altogether, as well as long-known risky and/or money-losing stocks like, say, HLS(LSR1).

FYI-I had classes in both macro and microeconomics when I was in college, so I do know a few basics about this ***brown trout***.

September 23, 2008

Yeah. Paulson wants what he calls a clean bill. This means a bailout with no strings attached. The working people are going to have pay for the wealthy's mistakes. frak YOU BANKS. MY MONEY IS GOING UNDER MY BED!!!!!!!!!!!!!!!

September 23, 2008

At first the Bush administration said the price tag to rescue the U.S. economy would cost $500 billion and within days the price tag was revised to a whopping $700 billion; if the rescue plan is approved by Congress, working people will be in a financial black hole for $11.3 trillion (the national debt). Vice Presidential Candidate Stewart A. Alexander, says “This rescue plan is only a temporary fix for an economy with many fractures. The root cause of the U.S. economic crisis is the system, capitalism; and every 75 years a new bailout plan becomes necessary.”

This past week, Fed Chairman Ben Bernanke and U.S. Treasury Secretary Henry M. Paulson Jr. presented the bleak news regarding the U.S. economy to ranking members in Congress and the two men made clear that the U.S. economy is facing an economic crisis that could quickly spread to all areas of the globe.

Within the past two weeks, the U.S. government took the extraordinary measure to bailout the mortgage giants Fannie Mae and Freddie Mac; and to indicate the depth of the U.S. financial crisis, the following week the U.S. government bailed out AIG (American International Group, Inc.). Unlike Fannie Mae and Freddie Mac, AIG is not directly regulated by the federal government.

With the additional $700 billion that the Bush administration is seeking from Congress, the American working class will be strapped with $1 trillion of debt to bailout the billionaires of the world with no guarantees of repayment; and no such plans for repayment have been offered to the American taxpayer.

Even if Congress approves the $700 billion that the Bush administration is now seeking from hard working Americans, Stewart Alexander believes “it would require much more; perhaps $10 trillion.” Alexander notes that the current economic crisis is now a global crisis and has spread to most of the major economies of the world.

Recently, Secretary Henry Paulson stated on Fox News Sunday, “There are no guarantees;” however, Alexander says, “With these federal bailouts there are many risk that will jeopardize the future well-being of all working people. It is likely working class people will be subject to sharp declines in their living standards, the U.S. currency will weaken further against other major currencies and inflation will further destabilize the U.S. economy. It is also likely Social Security, Medicare and Medicaid will be restructured to provide minimal benefits and services.”

Alexander says, “The $700 billion that the Bush administration is asking Congress to approve is an 11th hour plea by the Bush White House that reveals an urgent cry; not to let the U.S. economy crash on our watch.”

September 23, 2008

Now is the Time to Unite and Say with ONE Voice…

…NO to the bailout and NO to any congressman or senator who votes in favor of this disastrous piece of legislation that will redistribute hundreds of billions, if not trillions, of dollars out of the hands of honest Americans and grant the federal government massive new powers to control and manipulate markets.

A Rasmussen Poll out today puts the support for the bailout at 7%! For any legislator to vote yes on this plan is to spit in the face of his constituents and reveal his utter contempt for the democratic process and the voice of the people. To do so would require them to utterly disavow the Constitution that they swore by oath to uphold.

It can be tolerated no more.

Contact your representatives and let them know that support of this plan constitutes a betrayal of the public trust and grounds for their removal from office. We will publicize the names of all those that vote yes so everyone will know who has been bought and paid for and no longer deserves to wear the mantle of “the people’s voice in Washington.”

September 23, 2008

This part of the Paulson bailout plan should trouble everyone.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Paulson donated 100K to Bush in ‘04 campaign and now wants a blank check and no accountability to bail out his cronies.

September 23, 2008

U.S. Senator Byron Dorgan (D-ND) today issued the following statement on the proposal for a federal bailout of the financial industry. He said Congress should not approve the bailout without increasing regulation and making other changes to ensure the problems will not happen again.

STATEMENT OF U.S. SENATOR BYRON DORGAN

“The financial rescue proposal offered this weekend by the Bush administration is nearly unbelievable. President Bush wants Congress to provide a minimum of $700 billion in taxpayer money so that the federal government can purchase toxic securities from failing Wall Street firms without any safeguards or oversight attached to that bailout. The Bush administration is also asking for unlimited authority, proposing that, no matter what they do with the $700 billion in taxpayer money, it would not be subject to any oversight or review by the courts or Congress. Nothing like this has been done in the history of our country.

“I am prepared to take aggressive emergency action to prevent a collapse of our financial system. But this proposal looks to me like a stampede in the wrong direction. Right now it looks like a proposal to reward the very people on Wall Street who created this mess, and who pocketed more than $100 billion over the last several years making it.

“How did we get here? In 1999, when the Congress was pressured to repeal the financial protections that were put in place following the Great Depression, I voted against it. That bill, the mis-named Financial Modernization Act, repealed the Glass-Steagall Act. I warned then that a ‘financial swamp’ would result from the casino-like prospect of merging banking with the speculative activity of real estate and securities.

“In 1999, when the bill was debated, I warned, ‘This bill will also raise the likelihood of future massive taxpayer bailouts…I also think we will, in 10 years time, look back and say…we forgot the lessons of the past.’ I take no satisfaction that I was right.

“I agree that the Congress must now act, but that action must be smart and effective. That means any action taken must be guided by two principles: protecting U.S. taxpayers from being ripped off in a rushed, blank-check, no-strings-attached Wall Street bailout, and ensuring accountability and oversight to put an end to the very reckless business practices that led to this crisis and put our entire economy at risk.

“Congressional action must include:

1. Restoring the stability and safety of the banking system by recreating protections of the Glass-Steagall Act, which prohibited the merging of banking businesses with riskier investments. That post-Depression Era protection served us well for seven decades before its repeal.

2. Addressing the wildly excessive compensation on Wall Street, which has incentivized reckless behavior. In recent years, Wall Street has doled out more than $100 billion in bonuses to the very people who have steered us into this mess, including more than $33 billion in each of 2007 and 2006.

3. Developing a system of regulation that would require accountability for the speculative investment activities of hedge funds and investment banks that create and sell complex securities.

4. Providing for a period of forbearance on mortgages where homeowners could continue to pay mortgages at a set rate.

5. Creating a Taxpayer Protection Task Force that would investigate and claw back and claw back ill-gotten gains. This would be targeted at individuals and firms that profited from creating and selling worthless securities and toxic products. Despite the fact that this practice caused the current economic crisis, many of these individuals and firms now seek to benefit from a government bailout.

