by Dr. Jean Howard-Hill, Third District Congressional candidate
posted October 2, 2008
) Dr. Jean Howard-Hill |
No one can truly say that anything that resembles another government bailout is good. But because of the realization of the consequences of not acting has on the local, state, national and international economy, something has to be done. The Dow Jones on Monday plunging 777 points, the most ever for a single day, with a lost of $1.4 trillion in the stock market is an indication of what is yet to come.
The ripple effects on the people of the third district, caused by failing banks are certain to hit home. If Volkswagen cannot get the loans it needs to become operational in Chattanooga, it cannot proceed with its plant, and those jobs that we are greatly anticipating, will not come to reality. This also means any investments we have made in this project will cost taxpayers who are already under financial strain because of the economy and lack of jobs. If vehicles manufactured in Chattanooga cannot be sold in the market place because purchasers are unable to acquire loans, or if there is a production slow down, this will mean lay-offs and fewer anticipated jobs.
Municipalities will also be impacted in that they will not be able to issue bonds which are crucial to financing of local governments, including our own city and county governments within the Third District.
It impacts the liquidity, willingness and ability of banks to loan other banks the money necessary to maintain a flow of funds within the banking stream. Already short term interest rates have almost doubled to 7%. This means fewer loans for cars, mortgages, and for start-up and growing small businesses.
It also will impact 401Ks and retirement benefits, some of which also are invested in the stock markets not only in America. The devaluation of stocks could impact those benefits, as well as savings. This is because savings are often invested in the stock market in order for them to get the highest returns. Also, should there be a run on money, and people begin to withdraw their assets from the banks, this could be a major problem.
Small businesses will suffer because they are not able to obtain loans and lines of credit to meet payroll and to purchase goods and services that allow for them to stay afloat during an already troubling and slowed down consumer market. This could be a breaker for many. This is particularly crucial leading up to the one of the heaviest consumer volume purchasing seasons, i.e. Christmas, and holds true also for larger businesses. The ability to obtain lines of credit is absolutely necessary. Making sure loans are not frozen that allow small businesses to meet payrolls is crucial.
What has happened on Wall Street will cause a slow down in consumer credit as well as consumer spending, which will further weaken the economy. When people are unsure about their economic futures, they tend not to spend what they have. Without consumer purchases within the market place, the economy falls further into economy decline, ending up into recession and even depression.
With Tennessee already being 42nd in the nation for the number of college graduates with four-year degrees and 44th for two-year degree, this also poses a severe threat to students and institutions of higher learning. Not being able to obtain loans to finance a college education would result in pushing those already low numbers even further down, and almost guarantee struggles for public and private colleges to hold the line in tuition increases. Already some banks have begun to shut down their student loan divisions.
What this does within the mortgage industries is further threaten those who are about to lose their homes. This bill at least would have given them the opportunity to buy back their loans. It also would have given for the first time in history, taxpayers the authority to provide oversight, minimize losses and make sure profits go towards reducing debt.
Internationally, we saw a plunging of global markets as a result of the House rejecting the economic stabilization plan. On Tuesday, Japan’s Nikkei 225 index plunged 4.1 percent. Austrian stock sunk 4.3 percent. This was the same of Taiwan and India. These and many others are foreign markets of which are tied into the American economy. You have only to look and see where the products you have on or are using (and even eating) are from to understand this tie in. The reality is, that we no longer live in a world where America is isolated. What happens in foreign markets impact us, just as much as what we do impact them. This is the nature of the beast, whether we understand it or not, this is the case.
Unfortunately, what the public has been led to believe is a “bailout” is the lesser of the evils. But, no matter how we slice it, it still amounts to the public buying a bad debt which has been created by Wall Street. It does not make us feel good to know that the very same financial institutions that have caused so many to lose homes, not be able to get loans, pay high interest rates, incur penalties and late fees on credit card debt, and to have retirement benefits threatened, are now asking us to use taxpayers money to rescue the financial market from which they have benefited. From the greed of Wall Street, this debt has been passed on to the people at a time when the economy already is in peril. Therefore, none of this makes sense to the people, unless they are given more information so that they can better understand what it means to them both from a positive and negative prospective.
When the people are not properly informed, they too are at a lost for not being able to understand the complexities of issues before them that may have dire consequences.
