DORGAN STATEMENT ON FINANCIAL BAILOUT
Thursday, October 2, 2008
CONTACT: Justin Kitschor Brenden Timpe
(WASHINGTON, D.C.) – U.S. Senator Byron Dorgan (D-ND) today issued the following statement about his vote on the financial rescue plan.
STATEMENT OF U.S. SENATOR BYRON DORGAN“Providing a $700 billion financial rescue plan without requiring reform and regulation of the financial markets is a serious mistake. That is exactly what this legislation does.
“I believe that we are in an economic crisis that does require a response by Congress.
“But it cannot be a response that commits the American taxpayers to a large rescue fund for many of America’s biggest financial institutions while still leaving in place unregulated financial markets that allowed this financial crisis to happen.
“Despite my best efforts there is nothing in this legislation that will require the regulation of the very financial markets that have, in recent years, helped create a casino like atmosphere with large financial institutions exhibiting unprecedented greed in search of short term profits and big bonuses that knew no bounds.
“I will not vote for a plan that I believe fails to address the central cause of this crisis: unregulated financial markets that hide the unbelievable speculation and reckless investments by some major financial institutions whose losses are now being loaded on the backs of the American taxpayers. Those financial markets must be regulated NOW!
“In 1999 when Congress debated a large deregulation bill titled the Financial Modernization Act, I was one of only eight Senators who voted no and I warned then in Senate debate that “this bill will also raise the likelihood of future massive taxpayer bailouts”. I wish I had been wrong!
“Nine years later we are considering a ‘massive taxpayer bailout’ plan that provides no regulation of the hedge funds and derivative trading that has caused much of the financial wreckage in our economy.
“The plan also fails to restore the protections that were removed in the Financial Modernization Act to separate FDIC insured bank operations from the risky speculative investments in real estate and securities.
“Under this plan the creation of exotic securities that are traded in financial darkness by unregulated hedge funds and other institutions can continue. It is estimated that there is a notional value of more than $60 trillion of Credit Default Swaps in our economy. No one knows where they are, whose balance sheets they may threaten, or how much additional risk they pose to financial firms. Yet, I was told this plan could not require regulation and transparency of these financial markets because there was opposition in Congress and the White House. That is not a satisfactory answer for me. And I don’t believe it is satisfactory to the taxpayers.
“The legislation contains some provisions that I strongly support. I believe we should increase the FDIC insurance to $250,000 per account. I also strongly support the tax extenders and the tax incentives for renewable energy.
“But in the end, if this plan is about restoring confidence, the failure to include reform and regulatory measures along with the money is a fatal flaw that I believe will end up hurting our country.
(Attached are the six steps Senator Dorgan worked to include in the financial rescue plan during the past week. While there was some improvement in the plan along the way, it fails to do what Senator Dorgan thinks is necessary to protect both the economy and taxpayers.)
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 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.
(Thanks Jed for the link!)