6. Making sure that U.S. taxpayers get to share in the increased values – not just the burden of risk – of the firms they are bailing out.

“If government action is taken without the safeguards described above, it will not address or cure the major problems of our financial system, and it could wreck our economy and lower our standard of living. This is a crisis and we must address it quickly, but we need to get this right.”

September 23, 2008

The U.S. government has been turned into an engine that accelerates the wealth upwards into the hands of a few. The Wall Street bailout, the Iraq War, military spending, tax cuts to the rich, and a for-profit health care system are all about the acceleration of wealth upwards. And now, the American people are about to pay the price of the collapse of the $513 trillion Ponzi scheme of derivatives. Yes, that’s half a quadrillion dollars. Our first trillion dollar compression bandage will hardly stem the hemorrhaging of an unsustainable Ponzi scheme built on debt "de-leverages."

Does anyone seriously think that our public and private debts of some $45 trillion will be paid? That the administration's growth of the federal debt from $5.6 trillion to $9.8 trillion while borrowing another trillion dollars from Social Security has nothing to do with this? Does anyone not see that when we spend nearly $16,000 for every family of four in our society for the military each year that we are heading over the cliff?

This is a debt crisis, not a credit crisis. Just as FDR had to save capitalism after Wall Street excesses, we have to re-invigorate our economy with real - not imaginary - growth. It does not address the never-ending war on the middle class.

The same corporate interests that profited from the closing of U.S. factories, the movement of millions of jobs out of America, the off-shoring of profits, the out-sourcing of workers, the crushing of pension funds, the knocking down of wages, the cancellation of health care benefits, the sub-prime lending are now rushing to Washington to get money to protect themselves.

The double standard is stunning: their profits are their profits, but their losses are our losses.

This bailout will not bring real jobs back to America. It will not bring back jobs that make things. It does not rebuild our schools, streets, neighborhoods, parks or bridges. The major product of this financial economy is now debt. Industrial capitalism has been destroyed.

In the next few days I will push for a plan that includes equity for every American in any taxpayer investment in this so-called bail-out plan. Since the bailout will cost each and every American about $2,300, I have proposed the creation of a United States Mutual Trust Fund, which will take control of $700 billion in stock assets, convert those assets to shares, and distribute $2,300 worth of shares to new individual savings accounts in the name of each and every American.

I will also insist that all of the following issues be considered in whatever Congress passes:

1. Reinstatement of the provisions of Glass-Steagall, which forbade speculation

2. Re-regulation of the finance, insurance, and real estate industries

3. Accountability on the part of those who took the companies down:

a) resignations of management

givebacks of executive compensation packages

c) limitations on executive compensation

d) admission by CEO's of what went wrong and how, prior to any government bailout

4. Demands for transparencey

a) with respect to analyzing the transactions which took the companies down

with respect to Treasury's dealings with the companies pre and post-bailout

5. An equity position for the taxpayers

a) some form of ownership of assets

6. Some credible formula for evaluating the price of the assets that the government is buying.

7. A sunset clause on the legislation

8. Full public disclosure by members of Congress of assets held, with possible conflicts put in blind trust.

9. A ban on political campaign contributions from officers of corporations receiving bailouts

10. A requirement that 2008 cycle candidates return political contributions to officers and representatives of corporations receiving bailouts

And, most importantly, some mechanism for direct assistance to homeowners saddled with unreasonable or unmanageable mortgages, as well as protection for renters who have lived up to their obligation but fall victim to financial tragedy when the property they live in undergoes foreclosure.

Dennis J Kucinich

www.Kucinich.us

216-252-9000 877-933-6647

September 24, 2008

After grilling some of nation’s most powerful decisionmakers on Capitol Hill, Senator Jon Tester today said he still is not sold on the government’s proposed $700 billion bailout of the financial industry.

Tester also said the situation is too important and too expensive for an artificial deadline, adding that Congress should stay in session as long as it takes to make the right decision.

Federal Reserve Chairman Ben Bernanke, U.S. Treasury Secretary Henry Paulson, and Securities and Exchange Commission Chairman Christopher Cox said they support the controversial plan during today’s Senate Banking Committee hearing. The plan would allow the U.S. Treasury to buy up to $700 billion in troubled assets—like bad mortgages—from financial institutions.

“Like most Montanans, I’ve got a heck of a lot of concerns about this,” Tester said after the hearing. “I want to know that this legislation fixes the root problems, so we’re not doing this year after year. I want to know that no CEOs are getting big paychecks for running their companies into the ground. And I want to make sure that Main Street not just Wall Street is helped.”

During today’s hearing, Bernanke said Congress needs to take urgent action to avoid “serious consequences” in the financial industry and the U.S. economy. Tester was disappointed because the Treasury proposed its complex, controversial $700 billion plan just days ago.

“Wasn’t there some opportunity somewhere down the line where we could have been informed of how serious this crisis was so we can take some preventative steps before we got to this point?” Tester asked Bernanke. “I’m not sure we’ve got the whole sentence written much less the i’s dotted and the t’s crossed.”

Earlier this month the Treasury risked $85 billion to bail out insurance giant AIG, and the government took over housing lenders Fannie Mae and Freddie Mac. The government bailed out investment bank Bear Stearns earlier this year.

September 24, 2008

If you do not have time to read all of this. Just read the words in bold. The White House knew the financial markets were going to crash months ago.

For Immediate Release
Office of the Press Secretary

September 23, 2008

Press Gaggle Via Conference Call with Deputy Press Secretary Tony Fratto on the Economy

New York, New York

I just wanted to take an opportunity this morning to give you an update on where things stand right now with the effort to get legislation passed to help our credit markets right now and stabilize financial markets.

As you probably know, Secretary Paulson, Fed Chairman Bernanke and the Chairman of the SEC Chris Cox are all preparing to testify at Congress this morning -- I think that starts at about 9:30 a.m. -- so, obviously point to their testimony this morning, and I'm sure they'll have extensive Q&A.

Secretary Paulson and his team are still negotiating with members of Congress, with Senator Dodd and Financial Services -- House Financial Services Chairman Barney Frank. Those negotiations are still ongoing. I'm going to try to avoid getting in the way of those negotiations on some of the specific issues that you might have questions on, but be happy to take a lot of your questions.

The President is, as you know, up in New York. You probably just -- maybe saw the coverage of comments that he made before meeting with the Pakistani Prime Minister Zardari. He's up there for the U.N. General Assembly meetings. The President will be giving a speech to the General Assembly shortly. You can expect that he'll have some passage in there about the challenges that we're facing in our financial markets.

