U.S. Sen. Tom Coburn defends bailout vote
By The Associated Press
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Published: October 20, 2008
Modified: October 21, 2008 at 8:03 am
U.S. Sen. Tom Coburn rigorously defended his vote in favor of the economic rescue plan Monday as he faced hard questions at a town hall meeting in Oklahoma City.
Coburn, R-Okla., told a crowd at the Oklahoma City campus of
Langston University that he would vote to same way "time and time again," remembering the failure of the country's leaders to act soon enough to head off the Great Depression.
Coburn said, like it or not, the country already "is in the midst of a recession" that would "probably last for several quarters."
He said the bailout was needed to put money into the financial system so funds could be made available for lending to everyday citizens and to hopefully reduce job losses.
Some members of the audience at Langston expressed their displeasure with the bailout.
"We should have let it go. We should have let it fail," shouted one man.
"Your option is way too painful," Coburn said.
He said there was danger that a without the bailout, the nation's economy could have dipped to its level in 1960.
"How many of you think you'd still have a job?" he asked.
"We got the best deal we could and it stunk," he said of the bailout. He said his mail, e-mails and telephone calls from constituents are running more than 50-to-1 against his vote.
Coburn, who is known for his conservative approach to funding issues, defended holding up bills to expand small business programs and other projects.
He said he would oppose such measures until Congress includes criteria to determine if the programs work.
Coburn said most federal programs are funded and reauthorized without adequate oversight by Congress.
"That's 80 percent of the federal government. They don't know what they are doing," he said.
On another subject, Coburn said he is "a good friend" of Democratic presidential candidate
Barack Obama, though he is a vigorous supporter of
John McCain, the Republican nominee.
He called Obama "a good man" who "just has a different philosophy than I do."
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I know people are going to counter my statement citing the recent rally of the dollar in foreign countries. The reason this temporary rally is occurring is because we are slowly realizing that all these peoplpe and businesses have run up too much debt here in the US and are selling many many assets at the deflated prices we're seeing to liquidate this debt. This means foreigners are getting the dollars that we are paying our debt to them for, and are going to also use these dollars to buy up all these deflated assets here. We're at the mercy of the world that has been feeding our insatiable consumerism (particularly the Asian countries are doing well).
People are also going to counter me by saing the Asian markets are doing bad. They are temporarily but that is only because we're doing poorly and can't afford to pay them back all this money they lent us. Their economy is sound though and ours isn't. We have borrowed the money and spent it all and ran up credit debt; meanwhile produced little to nothing (thanks to jobs and businesses outsourcing) while the Asian economies are saving their money and producing goods. So while there will be a short term loss for the Asian markets, when they stop lending us money and sell their T-Bonds, we'll lose our borrowing and they'll start to really profit off of their sound economy without the burden of American consumerism.
This is all just to say that we're guaranteeing a depression of unprecidented magnitude by not letting our markets adjust and letting deflation to happen and for consumers to save money instead of taking out more loans, more debt, and more excess. That is precisely what got us in this mess in the first place. Stop encouraging your constituents to spend and stop encouraging our government to spend. YOU ARE A REPUBLICAN. Please be FISCALLY CONSERVATIVE for a change.
I can't speak for others, but I have no enthusiasm for the bailout. If you want a fight, you'll have to look elsewhere. I believe I have called it a "hold your nose vote" and that's exactly what it was. I like the increase in F.D.I.C. insurance. That could be helpful to small businesses and investors, but that's about it as far as I am concerned.
With 700 billion dollars to play with, Treasury should be accomplishing wonderful things. So far, I haven't read about them.
Before you say it Jason, I'm aware that some three hundred billion had been spent to bail out investment bankers, insurance companies and securities companies even before the "bailout" was passed. So far as I know these companies were responsible for their own bad decisions. The only possible justification for trying to put them back on their feet was to stop the unraveling of the whole economy. That may still happen.
The biggest problem was that Paulson, who proposed the original form of the plan wanted absolutely no oversight, specifically excluding the court system. Congress, constitutionally obligated to represent the best interests of the people was not to have oversight. That was quickly changed. The bill, as approved by Congreaa, was vastly improved over what Paulson had originally proposed.
