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

Comments

[subgenius]

Thank God somebody is paying attention.

Here is the list of NON-PARTISAN economic advisers (MIT,Chicago,Harvard,etc) who oppose this bill.

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm

BB&T Corp. Chief Executive Officer John Allison said the Treasury "is totally dominated by Wall Street investment bankers'' and "cannot be relied on to objectively assess'' the impact of government policy on the financial industry. Congress should "hear from well-run financial institutions'' as Treasury Secretary Paulson's proposed $700 billion bank rescue aims to help "poorly run'' companies and the primary beneficiaries would be Goldman Sachs Group Inc. and Morgan Stanley.

http://www.bloomberg.com/apps/news?pid=20601109&sid=afxCLBycUdbc&refer=home

The ONLY people supporting it are those with connections to Wall St.

Concerned individuals should visit "Mish" Shedlock's site:

http://globaleconomicanalysis.blogspot.com/

and take part in the actions to phone and fax senators and house representatives being organized there.

[Robert Laughing]

Couldn't we just give Wall Street the Trillions in Soc Sec IOUs Congress stuffed the "TRUST FUND" with, in order to squander the REAL MONEY on USELESS-to-us, but INVALUABLE to their ILLICIT RE-election campaigns??? If these IOUs have ANY value (like Wall Street's CDOs and SIVs) Wall Street should be tickled. Let's give THEM toxic waste for toxic waste...how much more reasonable can we taxpayers be? Or maybe Congress Repubs and Demos could swap their re-election funds, for Wall Street promissory notes, or shares of priceless (literally!) Wall Street stock? Let's hear YOUR thoughts on this!

[Chris Lemon]

The recent financial meltdown is appalling.

We used to lead the world in manufacturing and stable governmental policies. Now the economy and government are some complex huge Ponzi scheme.

We now look like an insolvent commodity exporting third world banana republic. We complained about government involvement in the economies of European countries, now the U.S government is in the process of nationalizing the mortgage and banking systems. Soon the U.S. will be begging the Arab and Chinese governments for cash to refinance the banks. What went wrong with the U.S.?

On thing we can definitely do now is to not reward the people who got us into this situation with more tax dollars.

As part of any bailout, make sure the taxpayer gets a huge equity stake in any participating company.

Re-regulate any financial institution that benefits in any way from federal guarantees of debt.

Make sure that there are no golden parachutes for the executives of the companies responsible for this debacle: no bonuses for “saving” the companies with U.S. tax dollars, no tax credit for losses, no booking future profits in overseas tax havens.

Turn the FBI loose on the companies responsible for this. Make examples of the culprits, with really long prison sentences and seizure of past bonuses.

Don’t let this happen again.

[Winfield J. Abbe]

Isn't this all a little like the lawyer joke: A lawyer told three of his closest friends, all lawyers, he thought he might need cash after his death. Just to be on the safe side, he gave each of them $500 in cash to place in his casket at the funeral, just before burial so those involved in the service couldn't steal it before he went into the ground forever.
After the service, the three friends were celebrating and talking. One said, I just couldn't do it; I only put $200 in the casket. A second said, I also couldn't do it, I only put $300 in the casket. The third lawyer said, I couldn't do it either, I left my personal check!

[AJ duggal]

We think the discussion should not even start with whether this bill will bail us out or not. The discussion should be: a open TRIAL of those, who put the US citizens and small businesses through this nightmare. They made their money, and probably left the country for us all to suffer. Just think about it. What is more important ? A quick bail out or prevention, so that, it does not happen over and over again.

We need stability, so we can be creative. Our families need to love this nation from their heart, not out of no choice.

What if we have enough to eat and clean roads, just imagine the stress levels around the nation for millions of people who suffer of of the hands of these criminals. Financial stress is far more felt and destructive in nature, than any other punishment.

It is over a year now, with this hell that we are living in, and there is no accountability.

Stop this discussion of bailing out and start a TRIAL and talk about punishment and regulation to make sure no body steals the peace of this nation, ever again.
I know, it is easier said than done !
http://saabt.org/article.asp?article=2360
Thank you.