Obviously, the President said he's seeing lots of leaders up there. Many economies around the world are affected or even dependent on the U.S. economy, and so there's a great deal of interest in how we're dealing with it. And I think, as the President said, he wants to assure the other leaders of the world that we're working together in a bipartisan way to get this legislation passed, and there is a great sense of urgency to get this accomplished and get it done quickly.

The President spoke to Secretary Paulson also this morning, about a couple of hours ago, and Secretary Paulson updated the President on where things stand. The President is also staying in regular contact with his Chief of Staff Josh Bolten and Ed Gillespie here, and his other economic advisors, on the progress of the talks with Congress and the status of our financial markets this week.

I think it's clear to everyone, anyone who's been paying attention to the markets for the last couple of weeks, that our markets are dealing with some very serious challenges. One of those challenges that we're hearing from the market is a little bit of uncertainty as to how the policy response from Washington will take place; whether it will take place as quickly as needed. I think we want to be confident that it will get done this week; that we will come together in a bipartisan way; that there is sufficient leadership in the House and Senate and from the committee chairmen and ranking members in the Republican Party to get this thing done.

Obviously the legislative process can be bumpy sometimes and there are lots of members who, rightly, have questions about how a program like this will be implemented, and whether it's the best way. We believe it is the best way to solve this problem. It gets at the real, root cause of what has been affecting our markets and our broader economy for some time.

We also think it is, by far, the best way to tackle it in a comprehensive and robust way that will protect the American economy -- not just the financial institutions in New York, but the ability of our economy to get the financing they need to continue to operate businesses, to protect retirement accounts, to make sure that there's available liquidity and credit for home loans, for auto loans and consumer financing and student loans -- that this is the best way to do it. And as I think you'll hear Secretary Paulson say this morning, the best taxpayer protection plan we can have is to have stable markets where our financial institutions can function in a normal way.

This is not a step that we have taken lightly. It's a very big plan. It was something we felt we had no choice but to do at this point. But we're going to move forward with it with great confidence that it will have the impact that we expect it to have and to allow growth to continue in this economy. But it is critical that we move quickly, that we get a clean bill out of the Congress, and that market participants and the American people can see that Washington is acting on this problem in a very forthright way.

Q Hi. How does the President specifically address the concerns of Senator Shelby and others, both about the size of the program and exactly whether it will work? And does the President reach out directly to any of those with deep concerns?

MR. FRATTO: Well, I think the President is obviously aware of the concerns that are being raised by a number of members. He gets regular updates on them. Secretary Paulson is our point person on dealing with these issues and explaining them to members and staffs so that they fully understand the full scope of not only the policy response, but also the problem that we're dealing with.

We feel very strongly that this is a very comprehensive plan. It is not just this plan to deal with buybacks of these assets. The Treasury Secretary and Chairman Bernanke outlined a number of issues. We're talking to Senator Shelby and his staff. I would also note that the Vice President and Josh Bolten, Keith Hennessey, the Director of the National Economic Council, are up on the Hill today talking to lots of Republicans. They're addressing the Republican Study Committee this morning over on the House side. So we're trying to address all of the issues that are being raised, and I think once we have this conversation over the next day or two as we started over the weekend, I think people will see that this is the best way to proceed.

Q To confirm, you say that Vice President Cheney is on the Hill, as well?

MR. FRATTO: Yes. He's up there right now.

Q Hey, Tony, how are you?

MR. FRATTO: Hey, Olivier.

Q I've a question about the comments yesterday that this was not the President's first instinct. What was his first instinct?

MR. FRATTO: Well, you want to have a light hand in dealing with some of these issues. I mean, nobody -- not the President and no one believes that the first instinct should be to do a massive rescue plan involving hundreds of billions of dollars. We do that as a last resort. If you're going to commit upwards of $700 billion of taxpayer money to a problem, you better be pretty sure that you absolutely need to do it. So that was nobody's initial instinct to go forward with this kind of plan.

We wanted to see if there were ways to contain this problem in the financial markets, and to deal with it very directly with the root causes with a lot of the housing programs that we initiated, shoring up Fannie May and Freddie Mac, which took far longer than we certainly hoped. You've heard us talk about the fact that we've tried to shore up Fannie Mae and Freddie Mac for years now. And I'll remind you, going back to August of 2007, the President personally came out where he announced a number of housing related reforms that we were proposing, called on Congress to reform Fannie Mae and Freddie Mac. It took nearly a year to get the housing bill that he called for and the reform of Fannie Mae and Freddie Mac passed through Congress.

Now, we would have preferred that that happened a lot earlier, but that's what we were dealt with, and that's the way we were trying to deal with this issue. But it was nobody's instinct that you would go in with a very large plan involving hundreds of billions of dollars as a first resort.

Q And another one for you. I know the President spoke to Hu Jintao about the program -- about the rescue plan. Are there any other plans to contact other countries with massive investments in U.S. Treasury bills?

MR. FRATTO: I see the connection you're making with countries who have investments in U.S. assets, and I wouldn't limit yourself to that. There are lots of economies that are very, very interested in the health of the U.S. economy. This is a global economy that is interconnected, involving trillions of dollars of financial flows between countries, involving things like sovereign debt, which you mentioned, but also trillions of dollars in trade and private sector finance. And it's critical that that system works for our economy and for all the other economies.

The President mentioned that he's heard from some members and he expects to see more there. If there are any calls that we make specifically that we can read out, we will and we'll let you know.

Q Thanks, Tony.

Q Hi. Good morning.

MR. FRATTO: Hey, Barb.

Q The issue of oversight, there's been talk on the Hill about creating an entire panel for oversight. How does the administration feel about that?

MR. FRATTO: Like I said earlier, I'm not going to negotiate on the specifics of what oversight would encompass and what the specific mechanism would be. But I think everyone should understand that we fully recognize how important it is to have robust, transparent oversight of this program. We're asking the American taxpayer to essentially front an investment here that will help us fix the economy. As we've said, it involves a lot of money. We think we're going to be able to return a lot of that money to the American taxpayer over time, and get the benefit of stable markets and a better functioning American economy. But we understand that there is a lot of interest in how the program will be run, how effective it will be, what will be the safeguards in it, and we will -- we insist, as much as anybody does, on a robust system of oversight.

Q Yes, Tony. The dollar has already taken a beating today, and the hype is that, of course, it's because there may -- people fear that there may be difficulties in getting this program through. However, there's also the issue of the massive increase of the U.S. government deficit, the fact that the government is going to go in to support the money markets and to back up a lot of what is considered speculative debt. It reduces the credibility in the dollar.

Is the President not afraid also of the fact that by putting in such a program he might have a hyper-inflationary takeoff in the U.S., which would destroy the value of the dollar, which is really the only way that the government has means of controlling the prices, is the credibility in the dollar? Isn't that a consideration?