As your congresswoman, after having thoroughly researched the consequences of the bailout, I would have held emergency Third District meetings and press conferences to disseminate that information to the people. I would have made sure the people understood the provisions of the stabilization plan and how it impacts them from a global to a local level. I would have polled and sought their input, only after I had informed them on this crucial issue. Then I would have been there for the debate and caucusing to make sure that the will and best interest of those I serve were a part of the mix that went into the decision making process. This is the way a well informed and qualified congressperson should operate. Not with rhetoric and quotes from someone else, after the vote. It is time out for an empty-headed congress. We need someone in Congress with the expertise, education and experience in dealing with those issues which will no doubt increase in complexities as we delve further into the national, global, as well as state and local economy.
After research and analysis of the provisions of the bill, please allow me to do what Wamp has failed to do.
Below I have provided a summary analysis of the Emergency Economic Stabilization Act of 2008 and how it impacts the people of the third district.
The bill which failed passage in the House on Monday, would have:
I. Provided up to $700 billion to buy mortgages and other assets that have gone bad from Wall Street financial institutions, which have made it difficult for individuals to procure car, student and housing loans, and to refinance mortgages; small businesses to make payrolls and to purchase lines of credit for products and services; and those companies that depend upon the ability to access lines of credit in order to do business. This is crucial in stabilizing the frail economy. It also is crucial in moving forward the Volkswagen deal locally. Without it, Volkswagen, as well as sub-companies that seek to gain from this project, may not be able to acquire loans and lines of credit to move forward as planned.
2. Established a program that would allow companies to insure troubled assets against losses. This would guarantee that good money that is invested is not turned into a bad loss of assets.
3. Required the U.S. Treasury to make modifications in trouble loans as a result of predatory lending practices. This would have helped owners to keep their homes and to get some level of relief from predatory lending practices that have caused them to loss their homes.
4. Directed other federal agencies to modify loans that they owned or controlled. This would have benefited further those with other forms of loans such as student loans, offering some forms of relief in debt retirement and interest rates.
5. Improved the HOPE for Homeowners program, so that its eligibility requirements are expanded and includes the opportunities for more Americans to purchase homes. This provision would have provided more ways for the Department of Housing and Urban Development to help more families keep their homes during this economic crisis.
6. Provided provisions which would have ensured taxpayers are not just paying for the mismanagement and greed of Wall Street by requiring companies that sell some of their bad assets to the government to provide warrantees, so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. This would amount to a taxpayer buy-in to the assets and profits of these companies. Carefully managed, this could have turned a profit for the people, provided those responsible for the bad debts are not allowed to profit from it.
7. Required the President to submit legislation that would cover any losses to taxpayers resulting from this program by charging a small, broad-based fee on all financial institutions. This would have made sure that public loses were covered from the deep pockets of Wall Street.
8. Prevented Wall Street CEOs and executives from receiving from golden parachutes in the millions of dollars and then walking away, leaving the government to cover the bad debts they hold and manage the bad assets they have created. It also would have required limitations on the amounts given CEOs as a part of the golden parachutes and required that unearned bonuses be returned.
9. Required that in some cases, executive pay would be limited. This would have placed government ceilings on what many Wall Street executives could receive and would have prevented some of the practices of outrageous salaries.
10. Required that as a part of participation in this program, companies would have to agree to forego and lose certain tax benefits.
11. Parceled out the $700 billion bailout by giving the U.S. Treasury $250 billion immediately, with a requirement that the President has to certify that additional funds are needed. With that certification, $100 billion, then $350 billion would be given, subject to congressional disapproval. This would have given Congress oversight of the spending and progress of the plan. By parceling out the money in this way, should things go wrong, further payment could be stopped and the plan modified without further expense to taxpayers.
12. Required the U.S. Treasury to report how the bailout funds are used, as well as updates on the economic impact it has in alleviating the financial crisis.
13. Established an Oversight Board to keep tabs on the U.S. Treasury and to ensure it did not act in an arbitrary manner, non-consistent with the purpose of the act.
14. Establishes a special inspector general to protect against waste, fraud and abuse.
The provisions of this bill are what make it an economic stabilization and asset acquisition, rather than a bailout.