[ricky]

Sen. Shelby never mentions one economist by name and I seriously question whether there are 200 opposed to the revised Paulsen plan (with oversight, equity stakes, hard terms for taxpayer payoff, no golden parachutes, etc),
I'm sure there would be 200 opposed to the original 3 page Paulsen proposal.
The fact is, the Resolution Trust Company of the late 80s seized savings and loans and taxpayers came out fine. The question should be do we want leaders to keep pounding out a deal or listen to Shelby who's playing russian roulette with the global financial system. The system is seized up.
All forms of credit and yes, municipal bonds are next. Check out the 10 part plan proposed by Nouriel Roubini online (Phd Economist, New York U) for the dire consequences of doing nothing.

[MPW]

Shelby said "I believe Congress can address the liquidity issue by increasing the combined resources of the Federal Reserve System and the Treasury." ...he may be paying attention but this sounds like EXACTLY what Paulson and Bernanke are suggesting int he first place! MORE power to the Fed and to the Treasury! (forget that) Let hear a REAL solution not just speaking in generalities. Check out this article http://www.infowars.com/?p=4844...

[KAR38]

Richard Shelby is a man who speaks the truth and has good common sense.

I think there should be more people in Congress like him and we would be in a lot fewer messes than we are, as a country.

[Dan]

I can guarantee I will not be voting for anyone on my ballot that supports this bailout.

[Eric Klein]

Dear Sen. Shelby,
Thank you for your courage. Keep up the good work in the interests of the people of the United States of America and the world.
May history remember you as one of the main heroes of the 21st Century.
If only somehow you could replace MaCain.

[subgenius]

Dallas Federal Reserve Bank President Richard Fisher said the proposed $700 billion rescue of financial institutions backed by Fed Chairman Ben S. Bernanke would plunge the U.S. government deeper into a fiscal abyss.

The plan by Treasury Secretary Henry Paulson to buy troubled assets from financial institutions would put "one more straw on the back of the frightfully encumbered camel that is the federal government ledger," Fisher said today in the text of a speech in New York. "We are deeply submerged in a vast fiscal chasm."

Fisher made the comments as the central bank expands its role in the biggest government intrusion into markets since the New Deal, with Bernanke trying to persuade Congress to approve Paulson's bailout plan.

Bernanke has already cut the benchmark interest rate at the most aggressive pace in two decades, invoked emergency powers to loan to securities firms and pumped billions of dollars into banks to try to restore liquidity. Also, the central bank loaned $85 billion this month to American International Group Inc.

"The seizures and convulsions we have experienced in the debt and equity markets have been the consequences of a sustained orgy of excess and reckless behavior, not a too-tight monetary policy," Fisher said to the New York University Money Marketeers Club.

"I was, and I remain skeptical, that lowering the fed funds rate is the most effective antidote," he said. "Rates held too low, too long during the previous Fed regime were an accomplice to that reckless behavior."

[Josh taylor]

I agree with Senator Shelby, that there are better alternatives than having Treasury buying "trash for cash."

Better to loan money to financially viable institutions so that they can buy the trash at market prices. See Buffet deal with Goldman Sachs.

I also agree with Cash for Trash By PAUL KRUGMAN -- http://www.nytimes.com/2008/09/22/opinion/22krugman.html

"...it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms and their stockholders and executives ” a giant windfall at taxpayer expense..."

My response to PK's comment is that this is the biggest hole in the treasury proposal .

This could be addressed if each seller of illiquid securities, as part of the agreement , is required to pay back the loss in value on the specific group of securities purchased ( either in stock or cash ) once the treasury sells them in addition to interest on the $ advanced . This way the financial institution gets immediate relief , but has to pay the bill at some point down the road .

Also, we do not need to buy all the bad paper , just enough of the larger blocks to unclog the system.

[emmanuel goldstein]

Did you ever wonder why they are pushing this so urgently ? It's the biggest attempted heist in American history. No wonder they want it to fly fast and low. This stampede of a rushed bill is Iraq and the Patriot act all over again. A new law passed without time for scrutiny is often worse than no new law at all.

Bush and Paulson ask for $700,000,000,000 no strings attached., and the spineless democrats say "No problem, would you guys like fries with that ? "

In true Bizzaro-Wolrd fashion, the republicans are now the only ones to man up to George Bush and Paulson and say "Now hold on just a second here .. This plan doesn't quite smell right."

[Manny Richards]

I hope this Bailout don't go through. Senator Shelby is so right.

This is insane to bailout companies that fail from there own causes .

Truly insane.

[somedude]

So we need to get the banks lending again? But to who???

They aren't lending to the consumer because the consumer is a bad credit risk. Bailing out Wall Street doesn't change that.

