Sen. Shelby on why the bailout plan should be axed
Republican leaders in Congress still haven't persuaded Sen. Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee, to go along with the administration's $700-billion financial system bailout.
Shelby gives a voice to the concerns that many, many people -- conservatives and liberals -- have raised about the plan devised (and railroaded) by Treasury Secretary Henry M. Paulson.
Here’s an excerpt from Shelby’s statement today:
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.
Photo: Sen. Richard Shelby (R-Ala.). Susan Walsh / Associated Press