MR. FRATTO: I'm just not going to comment on dollar policy. That's something that we let the -- the Treasury Secretary is the administration's spokesman on the dollar, and maybe he'll get that question this morning and can address it in an appropriate way.

But just to hit on two things. Number one, there should be no question out there that this plan will get done this week. There is bipartisan consensus that it needs to get done. We are negotiating over some elements of the plan, but we are very, very confident that it will get done this week. We believe it needs to get done this week, and that's our goal.

With respect to inflation, inflation is a monetary phenomenon. The Fed is focused on price stability, we have great confidence in Chairman Bernanke to address inflation and price stability.

Q Yes, hello. Just without getting into too many of the specifics with regard to the negotiations -- I mean, this clause over executive pay, or possibly changing the bankruptcy laws -- I mean, are those bottom-line deal-breakers for the White House, or are you still open to compromise on that? And also with regard to the $700 billion figure, I know there's talk it could go higher, it could be less, we're not sure, but at this point what are you hearing? Are you still kind of sticking with that figure?

MR. FRATTO: Well, I'm going to stick with the figure that's in Secretary Paulson's legislation that he sent up, and it was -- and that was $700 billion. And I have no reason to believe that we think that isn't the best estimate of what's needed for this program; that it's large enough to have the impact that the economy needs right now.

What was the first part of your question?

Q Just with regard to the provision about executive pay and possibly changing --

MR. FRATTO: Oh, right, right, right.

Q -- the bankruptcy laws. Are those deal-breakers for the White House or are you open to talking about that?

MR. FRATTO: Like I said earlier, I'm not going to get in the way of Secretary Paulson's negotiations with the Hill. He and his staff will have those discussions on specific elements and I'm not going to lay those lines out right now.

Q I appreciate your confidence that this will get done this week. What if it doesn't? What are the stakes here? And what if Congress fails to act this week?

MR. FRATTO: Well, I mean, I think you should think of that as unthinkable. I mean, every business, every employer, and so every employee in America depends every day on the flow of money coming through our financial system to sustain their normal business operations. That includes financing payrolls, maintaining their inventories. These are Main Street businesses that rely on a functioning banking system -- not just to expand their businesses and create jobs, but just to maintain their very normal business operations to preserve the jobs they have.

So this is very much about Main Street America and preserving the operations of those businesses. So I don't think anyone wants to contemplate the possibility that this doesn't get done. I think we are all arm-in-arm focused on the need to get it done.

Q Are you saying the choice is getting it done or essentially economic meltdown? (Laughter.)

MR. FRATTO: I'm not going to use your language on that. I think it would be a very, very serious situation for our economy were we not to get this legislation passed.

Q Any reaction to the idea that's been floated of essentially breaking this package into two parts so that you would do some of the operation this year and I guess some of the operation next year when you see how the first part worked?

MR. FRATTO: I'll be honest, John, I hadn't heard that, so I'm not sure that I have a reaction to it. That's the first I'm hearing of it.

Q I'd just like to ask you to follow up on one of the earlier answers that you gave. You indicated broad support for the idea of oversight and transparency. Do you have firm opposition to the idea of any curbs of executive pay, on executive pay of companies that are helped under this plan? And why is it important that it's this week that the legislation get passed? After all, Congress is likely to go on sitting next week, as well. Why is it so important that it should be this week?

MR. FRATTO: Well, I mean, in terms of this week, it shouldn't take much of analysis to remember what happened last week, which was a very serious freeze-up in our credit markets. So this is a present concern and it's something that needs to be dealt with urgently and quickly. As I said earlier, what our -- our financial markets right now do not need uncertainty; they need increased certainty as to how this rescue plan is going to go forward and that they can be sure that there is a plan to go forward and that will begin the correction in our financial markets. So we do need to get it done quickly and urgently and would oppose efforts to delay it.

With respect to executive pay, again, I'm not going to get into specific, point-by-point details on what our views are on that, other than the Secretary of Treasury said it would make more difficult to make this plan work and effective if you provide disincentives for companies and firms out there who are holding mortgage-backed securities and other securities from participating in the program. You have to remember, these are not all weak or troubled firms that own mortgage-backed securities. A lot of them are very successful banks and investment houses that have done very well, have been responsible, are holding performing assets that have value. They were not necessarily irresponsible players, and so you have to be careful about how you deal with them.

Q Hi, Tony. Tony, I wonder -- two things. First, if you could elaborate a little bit on what Vice President Cheney and Josh Bolten and Keith Hennessey are doing today. Maybe if you can tell us, are they attending the Republican lunches, are they seeing Republican and Democratic leaders? Or what's their --

MR. FRATTO: We have a number of staff up there from Treasury, but also from the White House, who are meeting with lots of Republicans up there. What the Vice President is doing with the Chief of Staff, Josh Bolten, and Keith, are meeting with the Republican Study Committee. So they're up there right now. I understand that the Vice President will also attend the Senate policy lunch today.

Q And as you know, the members of the Republican Study Committee are nervous about this kind of government intervention. They feel that it's the wrong way to go. Some have alternative plans involving suspension of the capital gains tax perhaps. What is the message that the Vice President and the others are sending to them to tamp down those concerns?

MR. FRATTO: We certainly understand a lot of the questions out there. It should not be unexpected that members of Congress on either side of the aisle have questions about how to move forward with this program. I think what the Vice President and others will emphasize is that this is absolutely necessary to do right now. In no way does it -- should it signal any abandonment of the belief that our markets work and our free market system works. We had a very unique problem in our economy and this is the best way to deal with it.

So that will be the message. It's urgent, it's needed. It's needed to prevent harm to the broader economy, to retirement accounts, and as I mentioned earlier, about the practices of businesses out there able to do their ongoing operations. So it's a critical time, and that's what they'll be helping to explain to members. We've seen those concerns raised, and I think the Vice President and others will be able to work through them and explain why, even given those concerns, this is still the best way to move forward.

Q And then if I could just follow: A lot of Americans have concerns, too, and I'm wondering, are there any plans for the President perhaps to address Americans directly at length to explain to ordinary people this complicated topic? Many people don't understand it. They don't -- they're nervous, but they don't know why this is happening and why it's needed. So do you have plans for the President to talk directly to Americans on this?

MR. FRATTO: I don't have anything on that right now.

Q Is it possible we'll see that later in the week or after the legislation gets passed?

MR. FRATTO: If we have a scheduling change, we'll announce it.

Q Thank you.

Q Hi, I was just wondering, the Republicans are proposing an alternative to this bill. Have you seen that bill, and what's your response to them wanting to do the -- something very different from the bailout?