In order to revive the bill which failed on Monday, Sept. 29, in the House, Congress has to go back and add another layer of protection to safeguard the people. As your congresswoman, I would advocate for an increase in the $100,000 ensured FDIC deposit limit; more detailed language as to how those who are impacted by this crisis can also become “stabilized; and punitive and criminal consequences for those responsible for the financial mess we are in. The tougher we make this bill as it is tweaked prior to another vote, the more acceptable it will be to the people.
Without a doubt the notion of bailing out corporate America is distasteful for those who have found themselves in their own sea of personal financial crisis. But it does not make the Emergency Economic Stabilization Act of 2008 a bad bill. What it does do is provide a way (of which none of us like) to stabilize the economy.
We all are mindful that never do we want to set a precedence which suggests, when the greed of the private sector causes a crisis within the national economy, the federal government will be there to bail them out. This is why when polled, the people of the third district overwhelmingly voted against it. But it was Wamp’s duty and responsibility to clear up any misunderstanding about the bill. It was his duty and responsibility as congressman to research and give voters all sides of this issue and how it directly affects those of us in the third district. Just as he has done with all of his voting, he neither researches issues thoroughly or ask for the input of the people. He simply goes to Washington, votes and then barks about how he is representing the good folks at home. Mr. Wamp, you cannot represent those you serve, if you do not take the time to inform them and to find out how they want you to vote.
It also must be understood that because of the failure of Congress to exercise its oversight function, it has allowed Wall Street to go unregulated and unchecked. This is where the problems lie. This means Wamp should also share the blame for the creation of this economic crisis that affects all of us.
We also need to ask Congressman Wamp, where was he on Sunday, Sept. 28, when the bill was being debated and the roll call vote was taken. When the roll call vote was taken electronically, there were 381 yeas, 41 nos and 11 not voting. Among those not voting was Zach Wamp. Yet he made this statement the next day regarding the Emergency Economic Stabilization Act of 2008.
“We must restore true confidence to the marketplace, which cannot be done by passing one bill through Congress. I am prepared to stay in Washington as long as it takes to help resolve this crisis by enacting sweeping reforms to the financial world that does not fall on the backs of the taxpayers and future generations.”
Again this is more of “Wamp rhetoric”. If Wamp can find a sweeping reform that does not cost taxpayers, then he is better than the national and international top economists.
Linda Killian in her book The Freshmen, said of Wamp when he first arrived in Washington, “When he was in Washington, Wamp was one of the noisiest freshmen…..”
Noise and very little substance is the trade mark of Congressman Wamp, which is evidenced by the following statement he issued on Monday. It shows just how naïve and severely lacking he is in his ability to understand and deal with the complex issues before Congress.
“While I am deeply concerned about the economy and the long-term viability of the nation’s markets as they relate to protecting small business, honest taxpayers and those saving for retirement, a vote today against the proposed ‘bailout plan’ is a vote for the people who did not issue or accept a sub-prime mortgage, for the people who demand more accountability than this bill provides and for the people who know that profit is a double-edged sword. When coupled with responsibility, profit is a healthy American virtue, but if people are driven to seek profit at any cost, it can wreck economies and ruin lives.
C.S. Lewis once wrote, ‘We all want progress, but if you're on the wrong road, progress means doing an about-turn and walking back to the right road.’ I came to Congress as a limited government conservative with a big heart for the common man who pays his own way, respects the Constitution and expects our leaders to do the same. We simply cannot borrow our way out of debt, spend our way into prosperity or explain this bailout as anything short of an unacceptable intervention of the federal government into our private sector.”
For Wamp to quote Lewis, rather than using his own intellect and understanding to inform the people on a level where they could understand and separate facts from fiction, is yet another indication of him having to rely upon the intellect of someone else to deal with this matter. At a time of crises, people of the third district need to know what is needed to be known about this pressing issue, and not what C.S. Lewis wrote.
It also shows he does not understand local, state, national or international economic impact and continues to espouse meaningless rhetoric which he thinks voters want to hear. Without the script, Congressman Wamp simply does not understand.
What he should have done is explained what this bill entailed and its dire consequences. This is what representative government is all about. This is the role of Congress – to educate the people on important issues before Congress; get their input; and then vote their will and best interest.
Because of Wamp’s failure to do so, and to understand the impact of America’s economy and the global community, the Volkswagen plant may be derailed, as other global economies are failing and Volkswagen is not able to acquire adequate loans and financial backings to live up to its end of the deal.
