KYLE – Congressman Lloyd Doggett (D-Austin) told the Kyle Chamber of Commerce Tuesday that this month’s $700 billion bailout of Wall Street was the wrong legislation passed the wrong way, and that he and his constituents were correct to oppose it.
“I heard from more people in the course of considering the bailout legislation than on any issue since President Bush invaded Iraq – over 5,000 communications that were initially pretty evenly divided between ‘No,’ and ‘Hell, no.'” Doggett said. “… It did seem to me that there clearly is and was a need for prop action. But it needed to be responsible action.”
Heavily favored to win his eighth congressional term on Nov. 4 against Republican challenger George Morovich, Doggett painted a somber picture of the bailout bill’s prospects for aiding the economy. Doggett argued, in effect, that the bill is structured to accomplish little but saddle taxpayers with more debt, adding that, “We are a part, nationally, of what I think is a serious recession that I think will continue for a number, if not many, months ahead.”
The economy, which has been slow for the last year, went into a full tailspin in the last two months, its effects even reaching Hays County, where a growing and relatively stable housing market based almost entirely on demand inched to a crawl this summer. Meanwhile, houses and stock portfolios lost years of equity in just a few months as lenders holding bad debts all but stopped issuing credit.
Because the bill passed Congress in a “panic” and a “stampede,” Doggett said, it doesn’t have the taxpayer’s interests sufficiently at heart, nor does it contain sufficient safeguards to be sure the funds will be effectively used. Lacking those measures, he said, some of his fears are being realized.
“Some institutions, instead of using the federal money that we’re all contributing to start more lending to keep our economy going, they’re using it to purchase other banks,” Doggett said. “We were told we had to do this because we had banks that were going to fail. Well, our money is being used to make these banks bigger, in some cases. I understand the arguments for why this is being done, but I question if that’s the best use of our tax resources.”
Doggett said he is heartened that the federal government hasn’t purchased “toxic securities” with the bailout money, as originally planned. However, Doggett said, that danger remains.
“A security is toxic, we’re told, because no one knows how to value it,” Doggett said. “So, since we can’t value it and don’t know what it’s worth, we’re going to sell it to the taxpayers.”
Furthermore, he said, the legislation contains no measures to ensure that regulators who looked the other way or lenders who broke laws will be held accountable. Doggett said he is concerned that the federal money will, instead, wind up subsidizing $70 billion in Wall Street bonuses.
“This didn’t just drop down from Mars or something,” Doggett said. “It is the result of neglect and indifference and not enforcing our laws. It’s the result of many things, and that’s one of them … There’s not one corporate director that’s been removed. There’s no change in the leadership of these institutions.”
Doggett said the October bailout doesn’t even compare favorably with the 1980s federal bailout of failing savings and loans.
“Some of the cost of that bailout was paid for by the financial services industry,” Doggett said. “In fact, it’s still being paid for to some extent. All this proposal did was to go borrow from China and whoever else will still lend to us this entire amount of money, though our children and grandchildren will still be paying the interest on this trillion dollar slice of debt in the future.”
And, at the end of all that, Doggett said not one economist has argued that the bailout will actually stimulate the economy so much as just prevent it from getting worse. Furthermore, he said, the bill intensifies one of the country’s most severe underlying problems, which is the enormous accumulation of foreign debt.
“All that stands between our country and Argentina, which had runaway inflation and still has some big problems, is the full faith and credit of the United States,” Doggett said. “There becomes a limit. We’ve added now, in the last eight years, $4 trillion (of debt), more borrowing from abroad than all of our presidents put together before President Bush, before we got to the bailout. How long do we maintain that full faith and credit if we over-borrow to meet these needs? We simply change over-leveraging from the private sector to the public sector.”
Lest it should be thought that Doggett disagreed with the entire bailout bill, he said he has long advocated the increase in federal insurance for bank accounts, which is up to $250,000, and approves provisions to incentivize energy projects.
“I’m convinced that the next wave of export producing jobs, as well as some of the challenges we’ve faced with $4-a-gallon gasoline, is likely to be found in our coming up with some of the answers on renewable energy and energy efficiency that the entire world wants,” he said.
From here, Doggett said, Congress has a lot of work to do, though he expressed his confidence that “change is coming,” an obvious allusion to Democratic presidential candidate Barack Obama’s strong run for the White House.
Doggett said the U.S. House of Representatives has passed a $61 billion stimulus package towards moving the economy. About half of the money will go for infrastructure projects to spur construction and much of the rest is allocated to the extension of unemployment benefits and food stamps “for trying to get spending going by people who are desperate enough that they’re going to spend whatever they get.” The Senate will take up the matter when it reconvenes on Nov. 17.
The congressman also said a full investigation of the financial crisis is in order to discover the roots of the problem and make “wrong doing” accountable. That discussion almost certainly will run alongside debates aimed at regulating the financial industry, which, Doggett added, will have to be carefully nuanced.
“There will be a demand to regulate any and every thing,” he said. “We know about the dangers of too much regulation. Everybody in business at some point or another has encountered some problem at the state, federal or local level. We need to try to find a balance. We clearly got totally out of kilter. It’s called regulation, but I call it law enforcement and we didn’t have the law enforcement that applied there.”Email | Print