MR. FRATTO: I have not seen that. I'm sure Secretary Paulson's team has, and they're out there talking about all the concerns that members on both sides of the aisle will have, and we'll let Secretary Paulson and his team deal with those. And again, I know they're about to -- they probably just started the hearing, and so I'm probably going to end this call here in a minute or two, maybe take two questions -- two more questions -- and then we can all watch Secretary Paulson and Chairman Bernanke, and they may be able to give more on some of these questions.

Q Tony, why are you so confident that you're going to get a bill this week? I mean, are you basically signaling administration openness to the proposals that are coming from the Democratic side, that you're likely to incorporate them?

MR. FRATTO: No, I'm not making any comment on that at all. I would say two reasons why we have confidence is, one, is the voiced commitments to the White House from leaders on both sides of the aisle that they intend to get it done this week, and that they are confident also that they can get it done this week -- so that's first of all. Second is just the urgency of it, that we believe everyone understands that it needs to get done as quickly as possible.

I'll take one last question.

Q I'm just trying to reconcile two points here. On the one hand, you said that there are a lot of members who rightly have questions and acknowledge that this is obviously a huge package, but on the other hand, you've emphasized several times that it's critical that it be done quickly this week and that it be done clean. You know, for lawmakers who are -- I guess I'm asking, isn't there something to be said for being careful beyond the urgency and the haste? Is there a concern here that maybe the administration is being heavy-handed?

MR. FRATTO: No, well, look, I think I would reconcile it this way: This is -- this was not a program that was conceived of or put together hastily. There was an enormous amount of analysis and debate and discussion before we came forward with this program. I think we have anticipated a lot of the questions that members of Congress would naturally have about taking this step, but we have had -- some of the policy staff have had months to think about what a program like this would be like and how it would work. Others have had at least weeks to think about it. Members of Congress have had days to think about it. And it's very, very complex and takes time to think through all of the implications of it and why some alternative ideas might not work as well as this one.

So I think that's really the issue here. We have thought through a lot of the concerns that some members have in advance, and I think we can address them on a member-to-member basis, on a committee-to-committee basis. I think Secretary Paulson and Chairman Bernanke will be able to help in that effort today. I think when people see their extensive discussion of the details and the implications and the consequences, I think more people will understand why this is the appropriate way to address this problem.

Q Well, I guess that's exactly my point, real quickly, is that you're saying the administration and its staff has had months to think about this and lawmakers have only had days. I mean, doesn't Congress get its turn? Doesn't it have its own right?

MR. FRATTO: And they are, and we're taking this time. I mean, I don't -- I'll concede that it is a lot of information to take in in a relatively short period of time, but I think they can -- I think it's enough time. At any rate, there is an urgent need here to get it done and I think members recognize that also -- the overwhelming number of members of Congress recognize that.

Some of the issues that have come up out there -- maybe I can just tackle them a little bit and maybe we can get into them a little bit more in your questions. First is this issue of how it impacts Main Street. I know that there's a -- the image out there that this is a rescue plan for Wall Street financial institutions. This is a rescue plan for the American economy. Our economy does not function properly unless we have well-functioning financial institutions.

What we saw last week was a freezing in our credit markets. This had very, very real impacts on numerous businesses around the country, even in just their ability to get overnight financing for their ongoing operations, to pay employees and to purchase equipment and the things that go into the products they make. That is a dire situation if our credit markets can freeze up that way.

There was some comment on -- out there about the need to do more for homeowners and, of course, we're talking to members of Congress about how this legislation impacts homeowners and mortgage markets. It will have a very positive impact for homeowners and mortgage markets. It will ensure that we have the mortgage financing availability in the system so that we can continue to go out and make home loans for Americans.

Remember that the root of this problem is the housing correction. We don't want to see housing finance freeze up or be restricted. We want to see increasing amounts of funds available for Americans who want to go out and begin to reduce the overhang of homes that we have out there in the market; but also just want to remind everyone that it was just recently that we passed a very large housing bill to help homeowners. We have a number of plans out there that are directed at preventing foreclosures.

And just very quickly, the third item is that we're hearing questions about transparency and oversight. Just want to say up front, transparency and oversight is very important to us. This is a very big program.* It's never been done before, and we will insist that there be very strong and robust transparent oversight and review of this program.

Let me stop there, and then I'll be happy to take any questions you have.

Luke_Wilbur · September 24, 2008

John McCain Remarks on the Economic Crisis

America this week faces an historic crisis in our financial system. We must pass legislation to address this crisis. If we do not, credit will dry up, with devastating consequences for our economy. People will no longer be able to buy homes and their life savings will be at stake. Businesses will not have enough money to pay their employees. If we do not act, every corner of our country will be impacted. We cannot allow this to happen.

Last Friday, I laid out my proposal and I have since discussed my priorities and concerns with the bill the Administration has put forward. Senator Obama has expressed his priorities and concerns. This morning, I met with a group of economic advisers to talk about the proposal on the table and the steps that we should take going forward. I have also spoken with members of Congress to hear their perspective.

It has become clear that no consensus has developed to support the Administration’s proposal. I do not believe that the plan on the table will pass as it currently stands, and we are running out of time.

Tomorrow morning, I will suspend my campaign and return to Washington after speaking at the Clinton Global Initiative. I have spoken to Senator Obama and informed him of my decision and have asked him to join me.

I am calling on the President to convene a meeting with the leadership from both houses of Congress, including Senator Obama and myself. It is time for both parties to come together to solve this problem.

We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved. I am directing my campaign to work with the Obama campaign and the commission on presidential debates to delay Friday night’s debate until we have taken action to address this crisis.

I am confident that before the markets open on Monday we can achieve consensus on legislation that will stabilize our financial markets, protect taxpayers and homeowners, and earn the confidence of the American people. All we must do to achieve this is temporarily set politics aside, and I am committed to doing so.

Following September 11th, our national leaders came together at a time of crisis. We must show that kind of patriotism now. Americans across our country lament the fact that partisan divisions in Washington have prevented us from addressing our national challenges. Now is our chance to come together to prove that Washington is once again capable of leading this country.

September 25, 2008

For Immediate Release

Office of the Press Secretary

September 24, 2008

President's Address to the Nation

State Floor

THE PRESIDENT: Good evening. This is an extraordinary period for America's economy. Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration. We've seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money.

We're in the midst of a serious financial crisis, and the federal government is responding with decisive action. We've boosted confidence in money market mutual funds, and acted to prevent major investors from intentionally driving down stocks for their own personal gain.

Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets. Financial assets related to home mortgages have lost value during the housing decline. And the banks holding these assets have restricted credit. As a result, our entire economy is in danger. So I've proposed that the federal government reduce the risk posed by these troubled assets, and supply urgently-needed money so banks and other financial institutions can avoid collapse and resume lending.