Local businesses may not be able to purchase goods and services, and meet payroll because they cannot obtain the usual line of credit.
Students may find themselves without loans to pay for their college education.
Retirement benefits, 401ks and savings that are invested in the stock market may be in jeopardy.
Those victims of predatory lending struggling to stay in their homes, may find themselves losing the battle without anyone to fend for them.
Layoffs may increase the unemployment numbers when payrolls are not met.
Some businesses may go under, and spending may decrease, affecting state and local tax revenue.
Local government may find the issuing of bonds a major concern.
All of this is the consequences of a “no” vote. Who stands to lose in this situation? The people of the third district.
So to applaud him for his no vote, is to applaud his ignorance and posturing on an issue he has not brought any meaningful understanding to the people, because in fact, he fails to understand it himself.
Wamp is no hero in this vote.
* * *
First I want to thank all the individuals who took the time to read and examine the opinion expressed by Dr. Howard-Hill. It shows, from her point of view, precisely what is wrong with both the credit system as it is in place, and the monitoring systems put in place by the federal government. Too bad she got it all wrong.
I applaud Mr. Wamp for not voting for the $700 billion bailout bill. The bill as it was written would not have required any change in the way credit is awarded.
While we are currently in a credit crisis, this problem began many years ago as a result of ill-conceived legislation pushed through by the Democratic controlled House and Senate. The bills that were passed, eased the credit requirements, and started new government programs so that more people could purchase homes. These people that the new government programs were geared towards didn't have the financial stability required to become homeowners. Sub-prime mortgages, with little to no down payment required and a slowing economy caught up with people who were over their heads with unconventional mortgages which increased their payment with each passing year. Until these types of mortgages are eliminated, and people are required obtain traditional mortgages, no money simply given to the institutions which caused this problem in the first place, is going to solve any problem.
Please take a look at this for yourself. Don't take my word for it, or the word of someone who stands to gain from trashing the work of Mr. Wamp.
Greg Middleton
* * *
Ms. Hill,
It seems like you are the one out of step with the values of the voters of the 3rd District.
Congressman Wamp opposed this bill originally based on the fact that the voters of this district do not believe in opening a huge door and welcoming socialist policies that will further complicate the problems that we face today. I am very concerned that we as a nation now condone socializing debt and privatizing profits.
Government has already shown how much damage it can wreak in the mortgage market by the way Fannie Mae and Freddie Mac were mismanaged. They encouraged lenders to create new ways to qualify homebuyers who should have never qualified for those loans. Every bad loan that Fannie and Fred bought, those running these quasi governmental programs such as Franklin Raines, (who is now a mortgage advisor for the Obama campaign), received more money in bonuses.
Now that the housing bubble has burst, and those who should have never gotten those loans cannot pay for them, the taxpayers are called upon to bail out the lenders and remove the bad debt from their books so money can be free to create new loans.
Congressman Wamp was right to not vote on the house bill. Yes, the senate bill has new provisions of tax breaks to help spur the private sector and some reforms, but it is still a bill that many voters do not support. Congressman Wamp basically is holding his nose while supporting this version. His choices were limited as time was running out.
Yes, something had to be done, but a true market driven plan would never be supported by the Democrats in congress.
I truly have concerns that someone who wants to represent this district would be so quick to toss aside the freedoms of this nation and open her arms to socialism. Your ignorance of the dangers of going down this road is astounding.
Valerie Morris
Harrison
* * *
One question, Mr. Middleton. If Dr. Jean Howard-Hill got it all wrong, then why does today's headline reads, Wamp is now switching his vote to yes? Also, does that make Corker and Alexander wrong as well?
You missed the whole point. It is called informing voters.
We have someone who has the intelligence to do the research and to inform the people on issues important to them. She took the time to do what he should have done. So what's your point?
It seems you are the one who is doing the trashing of a woman who has intelligence and the respect of so many, because she does know what she is talking about, unlike Wamp.
Wamp is definitely not in her league, sir.
I am sure after reading today's recant of his vote, this must make you feel really silly that you stuck yourself out there for Wamp. Sometimes it is just best to leave it alone, as I am sure you have learned from your posting in defense of a Congressman who doesn't have time to run for Congress, because he is so busy pasting his face on billboards, running for governor.
Dorothy Tate
Chattanooga
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