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Barney Frank on Budget & EconomyDemocratic Representative (MA-4) |
By early 2008 Congress was talking about a housing bailout.
The leading reform opponents were Rep. Barney Frank (D, MA) and Sen. Chris Dodd (D, CT). Frank first dismissed our fiscal warnings, suggesting administration officials would "exaggerate a threat of safety and goodness [to] conjure up the possibility of serious financial losses to the Treasury, which I do not see" and called Fannie and Freddie "fundamentally sound financially." Later, Frank went so far as to argue that this "is an artificial issue created by the administration. I don't think we are in any remote danger here." Even as Fannie and Freddie collapsed and helped drive the financial crisis of 2008, Frank labeled Bush's call for reform "inane."
Once the president helped spark a crisis, Frank voted in 2008 for the Bush administration's reform bill. It was blatant hypocrisy.
At that stage of the crisis, however, even Frank took pains to point out that free markets were great innovators and that we needed to take care not to discourage innovations. This disclaimer was politically necessary for a liberal chairman fighting an uphill battle against the conventional wisdom that markets could do few wrongs.
Since then, Frank has grown even bolder and has exerted real ideological as well as policy leadership. "We are in a worldwide crisis now because of excessive deregulation." With the 1999 repeal of the Glass-Steagall Act, Frank added, "We let investment banks get into a much wider range of activities without regulation," seeding the subprime mortgage mess and the cascading calamity in banking.
Proponent's Argument for voting Yes:
[Rep. Biggert, R-IL]: The HAMP Termination Act would put an end to the poster child for failed Federal foreclosure programs. The program has languished for 2 years, hurt hundreds of thousands of homeowners, and must come to an end. This bill would save $1.4 billion over 10 years. To date, the HAMP program has already consumed $840 million of the more than $30 billion of TARP funds that were set aside for the program. For this extraordinary investment, the administration predicted that 3 to 4 million homeowners would receive help.
HAMP has hurt more homeowners than it has helped. The program has completed about 540,000 mortgage modifications. Another 740,000 unlucky homeowners had their modifications cancelled.
Opponent's Argument for voting No:
[Rep. Capuano, D-MA]: This is a program that I'm the first to admit has not lived up to what our hopes were. This program we had hoped would help several million people. Thus far we've only helped about 550,000 people. But to simply repeal all of these programs is to walk away from individual homeowners, walk away from neighborhoods. I'm not going to defend every single aspect of this program, and I am happy to work with anyone to make it better, to help more people to keep their homes, & keep their families together. To simply walk away without offering an alternative means we don't care; this Congress doesn't care if you lose your home, period. Now, I understand if that makes me a bleeding-heart liberal according to some people, so be it.
Proponent's argument to vote Yes:Rep. LEWIS (D, GA-5): This bipartisan bill will provide the necessary funds to keep important transportation projects operating in States around the country. The Highway Trust Fund will run out of funding by September. We must act, and we must act now.
Opponent's argument to vote No:Rep. CAMP (R, MI-4): [This interim spending is] needed because the Democrats' economic policy has resulted in record job loss, record deficits, and none of the job creation they promised. Democrats predicted unemployment would top out at 8% if the stimulus passed; instead, it's 9.5% and rising. In Michigan, it's above 15%. The Nation's public debt and unemployment, combined, has risen by a shocking 40% [because of] literally trillions of dollars in additional spending under the Democrats' stimulus, energy, and health plans.
We had a choice when it came to the stimulus last February. We could have chosen a better policy of stimulating private-sector growth creating twice the jobs at half the price. That was the Republican plan. Instead, Democrats insisted on their government focus plan, which has produced no jobs and a mountain of debt.
Proponent's argument to vote Yes:Rep. PETER WELCH (D, VT-0): Citigroup supports this bill. Why? They're a huge lender. They understand that we have to stabilize home values in order to begin the recovery, and they need a tool to accomplish it. Mortgages that have been sliced and diced into 50 different sections make it impossible even for a mortgage company and a borrower to come together to resolve the problem that they share together.
Sen. DICK DURBIN (D, IL): 8.1 million homes face foreclosure in America today. Last year, I offered this amendment to change the bankruptcy law, and the banking community said: Totally unnecessary. In fact, the estimates were of only 2 million homes in foreclosure last year. America is facing a crisis.
Opponent's argument to vote No:
Sen. JON KYL (R, AZ): This amendment would allow bankruptcy judges to modify home mortgages by lowering the principal and interest rate on the loan or extending the term of the loan. The concept in the trade is known as cram-down. It would apply to all borrowers who are 60 days or more delinquent. Many experts believe the cram-down provision would result in higher interest rates for all home mortgages. We could end up exacerbating this situation for all the people who would want to refinance or to take out loans in the future.