This rescue effort is not aimed at preserving any individual company or industry -- it is aimed at preserving America's overall economy. It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America's financial system is back on track.

I know many Americans have questions tonight: How did we reach this point in our economy? How will the solution I've proposed work? And what does this mean for your financial future? These are good questions, and they deserve clear answers.

First, how did our economy reach this point?

Well, most economists agree that the problems we are witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad, because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions -- along with low interest rates -- made it easier for Americans to get credit. These developments allowed more families to borrow money for cars and homes and college tuition -- some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.

Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit -- combined with the faulty assumption that home values would continue to rise -- led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.

Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected -- along with mortgage payments they could not afford. As a result, many mortgage holders began to default.

These widespread defaults had effects far beyond the housing market. See, in today's mortgage industry, home loans are often packaged together, and converted into financial products called "mortgage-backed securities." These securities were sold to investors around the world. Many investors assumed these securities were trustworthy, and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.

The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses. Before long, these securities became so unreliable that they were not being bought or sold. Investment banks such as Bear Stearns and Lehman Brothers found themselves saddled with large amounts of assets they could not sell. They ran out of the money needed to meet their immediate obligations. And they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up, and the gears of the American financial system began grinding to a halt.

With the situation becoming more precarious by the day, I faced a choice: To step in with dramatic government action, or to stand back and allow the irresponsible actions of some to undermine the financial security of all.

I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There's been a widespread loss of confidence. And major sectors of America's financial system are at risk of shutting down.

The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold:

More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.

Fellow citizens: We must not let this happen. I appreciate the work of leaders from both parties in both houses of Congress to address this problem -- and to make improvements to the proposal my administration sent to them. There is a spirit of cooperation between Democrats and Republicans, and between Congress and this administration. In that spirit, I've invited Senators McCain and Obama to join congressional leaders of both parties at the White House tomorrow to help speed our discussions toward a bipartisan bill.

I know that an economic rescue package will present a tough vote for many members of Congress. It is difficult to pass a bill that commits so much of the taxpayers' hard-earned money. I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street. But given the situation we are facing, not passing a bill now would cost these Americans much more later.

Many Americans are asking: How would a rescue plan work?

After much discussion, there is now widespread agreement on the principles such a plan would include. It would remove the risk posed by the troubled assets -- including mortgage-backed securities -- now clogging the financial system. This would free banks to resume the flow of credit to American families and businesses. Any rescue plan should also be designed to ensure that taxpayers are protected. It should welcome the participation of financial institutions large and small. It should make certain that failed executives do not receive a windfall from your tax dollars. It should establish a bipartisan board to oversee the plan's implementation. And it should be enacted as soon as possible.

In close consultation with Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox, I announced a plan on Friday. First, the plan is big enough to solve a serious problem. Under our proposal, the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system. In the short term, this will free up banks to resume the flow of credit to American families and businesses. And this will help our economy grow.

Second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply. Yet the value of many of these assets will likely be higher than their current price, because the vast majority of Americans will ultimately pay off their mortgages. The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the Treasury as these assets are sold. And we expect that much, if not all, of the tax dollars we invest will be paid back.

A final question is: What does this mean for your economic future?

The primary steps -- purpose of the steps I have outlined tonight is to safeguard the financial security of American workers and families and small businesses. The federal government also continues to enforce laws and regulations protecting your money. The Treasury Department recently offered government insurance for money market mutual funds. And through the FDIC, every savings account, checking account, and certificate of deposit is insured by the federal government for up to $100,000. The FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit -- and this will not change.

Once this crisis is resolved, there will be time to update our financial regulatory structures. Our 21st century global economy remains regulated largely by outdated 20th century laws. Recently, we've seen how one company can grow so large that its failure jeopardizes the entire financial system.

Earlier this year, Secretary Paulson proposed a blueprint that would modernize our financial regulations. For example, the Federal Reserve would be authorized to take a closer look at the operations of companies across the financial spectrum and ensure that their practices do not threaten overall financial stability. There are other good ideas, and members of Congress should consider them. As they do, they must ensure that efforts to regulate Wall Street do not end up hampering our economy's ability to grow.

In the long run, Americans have good reason to be confident in our economic strength. Despite corrections in the marketplace and instances of abuse, democratic capitalism is the best system ever devised. It has unleashed the talents and the productivity, and entrepreneurial spirit of our citizens. It has made this country the best place in the world to invest and do business. And it gives our economy the flexibility and resilience to absorb shocks, adjust, and bounce back.

Our economy is facing a moment of great challenge. But we've overcome tough challenges before -- and we will overcome this one. I know that Americans sometimes get discouraged by the tone in Washington, and the seemingly endless partisan struggles. Yet history has shown that in times of real trial, elected officials rise to the occasion. And together, we will show the world once again what kind of country America is -- a nation that tackles problems head on, where leaders come together to meet great tests, and where people of every background can work hard, develop their talents, and realize their dreams.

Thank you for listening. May God bless you.

September 25, 2008

President Bush appeared on television last night to tell the American people that our economy is in crisis and asked taxpayers to support a $700,000,000,000 Wall Street bailout. That's over $2,300 for every man, woman and child in our country. And what will the Bush Administration do with our money? He says it's complicated, and that we should just trust him.

We cannot trust this President or his administration with another dime!

Please, call your Senators - (202) 224-3121 - and demand they put the needs of the American people first. Then tell us about your conversation so we can keep up the pressure on Congress.

The Bush Administration wants us to spend the better part of a trillion dollars to bail out Wall Street, but they have no plans to help those struggling on Main Street. Just a few weeks ago George W. Bush, John McCain and their Republican allies repeatedly assured the American people that "the fundamentals of our economy are strong." This week they're telling us that our economy is in a crisis and the only answer is to give them more money and more power! If the problem is so severe that American taxpayers must risk hundreds of billions of dollars, then we need to make sure we're getting what we pay for.

The following items must be included in any bailout bill:

NO BLANK CHECKS for the banking industry.

PROTECT THE TAXPAYERS. Taxpayers should get ownership in a company equal to any amount paid in excess of the value of the bad debt. This will prevent profitable firms from using this bailout to get rid of their bad debt. It will insure that if the bailout works and the firms become profitable again, taxpayers - not simply bankers - benefit from the upside.

HOLD CEOs ACCOUNTABLE. Any firm that wants a bailout must agree to hold CEO's and Boards of Directors accountable - by firing them. Those held accountable should NEVER be given millions of dollars for overseeing failure.

PUBLIC OVERSIGHT. An independent watchdog should oversee the public ownership of failing companies to ensure taxpayers recoup their investment. Members of this independent oversight entity should include workers and consumers and be approved by Congressional vote.