[frank chatham]

Senator SHELBY,

IT'S TIME TO REVISIT THE BOSTON HARBOR TEA PARTY
LET THEM EAT CAKE - THROW THE BUMS OUT OF OFFICE - OFF WITH THEIR HEADS
LET THE BANKS FAIL
LET THE FREE MARKET WORK
LET THE FORECLOSURES HAPPEN
PUT THE FIREWALL BACK BETWEEN BANKS & INVESTMENT FIRMS
THE FEDERAL GOVERNMENT IS ALL READY IN THE PUBLIC HOUSING SECTOR - HUD??
THE FEDERAL GOVERNMENT NEEDS TO STAY OUT OF THE REALEST BUSINESS !!
THE FEDERAL GOVERNMENT NEEDS TO SALE FREDDIE MAC & FANNY MAE - IMMEDIATELY
THE FEDERAL GOVERNMENT DOESN'T NEED ANYMORE DEBT - WE ARE AT WAR !!!

ANY QUESTIONS? Maybe WE should be seriously looking at RON PAUL FOR PRESIDENT -

http://stopthehousingbailout.com/

[Manuel Ortega]

When Democrats incude billions of dollars of earmarks in a bill and then make statments that if it fails, ( As stated by Pelosi ) that they are not at fault if it fails. We are lost as a country. If our representatives are more concerned about running for office and pointing fingers at others. I have to question how many fingers are pointing back to them. I do not believe that the rush to pass this bill will benefit the people, just those who wish to escape having to face responsibility for not representing the welfare of the people. Futhermore this has been used t futher the propaganda of political parties to determine the presidency vote. Shame to those who think that some of us don't see them for what they are. THIEVES and alot of them are in office, and are more concerned about themselves than the people they have sworn to represent and protect. I would rather take a partial loss than sign my self over to servertude of those who have self interests as their priority.

[Web Smith]

A free market will never heal its self as long as the government continues to intervene. However, Congress and the Senate mandated that loans be made by the banks in rural, ethnic, and under served areas. The Federal government, by being involved in something it is not supposed to be, has made its Citizens liable for part of the reparations. It doesn't matter that the banks got a little too carried away and acted irresponsibly. Taxpayers are on the hook.

We now have to be part of the solution, but the solution should be developed from the point of view of the taxpayers that the government is supposed to protect. Make sure that you hold your Congress members, Senators, and President responsible this election.

http://ewebsmith.com/bus/taxpayers.html

[Gabby]

Ron Paul. I hope there is a place to write in his name. I wish a real candidate would pop up. It is sad that these two are the best we can find??? What happened to us?

[Robert Wishart]

Dear Senator,

We've helped other countries in need, with "American Taxdollars" and also as someone above my comment stated you in congress has missmanaged our country so bad, that you have stashed the Social Security Fund with IOU's that won't be repaid and that is the only reason SS will be in trouble.

Your state of Alabama also, from what I have read did the following,

Alabama offered a stunning $253 million incentive package to Mercedes. Additionally, the State also offered to train the workers, clear and improve the site, upgrade utilities, and buy 2,500 Mercedes Benz vehicles. All told, it is estimated that the incentive package totaled anywhere from $153,000 to $220,000 per created job. On top of all this, the State gave the foreign automaker a large parcel of land worth between $250 and $300 million, which was coincidentally how much the company expected to invest in building the plant.

Is this not subsidizing? If not, then why not?

It goes to show that history hasn't changed. In the Roman days the peasants all gathered once a year to pay taxes to the king for his pleasures and we are still doing it now.

But, one thing is ironick. I'll bet the founding fore fathers never reliaized that an African-American would become the most powerful man in the world.
They wouldn't even let them vote, so I know they didn't.

Hopefully he can help to get the ball rolling to straighend out the mess that you in Congress, during the first 6 years of the Bush Administration have caused. You have doubled the National Debt from 5 trillion to 10 trillion and now you refuse to give "LOAN", not a bailout like you did for the banking industry, the auto manufacturing companies, which is the truly the last major manufacturing we have left in this country.

Congradulations on a great job.

Bob Wishart

[Craig]

Why is this Toyota Republican still on the Senate banking committe. He is just another political hack. He it too old for the job. He would like nothing better than watch people suffer. Let's get rid of this type of non-representitive he is nothing but a liar. People of Alabama please find a replacement - you were lied to when you voted him in but now you know.