Rep. MICHELE BACHMANN (R, MN-6): Of the foundational policies of American exceptionalism, the concepts that have inspired our great Nation are the sanctity of private contracts and upholding the rule of law. This cramdown bill crassly undercuts both of these pillars of American exceptionalism. Why would a lender make a 30-year loan if they fear the powers of the Federal Government will violate the very terms of that loan?
Proponent's argument to vote Yes:Rep. DAVID OBEY (D, WI-7): This country is facing what most economists consider to be the most serious and the most dangerous economic situation in our lifetimes. This package today is an $825 billion package that does a variety of things to try to reinflate the economy:
Opponent's argument to vote No:
Rep. JERRY LEWIS (R, CA-51): Most of us would agree that the recent $700 billion Troubled Asset Relief Program (TARP) is an illustration of how good intentions don't always deliver desired results. When Congress spends too much too quickly, it doesn't think through the details and oversight becomes more difficult. The lesson learned from TARP was this: we cannot manage what we do not measure. We cannot afford to make the same mistake again.
Sen. THAD COCHRAN (R, MS): We are giving the executive branch immense latitude in the disbursement of the spending this bill contains. We are doing so without any documentation of how this spending will stimulate the economy. Normally, this kind of information would be contained in an administration budget. For items that have a short-term stimulative effect, most of us will feel comfortable debating their merits as an emergency measure. But there is a great deal of spending that is not immediately stimulative.
Proponent's argument to vote Yes:Rep. BARNEY FRANK (D, MA-4): Last year, after we responded to the urgent pleas of the Bush administration to authorize the $700 billion deployment of Federal funds to unstick the credit markets, many of us became very unhappy, [because Bush] repudiated commitments to use a significant part of the fund to diminish foreclosures. If we do not pass this bill today, we will make no progress in what is the single biggest economic problem we've been facing, namely, the foreclosure crisis.
Opponent's argument to vote No:Rep. RON PAUL (R, TX-14): There has been a lot of money spent to try to bail out the financial industry, and nothing seems to be working. I think it's mainly because we haven't admitted that excessive spending can cause financial problems, & excessive debt and inflation can cause problems.
Actually, the recession is therapy for all of the mistakes, but the mistakes come, basically, from a Federal Reserve system that's causing too many people to make mistakes. Interest rates are lower than they should be, so they don't save. That contributes to what we call "moral hazard" as well as the system of the Fannie Mae and Freddie Mac system. With the assumption that we're all going to be bailed out, people say, "Well, no sweat because, if there is a mistake, the government will come to our rescue." A private FDIC would never permit this massive malinvestment. There would be regulations done in the marketplace, and there would not be this distortion that we've ended up with.
Proponent's argument to vote Yes:Rep. BARNEY FRANK (D, MA-4): This economy is in the worst shape that it has been in since the Great Depression. This Congress voted 2 months ago to advance $25 billion to the auto industry to promote innovation. This $15 billion is an additional "bridge loan."
Opponent's argument to vote No:Rep. SPENCER BACHUS (R, AL-6): We all understand that the bankruptcy of either GM or Chrysler would have a cascading effect on other manufacturers. But I cannot support this plan because it spends taxpayer money without any real promise to return the industry to profitability. I see several glaring flaws. We are creating a new car czar to manage these companies from Washington; not a CEO, but a car czar. Second, this legislation actually imposes new and expensive mandates on our automobile companies. Third, this legislation imposes Federal Government management on the Big Three, the wisdom of Washington. It is clear that the management of these companies have made mistakes, many mistakes, but to set up a command and control Federal bureaucrat is exactly the wrong solution.
Rep. RON PAUL (R, TX-14): The problems that we are facing today date back to 1971. But we don't seem to want to go back and find out how financial bubbles form and why they burst. Instead, we just carry on doing the same old thing and never look back. We spend more money, we run up more debt, we print more money, and we think that is going to solve the problem that was created by spending too much money, running up debt, printing too much money. Today, we are talking about tinkering on the edges without dealing with the big problem.
Proponent's argument to vote Yes:Rep. DAVID OBEY (D, WI-7): Congress has tried to do a number of things that would alleviate the squeeze on the middle class. Meanwhile, this economy is sagging. Jobs, income, sales, and industrial production have all gone down. We have lost 600,000 jobs. We are trying to provide a major increase in investments to modernize our infrastructure and to provide well-paying construction jobs at the same time.
Opponent's argument to vote No:Rep. JERRY LEWIS (R, CA-41): Just 2 days ago we were debating an $800 billion continuing resolution. Now in addition to being asked to pay for a bailout for Wall Street, taxpayers are being asked to swallow an additional $60 billion on a laundry list of items I saw for the first time just a few hours ago. The Democratic majority is describing this legislation as a "stimulus package" to help our national economy. But let's not fool ourselves. This is a political document pure and simple. If these priorities are so important, why hasn't this bill gone through the normal legislative process? We should have debated each of the items included in this package.