ENACT REGULATIONS TO PREVENT THIS FROM HAPPENING AGAIN. Any bailout must contain stronger regulation to end the "casino culture" of Wall Street. Financial products based on speculation with no collateral of tangible assets should be prohibited.

AID THE VICTIMS, NOT JUST THE PREDATORS. Since everyone is better off when working families avoid foreclosure, bankruptcy judges should be able to adjust the terms of the mortgages for families facing foreclosure so as many people as possible can stay in their homes.

INVEST IN THE REAL ECONOMY. Any bill to bailout the big corporations should include major public investment in development of new sources of energy and energy conservation, rebuilding schools and infrastructure, extending unemployment and food stamps, and helping states avoid crippling cuts in police and health services.

PROTECT CONSUMERS. Commercial banks that accept taxpayers' money should be compelled to accept tough new restrictions on credit card and banking fees, credit card interest rates and predatory credit practices.

Call your Senators - (202) 224-3121- and let them know you want a bill that helps Main Street, not just Wall Street. Then tell us about your experience, so we can keep up the pressure on Congress.

September 25, 2008

The Bush administration has spent more than $800 billion for wars in Iraq and Afghanistan. Now they're demanding a $700 billion blank check for Wall Street using the same old scare tactics and threats to avoid public debate and Congressional oversight. Our members are showing our support for a responsible plan by rallying against the Bush Blank Check Bailout. We say, 'Bring Home the Troops and Bail Out Main Street--not Wall Street!

September 25, 2008

Any action must address our communities' needs. We have to uncover the roots of the meltdown, and impose guidelines to make sure the solution will benefit average working Americans. Progressive activists are making thousands of calls to Congress opposing Bush's Blank Check. Our sources tell us that the tide is slowly turning. We're leading the way, demanding accountability for the Wall Street Robber Barons along with help for average Americans in need. That's the real solution to this economic crisis.

September 25, 2008

Treasury Secretary Henry Paulson’s warning that ‘the future health of the American economy depends on the swift passage of the $700 billion bailout for Wall Street’ is ridiculous.

“Our nation is in economic crisis brought on by greed, mismanagement, and a lack of regulatory and oversight role by this Administration.

“I have serious concerns about this so-called plan. Every man, woman and child in America will ante up $2000 each to bail out the very people who created this crisis. The banking industry lobbied and sued to reduce regulation and oversight of their activities. Now they are suffering as a result of the not-unforeseen housing downturn and the Administration helps big business again, at the expense of working families.

“Why is it that families who fall on hard times and need public assistance are called irresponsible but when the fat cats on Wall Street do the same, they are not held personally responsible for their actions?

“While we cannot fiddle away like Nero to let Rome burn, we cannot give a blank check yet again to Wall Street.

“I will only support a responsible package that will actually help the economy and protect the taxpayer. This package must be transparent, coupled with tough new oversight and regulations of our financial institutions.

“Congress must correct these abuses and move to stabilize our financial markets while ensuring corporate accountability. Major public investment in employment opportunities, schools, energy, the environment, and health services is vital to get the real economy moving and put people back to work.

“Wall Street must repay the American taxpayer through a surcharge on transactions of commodities and stock, as it did up until 1966. We must have a companion economic stimulus package that invests in jobs, education and American families. No bailout should proceed without being linked to support these investments in the future to get the economy going again.”

September 25, 2008

Are we witnessing the death of the Republic? Sound hysterical? Look at how Treasury Secretary Hank Paulson proposes to govern the $700 billion – some $2000 for every man, woman and child in America – that he wants in order to bail out the banks.

He wants the power to buy “Troubled Assets from any Financial Institution…. on such terms and conditions as determined by the Secretary,” and his decisions “may not be reviewed by any court of law or any administrative agency.” Give him the $700 billion to spend as he sees fit and shut up.

The occasion for this breathtaking insult to the Constitution is the worst financial meltdown since the Great Depression. Essentially, we are being held for ransom: give us the money on our terms or the banks will take down the global economy.

We know how we got here. Decades of reckless economic policies and batty ideas – deregulation, disemboweling regulatory agencies, allowing a shadow banking system to develop without limits, market fundamentalists preaching nonsense about markets always being efficient and self-correcting – left Wall Street’s speculators free to gamble on their own. They borrowed heavily, invented complex new instruments, and pocketed millions along the way. Much of it depended on housing prices going up. Predatory lenders huckstered complicated loans to folks, with no stake in whether they had any chance to repay them.

When housing prices peaked out, banks found themselves with billions in toxic paper, and trillions in exposed credit swaps. No one knew what the other had. All tried to off load the junk at once. Financing froze up. For months, the Federal Reserve and the Treasury reassured us that the situation was under control, while cobbling together one bailout after another – Bear Sterns merged, Fannie Mae, Freddie Mac and insurance giant AIG nationalized, Lehman left to bankruptcy. Now they want free use of $700 billion which they say will get the crisis under control.

Treasury Secretary Paulson says Congress must act immediately. Well, wait just one minute. If it takes $700 billion to bail out Paulson’s former colleagues on Wall Street, some basic questions have to be answered:

Who pays? The rewards of the economic growth of the last decade went overwhelmingly to the wealthiest Americans. 15,000 families – one-one hundredth of one percent of households – pocketed fully one-fourth of all the growth in national income. Send the bill to those who had the party. We need an excise tax on high incomes to pay for cleaning up the mess.

Who decides? We can’t allow the folks who helped create the mess be in charge of cleaning it up. We need an independent entity, governed by a board with union and consumer representation and the power to make the rules for any bailout.

Who benefits? If taxpayers are bailing out banks, taxpayers should get partial ownership – so if the banks do return to profitability, we get some of our money back.

Who gets helped? We can’t just bail out Wall Street and ignore Main Street. The bail out must be bottom up, not just top-down. Any bailout must include provisions for renegotiating mortgages, freezing foreclosures and keeping people in their homes.

What gets the economy going? It’s not enough to bail out the banks. We need serious public investment in the real economy – in rebuilding schools and sewers, in green jobs and conservation that will put people back to work. In this way, we not only do the right thing, but we do the smart thing to create lasting economic growth.

Who is independent? The oversight committees and the overseers must come off Wall Street’s payroll. If the owners pay the referees and umpires, the integrity of the game is corrupted, leaving all outcomes suspect. Financial industry lobbyists should be banned from the beltway for the next year. Legislators should refuse Wall Street PAC and executive donations for at least the next two years.

Who is accountable? We must ban multi-million dollar golden parachute retirement payouts to fired executives who led their companies down a failed road. No executive of a firm that is bailed out should be paid more than the president of the United States.

