Interesting correspondence from Sam Farr

[MaryBear]

- apparently his vote for bailout gave cause for other constituents to get upset. Interesting that he waited until after the election to respond. - mb


"Thank you for contacting me regarding the Emergency Economic Recovery Act of 2008. The economy is greatly troubled and I appreciate the opportunity to share with you my thoughts on this substantial piece of legislation that the House of Representatives voted on to avert an economic meltdown.

First, it is important to know that the president's original $700 billion blank check to Wall Street is not what was voted on in the House. That proposal was "dead on arrival." Instead, the package was a loan to the financial industry that must be paid back within 5 years. I voted for the rescue plan and it passed on a vote of 263-171.

I received hundreds of calls to my office asking that Wall Street not get a freebie -- no bailout. I took those calls to mean that the public wanted a solution that would protect their savings, protect their investments and force Wall Street to be accountable. My vote for the loan package, I believe, was exactly that. I could not sit idly by and watch the credit markets seize up and banks fail while individual taxpayers and small-business owners struggled to get by and saw their credit lines disappear - no car loans, no business loans, no home loans, no student aid loans. I believe in "fixing what's broken." This fix may have been imperfect, but it was a necessary step toward bringing some sanity to a market meltdown. Doing nothing was not an option.

We are in the midst of an economic storm, the likes of which we have not seen in 70 years. Distilling Congress' response to the crisis to base terms, the media has dubbed it a "bailout" for Wall Street. But that shorthand term is misleading and hides the true nature of both the problem and our response. The crisis started in the financial markets due to massive losses on mortgage-related securities. The economic upheaval has violently disturbed the operations of the financial system both here and abroad. Investment banks have vanished from Wall Street; they have been converted to holding companies subject to rigorous regulation. Major brands in the financial sector have been forced to merge, go bankrupt or a combination of the two.

Fear continues to spread and the financial institutions are wary of one another because no one knows which firm might go under next. Only the government has the capacity and mandate to intervene, reduce uncertainty and bring confidence back to the banking system.

I am as displeased as anyone that tax payers have been forced to risk their money to keep our financial system from collapse. There is plenty of blame to go around and meaningful reform is needed to avoid this happening again. However this financial crisis needed to be addressed immediately, before it took down our economy.

Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke briefed Congress on the nation's dire financial situation. We were told that the financial meltdown threatens the entire economy. First, the credit markets would freeze. Investors would stop investing and banks would stop lending. The impact would quickly ripple throughout the equity markets. With more than half of American households invested in our financial markets through stocks, retirement plans and mutual funds, I decided we could not risk zeroing out people's saving plans.

Granted, individual savers would still see their bank accounts protected up to established levels, so you might not immediately feel the impact of the financial meltdown. But prominent economists agreed that the government needed to step in to reduce the severity of economic crisis which is spreading beyond the financial sector and into the productive economy. As the financial system seizes up, consumers and businesses won't be able to find essential credit. Businesses, large and small, depend on credit to conduct the everyday operations like stocking the shelves, paying suppliers, making payroll and investing to improve their businesses.

If credit is in short supply or expensive to find, businesses will reduce spending and fire workers to avoid bankruptcy. As the problem spreads to households, it would make it impossible to find credit to buy a car or appliances and push up the costs of student and home loans. This could result in catastrophic economic failure and lead to a severe recession.

With our financial markets teetering, I felt that Congress had to act to ease the financial disruption and reduce the damage to the whole economy. I made this decision after considerable thought and only after the initial proposal was drastically improved.

The proposal the president sent to Congress was a $700 billion giveaway. His proposal was dead on arrival. It failed on fours fronts:

1)It failed to protect taxpayers;
2)It failed provide enough oversight and transparency;
3)It failed to remedy the foreclosure problem at center of the crisis;
4)It failed to reign in out-of-control executive compensation.

Democrats negotiated improvements that ensured that the government will take an equity stake in the firms in exchange for buying bad assets. This way the tax payer will benefit from any upside that may result due to participation in the program. It is no longer a handout; it is a loan. This will protect taxpayers.

The new plan also does not give all of the funds to the Treasury at once. Congress provides the Treasury $250 billion immediately, then requires the president to certify the need for additional funds and give Congress the authority to deny the Treasury the last tranche of $350 billion. The Treasury must report on how the funds are used and what progress the agency is making to address the crisis. The legislation also establishes an Oversight Board so that the Treasury cannot act arbitrarily. And it appoints a special inspector general to protect taxpayers against waste, fraud and abuse. We also raised FDIC limits to cover bank accounts up to $250,000 and created a tax credit for homeowners who do not currently itemize.

The Emergency Economic Stabilization Act that I voted for also requires the Treasury to modify troubled loans to keep American families in their homes. The act directs other federal agencies, whenever possible, to modify loans. Furthermore, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development.

Last, but certainly not least, the bill stipulates that any financial institution that sells troubled assets to the government will be subject to executive pay limits. Executives who made bad decisions will not be allowed to dump their bad assets on the government and then walk away with millions of dollars in bonuses. Additionally, the bill limits "golden parachutes" - the bloated bonuses that financial executives pocket - and requires that unearned bonuses be returned.

Even with all the conditions added to the bill to improve the measure, it is true that we were attempting to solve a problem that has not entirely revealed itself. It is a difficult proposition to intervene in the marketplace and to put considerable taxpayer money at risk. However, after I studied the financial condition of our country carefully and spoke with local bankers, businesses and real estate interests, I decided I simply had to vote for the economic rescue plan. It's important to realize that I did not do this not to save Wall Street, but instead to protect the economy and the bank accounts of millions of Americans. It was not an easy vote, but I hope you can appreciate why I made the decision that I did.

Thank you for sharing your thoughts. I always appreciated hearing from as many people as possible, especially on the tough economic issues that our country is currently confronting."