It's a judgment call whether, even then, it was what we needed. That's a question that probably will not recieve an answer until the next administration.
We are floundering in a situation unlike any we have faced since 1929-1941. Then, Roosevelt tried first one thing, then another to tackle the problem. Some worked to some extent, others didn't. His administration abandoned those that did not work. We shall probably have to do the same.
We could, of course, do nothing and wait for the problem to resolve itself. In the first great depression, a final solution did not come for twelve years. Then it was more or less forced on us by the Japanese attack on Pearl Harbor. We are not so deep as that first traumatic experiance yet. Hopefully, we will not be. But, there can be no doubt that whomever we elect as our next President will face problems not comparable to anything this nation has seen for more than fifty years.
Fannie Mae and Freddie Mac can't be reformed and should be closed: so long as they are around they will be in the sights of politicians who want to further their careers by promoting the fantasy of home ownership without responsibility.
And how can Coburn rail about pork - which makes up less than one percent of the federal budget - and say nothing about the out-of-control growth of Social Security and Medicare, which account for one-third of the federal budget?
All this scare-mongering about credit is nothing but an excuse for a power grab on an unprecedented scale, and Coburn is a willing accomplice. He knows nothing about free markets or principles and is no defender of Capitalism.
http://moralitywar.blogspot.com
all Oklahomans should be proud that Coburn puts the nation's interests first.
After hearing the concerns of my fellow Oklahomans who were angry and suspicious of this proposal and the anxiety of other Oklahomans who were concerned about the consequences of failing to pass this recovery bill, I struggled with what was best both for taxpayers and the economic future of our nation, our children, and our grandchildren. After much consultation and consideration, I decided to vote for the plan.
Our country finds itself in the midst of difficult economic circumstances due to tremendous strain on worldwide financial markets. I believe the challenges created by this situation are so great that failure to address them could spill over into the broader economy and negatively affect every American.
In recent months, the Treasury Department and the Federal Reserve have attempted to address the situation through arrangements with Bear Stearns, insurer AIG, and Fannie Mae and Freddie Mac. While many Oklahomans are rightly uncomfortable with bailing out large banks and corporations at the expense of taxpayers, the purpose of the legislation was to protect ordinary Americans and not Wall Street executives. The economic stabilization bill addresses a different problem in a different way, and is just a set of tools that can prevent a worsening crisis for Oklahoma citizens.
As a staunch advocate for free enterprise and the elimination of wasteful government spending, many have wondered why I chose to support this legislation. To answer that question, it is important to know how we have gotten to this point.
Plummeting home values have left many homeowners with mortgages that exceed the market value of their homes, making it uneconomical for them to sell and making it impossible to refinance their adjustable rate mortgages into more affordable loans. As a result, many people have become delinquent on their mortgages and, in many cases, have entered foreclosure.
The financial institutions holding those troubled mortgages have, in turn, found themselves unable to collect on those mortgages or resell them to other investors. Because these assets cannot be liquidated, the banks holding them have significantly cut back on the amount of money they lend as they try to preserve their capital. This in turn is severely restricting the amount of money that Americans can borrow.
Families and businesses alike rely heavily on financial markets. Families borrow to purchase cars, appliances, furniture, and other consumer items. Businesses borrow for various essential reasons as well-for everything from overcoming short-term cash flow problems to investing in new equipment or new ideas. A collapse of the financial markets would prevent consumers and businesses from getting the funds they need to consume and invest-undermining two key drivers of the U.S. economy.
What is missing from this account is the role Congress played in creating these economic troubles in the first place. For years, Congress pursued "affordable housing" policies with the goal of providing loans (subprime loans) to borrowers that could not pay them back. Fannie Mae and Freddie Mac - companies charted by Congress - encouraged banks to make subprime loans by purchasing the loans from banks and turning them into investments. Investors believed that the mortgage-backed investments were a safe investment because of the implied backing of the federal government and purchased them in great amounts.
These policies, along with low interest rates, pushed housing prices artificially high and created the often discussed housing price bubble that could not be sustained in the long run. Once the housing bubble burst and prices declined, investors were left with mortgage-backed investments that were worth less than their face value, and because of an accounting rule (mark to market) financial institutions had to value them far below their true value thus causing the banks to show much less capital than they actually have. The effect of these policies has been the crippling our country's financial system.
As much as members of Congress want to find scapegoats, the root of this problem is political greed. Members of Congress from both parties wanted short-term political credit for promoting home ownership even though they were putting our entire economy at risk by encouraging people to buy homes they couldn't afford. Then, instead of conducting thorough oversight and correcting obvious problems with unstable entities like Fannie Mae and Freddie Mac, members of Congress chose to ignore the problem and distract themselves with unprecedented amounts of pork-barrel spending.
If the American people are angry about the financial situation of this great country, there is only one place they need to direct their anger - the United States Congress. The economic recovery bill does not represent a new and sudden departure from free market principles as much as it represents an emergency response to congressional actions that have ignored free market principles, and our Constitution, for decades. If anyone in Washington should offer their resignation it should be the members of Congress who peddled the fantasy of free home ownership without risk. No institution in our country is more responsible for the myth of borrowing without consequences than the United States Congress.
In 2006, along with nineteen other Senators, I called for major regulatory reform with regard to Fannie Mae and Freddie Mac. We warned of the dangers of these laxly regulated entities, and the enormous risk they could pose to the housing market, the financial system, and the economy as a whole. Yet Congress failed to take any action and the problem grew worse until we have found ourselves faced with an imminent financial catastrophe.
Failure to act now could have devastating effects on our economy. If banks continue to fail and stop lending, many Americans could lose their job, be unable to secure a loan for a car, home or college education, and find their life savings and retirement in jeopardy. Our economy depends on having liquid assets available for credit and lending just as an automobile engine needs oil. If those liquid assets stop flowing, our economy will be seriously damaged and will require far more costly and lengthy repairs.
My first priority in the Senate is to protect the American taxpayer. The plan put forth by Treasury Secretary Paulson and the Bush Administration is not perfect, but I believe is the right action to take at this moment. Consequently, I worked with my colleagues in the Senate to secure the following key provisions to protect taxpayers in the final version of the economic rescue package:
Reduces Taxpayer Exposure - Rather than a $700 billion blank check, as requested by the Bush Administration, $250 billion would be available immediately to the Treasury Secretary with stringent oversight. Any additional funds would require further Congressional approval.
Wall Street Helps Bail Itself Out - Addresses the frozen assets clogging up the financial system. Participating institutions holding these assets would pay the insurance premiums - in effect helping bail themselves out rather than rely on taxpayers' hard-earned money.
Increased Oversight and Transparency - While the Paulson proposal explicitly removes any judicial oversight and lacks transparency provisions, the negotiated economic rescue package establishes a bipartisan oversight committee that requires honest and transparent reporting to Congress and the public. In addition, the programs will be monitored by a Special Inspector General, and reviewed and audited by the Government Accountability Office.
Increased FDIC Insurance - FDIC insurance limits for bank accounts were increased from $100,000 to $250,000.
Taxpayers who want to ensure that this doesn't happen again should send a very clear message to Washington that it is time for Congress to live within its means and restore the principles of limited government, balanced budgets and free markets that made this country great. I will do everything in my power to ensure that this bill does not lead us down a slippery slope to European style socialism and slow economic growth. I will also promise taxpayers that I will do everything in my power to block what I expect will be hundreds of attempts by politicians in Washington to continue business-as-usual borrowing and spending in the next Congress.
In a time of crisis, American families have to make hard choices between budget priorities. So should Congress. If politicians want to create new programs they should eliminate duplicative programs or reduce funding for less important programs. The only way we can put this crisis behind us is for Congress to rejoin the real world of budget choices and consequences which, as we have seen in recent days, can be ignored for only so long.
Again, thank you for contacting me on this most important issue.
Sincerely, A
Tom A. Coburn, M.D.
United States Senator
TC: JEC