This Congress is facing its Roosevelt moment. The crisis is deep. The country is headed into a recession. Will the Congress act with the wisdom to put us back on track? Or will it squander even more money on Wall Street without making America better? Americans better weigh in to insure Congress makes the right choice.

September 25, 2008

Citizens from across the political spectrum are telling Congess – No to the Bailout. I’m urging people to respond again to keep the pressure building. We are having an impact but it is going to take an avalanche of citizen input to re-think the bailout. The decision Congress is considering could affect us for a generation or more. It could make progressive change financially impossible. Already, Senator Obama is saying the bailout will slow his plans for new programs to re-build the economy.

One reported quote from an anonymous congressional staffer about the effect of our e-mails, phone calls, faxes, etc. indicates that support for the bailout plan in its present form is rapidly declining due to citizen pressure. The Congressional newspaper Roll Call reports:

“The Bush administration's forceful lobbying effort failed Tuesday to win support from rank-and-file Republicans or Democrats for a $700 billion Wall Street bailout package, though GOP and Democratic leaders still planned to move a bipartisan bill by the end of the week. . . .

“The rank and file in both parties expressed deep concerns about anything resembling the $700 billion that the White House wants, and leaders struggled to keep their Members open-minded in the face of surging outside opposition from a diverse range of voices from former Speaker Newt Gingrich (R-Ga.) and the Club for Growth on the right to liberal bloggers on the left. . .

“But both sides face heat internally, with liberals upset with what some see as a handout to Wall Street cronies and with conservatives who are appalled at the unprecedented intervention in the free market.”

It is important to get more people writing and calling their legislators (202-224-3121). Please forward this newsletter to everyone you know or send them to www.FreshAirCleanPolitics.net to take action. You can write/call again and update your representatives on your views as this drama is unfolding.

And, people are starting to ask very sensible questions that should slow down the process. One writer on economics and taxes that I have a great deal of respect for, David Kay Johnson of the N.Y. Times is making some important points in a memo to the media:

“In covering the proposed $700 billion bailout of Wall Street don't repeat the failed lapdog practices that so damaged our reputations in the rush to war in Iraq and the adoption of the Patriot Act. Don't assume that Congress must act instantly, as so many news stories state as if it was an immutable fact. Don't assume there is a case just because officials say there is.

“The coverage of the Paulson plan focuses on the edges, on the details. The focus should be on the premise. And be skeptical of what gullible Congressional leaders, most of them up before the voters in a few weeks, say after being given a closed-door meeting on supposed horrors. . .

“Ask this question -- are the credit markets really about to seize up?

“If they are then lots of business owners should be eager to tell how their bank is calling their 90-day revolving loans, rejecting new loans and demanding more cash on deposit. I called businessmen I know yesterday and not one of them reported such problems. Indeed, Citibank offered yesterday to lend me tens of thousands of dollars on my signature at 2.99 percent, well below the nearly 5 percent inflation rate. That offer came after I said no last week to a 4.99 percent loan.

“If the problem is toxic mortgages then how come they are still being offered all over the Internet? On the main page AOL generates for me there is an ad for a 1.9% loan (which means you pay that interest rate and the rest of the interest is added to your balance due.) Why oh why or why would taxpayers be bailing out banks that are continuing to sell these toxic loans? . . .

“What steps are being taken to take back bonuses, fees and other compensation from the folks who got rich selling toxic mortgages and illiquid investments that Secretary Paulsen claims are threatening the whole system?

“How will adding $700 billion to the national debt ease strains on the credit markets?

“As of now we are, as a group, behaving just as we did the last two times the administration sought to rush through a hastily thought out, ill-conceived plan. Why in the world are we being so gullible and naive? Whatever happened to the core value of journalism -- check it out?

And, Nobel laureate Joseph Stiglitz, an economics professor at Columbia University, is describing the plan as a raw deal for taxpayers. What's needed most, Stiglitz argues, is to assist struggling homeowners. “We should begin with the core of the problem, the fact that millions of Americans were made loans beyond their ability to pay. We need to help them stay in their homes, including by converting the home mortgage deduction into a cashable tax credit and creating a homeowners' Chapter 11, an expedited way to restructure their liabilities.” If these mortgages are fixed so the debts are paid, will that not make the banks solvent? It is time to build the economy from the base, rather than the top. Trickle down does not work – especially when it is debts that trickle down.

September 25, 2008

Senator Chris Dodd (D-CT), Chairman of the Senate Banking, Housing, and Urban Affairs Committee, released the following statement after the President’s address tonight:

“It is regrettable that 40 days before an election, it has taken the worst economic crisis in our nation since the Great Depression to finally get the attention of the President. Until this point, the cries for help from millions of Americans being forced from their homes and struggling to make ends meet fell on the President’s deaf ears. Now, we face challenges that were entirely preventable and avoidable.

“The Administration has put forth a proposal to address the crisis they helped to create. It would be a grave mistake to sign away billions in taxpayer dollars with no questions asked. For that reason, the Congress is working around the clock to develop a solution that includes more oversight, stronger protections for taxpayers, and measures that will address the root cause of this crisis – the collapse of the housing market. We are making progress, and are committed to sending the President a proposal in an expeditious – but judicious – manner."

Senator Dodd will meet with Republicans and Democrats from the Senate Banking Committee and the House Financial Services Committee tomorrow at 10 a.m. A press availability will follow; location to be determined. Senator Dodd has also accepted an invitation to attend a meeting at the White House with Congressional leaders tomorrow afternoon.

September 25, 2008

Congressman Mike Pence gave the following speech from the floor of the U.S. House of Representatives today, urging caution when considering the possibility of a federal bailout:

“Our financial markets are in turmoil and the Administration was right to call for decisive action to prevent further harm to our economy.

“But nationalizing every bad mortgage in America is not the answer. This Administration’s request of this Congress amounts to the largest corporate bailout in American history.

“I believe Congress should act, but we should act in a way that protects the integrity of our free market and protects the American taxpayer from more debt and higher taxes.

“The strength of America resides in our faith in God and our faith in freedom, including our economic freedom. To have the freedom to succeed, we must also have the freedom to fail and any solution to the present crisis must preserve that essential economic liberty.

“Next, Congress should consider all available options to put our nation’s economy back on its feet.

“There are no easy answers but there are alternatives that this Congress can consider: indexing capital gains to inflation, passing a real energy bill, even regulating the credit default swap market as the chief of the SEC requested yesterday.

“These and other alternatives to a massive federal bailout must be fully considered and debated before Congress acts.

“We must address this crisis with forethought and creativity, rather than massive federal resources.”

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