Sep 25 2008
Senator Richard C. Shelby, ranking Republican on the U.S. Senate Committee on Banking, Housing and Urban Affairs, today issued the following statement:
“Last Saturday Secretary Paulson presented Congress with draft legislation that would grant him sweeping authority to spend up to $700 billion in taxpayer money to buy illiquid securities. The stated goal of this scheme is to return confidence and liquidity to our credit markets.
“I do not believe this is the right approach. We did not get into this situation in a matters of days, and we are not going to fix it in a matter of days.
“Proponents of the Paulson plan are telling the American people we can solve this problem with a single bill. I don’t believe that is credible. We have a number of interrelated problems that need to be addressed in order of their significance. First, and most urgent, is liquidity. Then we must address the solvency of our financial institutions and declining home values, not to mention our entire regulatory structure.
“I believe Congress can address the liquidity issue by increasing the combined resources of the Federal Reserve System and the Treasury. By enhancing the Federal government’s existing lending facilities and guarantee programs, we can help stabilize money market funds and provide loans to troubled financial institutions without exposing taxpayers to massive losses.
“Thereafter, we must determine how to address the troubled assets on the books of financial institutions and continue the process of dealing with declining home values. This will likely be a long and difficult process. We must recognize that now.
“Even if the Paulson plan works perfectly, which many doubt, including nearly two hundred economists, it will not stimulate new lending, stop de-leveraging, help distressed home owners, or jump start the economy.
“The next Congress is going to have to do more to address this crisis and we have not made this clear to the American people. As a member of Congress, I’m concerned that we are being asked to ratify the Secretary’s plan without having given meaningful consideration to any alternatives. This I can not support."
*The list of economists cited above can be found at: http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm