Dear T. Scott,
Thank you for contacting me regarding the financial recovery package recently considered by Congress; I appreciate hearing your thoughts and concerns on this issue. This package failed by a vote of 205-228. I voted for this legislation, and I'd like to take a moment to explain my thinking about this complex problem.
Like many Americans, I had major concerns with the Bush Administration's initial financial recovery proposal. It contained no help for ordinary Americans struggling with their mortgage payments, no oversight and no protection for taxpayers. It was a major power grab attempt by the Administration in the form of a $700 billion blank check and Congress correctly rejected that plan. I also worried about the true extent of this economic crisis - would it just punish Wall Street people who acted unwisely? Or would it impact us all? And, if the latter was true was action by Congress required?
After listening to many of my constituents, small business owners, local bankers, and many others in the business and financial world, I have concluded that this crisis is more serious than just the normal downside of the business cycle; that failure to act by Congress could turn a severe economic slow down into a panic-a run on banks and all financial institutions that could plunge us into a deep and lasting recession; and that the plan before Congress, while offering no guarantees, represented a prudent and necessary step to prevent this much more painful economic outcome.
I now believe strongly that this crisis affects all Americans. If it only impacted the financial institutions on Wall Street who made outrageously risky investments then I would not have supported this plan. But the credit crunch and the economic slow down will hit us all. Loans for college, cars, homes, or any other consumer need will be almost impossible to obtain. As this reality spreads, businesses in all communities in our country will be forced to cut back, leading to significant job loss. The markets will go down also, placing in jeopardy pensions, 401K plans, and many other investments for all people in our country.
I also want to make clear that significant economic hardship is coming no matter what we do. Our nation has lived on credit for far too long, from the federal government's growing debt right down to average households where we have been collectively spending more than we earned for years. The housing boom only made it worse, enticing people in all walks of life to take on even greater debt with the illusion that the ever rising value of homes would always cover that debt. Wall Street made all of this immeasurably worse with risky financial deals designed to maximize short term profit with no thought whatsoever to long term consequences. Now we all have to find a way to mitigate the damages and begin digging our way out of the mess.
Over the past week, through bipartisan cooperation and thoughtful deliberation, Congress delivered a plan that addresses the drastic shortcomings of the Bush Administration's proposal and protects the interest of taxpayers. The revised plan helps to prevent home foreclosures crippling the American economy. It cuts the requested $700 billion in authorized purchasing of troubled assets by the Secretary of the Treasury in half, and requires Congressional review for future payments. It has a profit-sharing provision that ensures tax payers benefit from the use of their money and requires in five years that the President put forth a plan to recoup the taxpayers' money from institutions that benefit. I am particularly pleased that this provision was included, as it makes certain that taxpayers receive a maximum return on our money.
This financial recovery package also ensures strong independent and Congressional oversight and transparency mechanisms throughout this process, and imposes strict limitations on excessive compensation for CEOs and executives of participating financial institutions. The plan requires strong oversight by a board appointed by bipartisan leaders of Congress as well as strict over sight by the Government Accountability Office. It makes sure to prevent the further enrichment of the people who contributed so much to creating this crisis in the first place, and that any actions by the Treasury Secretary are transparent and open to scrutiny and review
This was not an easy vote and I do not believe for a second that this legislation will somehow solve all our economic problems. We must make major changes in how we regulate our financial institutions. We must also change our spending priorities in Congress and throughout our nation so that we build a fiscally sound economy-one that focuses on long-term sustainable growth, not just short-term profit.
This bill was not a perfect solution and it is not exactly how I would have drafted it. However, I do believe that it would have helped reduce and reverse the negative trends in our economy today. Now that the bill has been defeated, I will continue to consider all views and options and work with my colleagues to build consensus for a solution that will protect Americans from more economic harm.
Again, thank you for contacting me. I hope this has helped explain my thoughts on this complex issue. Please feel free to contact me in the future should you have additional comments or concerns.
Sincerely,
Adam Smith
Member of Congress
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