Senator Claire McCaskill Responds to my letters on the bailout

Posted by on October 29, 2008 7:16 pm
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I’m going to take the same approach to Senator McCaskill’s response by covering the issues I have with the response, and then let you read the complete response and let you make up your mind. What I do ask you is that you also read the response from Kit Bond and tell me if they don’t sound similar and have many of the same talking points.

Issues:

First one: “…While many Missourians have not felt it yet, the credit crisis has already caused some farmers and small businesses to lose the lines of credit they rely on to function day to day…”
Senator, my problem with this statement is that I don’t believe that the problem was with lack of credit, or frozen credit, but with the poor balance sheets and the return of common sense to lending practices. Today, October 29 2008, we’re still talking about frozen credits yet most companies have been able to get their credit lines to pay payroll and to purchase inventory. The point is, this was part of the crisis talking points to help the country accept this poorly conceived plan and allow you to force it upon us under the cover of panic.

Second one: “…Many city and state governments have been unable to find financing for important projects, such as sewer projects and hospital improvements…”
Senator McCaskill, with all due respect, I challenge you to find a list of 50 such projects throughout the country (one for each state). I will bet that you are unable to do so without ignoring the fact that the programs were not worthy of being done. Even in California Governor Schwarzenegger asked for a bailout from the Federal Government, but if you look deeply into it, California had other options but it was “easier” to get the Federal Government to pay for a runaway budget. Cut spending Governor, your constituents know how to do that because they do it every day and every month California should do that and not ask for a hand out from the Federal Government.

Third one: “…With no action, even Missourians with good credit might not be able to get a home loan, a student loan, an auto loan or a loan to expand their small business…”
I must disagree with you Senator, just like I disagreed with Senator Bond, based on the fact that the small companies I know personally have had no such problem so long as they have a good balance sheet. Poor lending practices have come to an end, and only those with bad credit are paying the price, the rest of us are doing well. Auto loans now require the same common sense lending practice that states, “put some money down so you’re not upside down from day one” and not give people 100% loans on automobiles that are going to loose 20% of their value the minute you pull them from the car lot. Please Senator, you are much better than these talking points.

Fourth one: “…Congress inserted many provisions designed to protect the taxpayer and ensure oversight of the program. It puts limits on compensation paid to CEO’s at participating companies and there are provisions to work with homeowners to restructure loans and keep them in their homes to the greatest extent possible. …”
Senator, in yesterday’s (October 28, 2008) news leads on all the major news channels CNN, MSNBC, FOX News, the question was how the money was going to be used from this bail out for the first 9 major financial institutions. The cry was for explanation whether or not the money was going to be used to pay for year end bonuses. In today’s news channels (October 29, 2008) the lead story was to ask Assistant Secretary of the Treasury and all the major pundits, why the lending had not been mandated when the billions of dollars were given to the major financial institutions. So, tell me Senator McCaskill, what were the many provisions designed to protect the taxpayer and ensure oversight? It appears that with the benefit of hindsight, my original complaints and concerns I shared with you over this particular bail out turned out to be correct.

Please take a close look at the response and keep in mind why I was so against this bailout, and pay attention to the news on how this bailout is helping and not helping and you be the judge whether our Senators here in Missouri should be held to account on the failure of the bailout. Then ask them these questions:

1) Where is the call for a special council to find the true root cause of this financial crisis?

2) Which Congressman and Senators have taken the most money from Fannie Mae and Freddie Mac, and is that not a severe conflict of interest when the people who are supposed to guard the henhouse are being financed by the foxes themselves?

3) What happened to the old “appearance of impropriety” being sufficient to conduct an investigation?

We, the taxpayers of the United States of America, just paid $700,000,000,000, plus an additional $150,000,000,000 for a total of $850,000,000,000 for a lesson in improper financial and lending practices, should we not get the clear learning and establishment of true culpability in this fiasco?

Thanks
The Lee’s Summit Conservative, Paul Z

Letter from Senator Claire McCaskill
Dated: October 14,
2008

Thank you for contacting me regarding the turmoil in the financial markets and federal government’s response to it. I appreciate hearing from you, and I welcome the chance to respond.

The situation in the credit markets is dire, and that has left us with some tough choices. We have seen a series of financial institutions fail and that brought us to a crisis point where lending all but stopped. Problems spread beyond investment banks and Wall Street trading firms. Retirement funds and even some money market accounts, which are supposed to be safe places for savings, have been threatened. Meanwhile, interest rates for the short term financing that businesses rely on to make payroll rose to levels that they could barely afford. Many have found
that they could not get financing at all, and some small businesses in Missouri have shut their doors as a result.

Missourians are right to be angry about this situation. Financial firms packaged risky subprime loans into securities which they said were as safe as government bonds, and investors made reckless bets on these new products. The new products were so complex that, when they started to go bad, no one knew which securities were affected and to what extent. What’s more, some firms had borrowed huge amounts of money to buy these products, which put their creditors on the hook as well. Confidence dropped to zero throughout the whole market. The federal government was asleep at the wheel during all of this. Regulation was inadequate and oversight was nonexistent.

I do not like how we got here, and I do not like what we have to do to get out. It stinks that the American people are now being asked to post $700 billion to clean up this mess. It all stinks to high heaven. But doing nothing would be much worse. While many Missourians have not felt it yet, the credit crisis has already caused some farmers and small businesses to lose the lines of credit they rely on to function day to day. Many city and state governments have been unable to find financing for important projects, such as sewer projects and hospital improvements. With no action, even Missourians with good credit might not be able to get a home loan, a student loan, an auto loan or a loan to expand their small business.

Still, I took no pleasure in voting for the Emergency Economic Stabilization Act, but I did so because the credit crisis poses a very real threat to the economic security of all Americans. This bill will attempt to address the credit crisis in a systemic way and get credit flowing again. The bill will allow the Treasury to purchase up to $700 billion in distressed assets, such as mortgage backed securities. The Treasury hopes that this will restore confidence and free up lending by removing some of these distressed assets from the banks’ balance sheets and replacing them with capital. The Treasury also hopes to recover the $700 billion through the sale of these assets and possibly return a profit to the American people.

Like many Americans, I have my doubts about this plan. However, I was pleased that Congress inserted many provisions designed to protect the taxpayer and ensure oversight of the program. The bill places strict reporting and disclosure requirements on the Treasury. It requires the companies that participate in the program to give the government equity shares, allowing the taxpayer to benefit if the company recovers and its stock price goes up. It puts limits on compensation paid to CEO’s at participating companies and there are provisions to work with homeowners to restructure loans and keep them in their homes to the greatest extent possible. While it is far from perfect, it is much better than the blank check the Secretary of the Treasury initially proposed.

I know this plan will not be a silver bullet. We will need to do a lot more to get our economy back on track, including investing in education, job training, and renewable energy. We also need to get to work to establish strong, common sense rules and regulations to undo the damage of the last decade of deregulation that turned our financial markets into the world’s largest casino. As your Senator, I will be pushing hard to address all of these issues.

Thank you again for contacting me. I hope you will continue to reach out in the future with your thoughts and advice.

All best,
Senator Claire McCaskill