It doesn't take an economist to tell you that the economy needs our help. But what does this Congress do? It proposes to spend billions more without any offsets in spending. The failure to adhere to PAYGO means that this new spending will be financed through additional borrowing, which will prove a further drag on our struggling economy.
Opponents argument for voting NAY: Rep. BARTON of Texas: [My first issue the bill is that by the bill's own definition], we don't have price gouging in the US today. We do have high prices. But the reason we have that price is not because of price gouging at retail. I am not aware of any pending State action on price gouging, and almost every State has State law to go after price gougers.
The second issue with the bill, it requires the declaration of a Presidential energy emergency. The bill doesn't give any definition as to why the President should declare an energy emergency; it doesn't define "unconscionably excessive"; it doesn't define when a "seller is taking unfair advantage."
I know there is a lot of pressure on the Congress doing something. I would state we would be better served to look at the underlying fundamentals that address the supply situation.
SUPPORTER'S ARGUMENT FOR VOTING YES:Rep. WATERS: This bill preserves public housing. The administration eliminated the one-for-one replacement requirement in 1996, effectively triggering a national sloughing off of our Nation's public housing inventory. Housing authorities have consistently built back fewer units than they have torn down and, as a result, over 30,000 units have been lost. I urge you to support our Nation's low-income families and to preserve our housing stock.
OPPONENT'S ARGUMENT FOR VOTING NO:Rep. HENSARLING: President Reagan once said that the nearest thing to eternal life on Earth is a Federal program, and I don't think there is any better case study than perhaps the HOPE VI program. If there was ever a program that cried out for termination, it's this one.
This program began in 1992 with a very noble purpose of taking 86,000 units of severely distressed public housing and replacing them, demolishing them. Well, it achieved its mission. But somewhere along the line we had this thing in Washington known as mission creep.
We already have 80-plus Federal housing programs, and the budget for Federal housing programs has almost doubled in the last 10 years, from $15.4 billion to more than $30 billion now. So it's very hard to argue that somehow Federal housing programs have been shortchanged.
LEGISLATIVE OUTCOME:Bill passed House, 271-130
Proponents support voting YES because:
Rep. FRANK: This legislation seeks to prevent a repetition of events that caused one of the most serious financial crises in recent times. We have a worldwide problem economically, with a terrible shortage of credit. Innovations in the mortgage industry, in themselves good and useful, but conducted in such a completely unregulated manner as to have led to this crisis. The fundamental principle of the bill is not to put remedies into place, but to stop future problems from occurring in the first place. We have had two groups of mortgage originators: banks subject to the regulation of the bank regulators; and then mortgage loans made by brokers who were subject to no regulation. The secondary market has been on the whole useful but, having been unregulated, has caused some problems.
Opponents recommend voting NO because:
Rep. HENSARLING: This is a bad bill for homeowners in America. There is no doubt that this Nation faces a great challenge in the subprime market, but this piece of legislation is going to make the situation worse. Clearly, there has to be enforcement against fraud in the subprime market. But what Congress should not do is essentially outlaw the American Dream for many struggling families who may be of low income, who may have checkered credit pasts, for whom a subprime mortgage is the only means to purchase a home.
The House Committee on Financial Services (also referred to as the House Banking Committee) is the committee of the House of Representatives that oversees the entire financial services industry, including the securities, insurance, banking, and housing industries. The Committee also oversees the work of the Federal Reserve, the United States Department of the Treasury, the U.S. Securities and Exchange Commission, and other financial services regulators.
A bill to increase the debt limit from $14.3 trillion to $16.7 trillion.
[Explanatory note from Wikipedia.com "Debt Ceiling Crisis"]:
The US debt-ceiling crisis was a financial crisis in 2011 that started as a debate in the Congress about increasing the debt ceiling. The immediate crisis ended when a complex deal was reached that raised the debt ceiling and reduced future government spending. However, similar debates are anticipated for the 2012 and 2013 budget. President Barack Obama and Speaker of the House John Boehner announced on July 31 that an agreement had been achieved. After the legislation was passed by both the House and Senate, President Obama signed the Budget Control Act. On August 5, the credit-rating agency Standard & Poor's downgraded the credit rating of US government bond for the first time in the country's history.
Under US law, an administration can spend only if it has sufficient funds to pay for it. These funds can come either from tax receipts or from borrowing. Congress has set a debt ceiling, beyond which Treasury cannot borrow. The Obama administration stated that, without this increase, the federal government would shut down and the US would enter sovereign default, thereby creating an international crisis in the financial markets. Alternatively, default could be averted if the government were to promptly reduce its other spending by about half.
An increase in the debt ceiling requires the approval of both houses of Congress. A large majority of Democratic legislators (who held a majority in the Senate) favored tax increases along with smaller spending cuts. Supporters of the Tea Party movement pushed their fellow Republicans to reject any agreement that failed to incorporate large and immediate spending cuts or a constitutional amendment requiring a balanced budget.