Speeches & Floor Statements
Posted on September 30, 2008
I wish to congratulate the Senator from Arizona on his usual clear exposition on what is happening here and to thank the majority leader, Senator Reid, and Senator McConnell, the Republican leader, and the assistant Republican leader, Senator Kyl, all for making it clear that the Senate has not finished its work on the economic recovery plan and we plan to continue our work and discuss it today and tomorrow and to complete our work on that by the end of the week. That is our intention. We believe that will happen. We are united in that purpose in a bipartisan way. We have been for the last week. We are disappointed by what happened yesterday in the House of Representatives. However, photographs of legislation are best taken sometimes at the beginning and at the end but not in the middle, and we are in the middle right now. Senator Kyl and I have been giving Senator Domenici credit for an idea he had about how to explain what we are about in trying to deal with the financial crisis. He uses the analogy of a wreck on a highway. The Presiding Officer is a good Scotch Irishman from Virginia. He may have heard Roy Acuff's song "Wreck on the Highway," which was a big song back in the 1940s and the 1950s and the 1960s. That is what we have here. We have had someone who should have known better empty a big pile of cars -- or bad mortgage loans, based on the securities on these loans -- right in the middle of the interstate, and it slowed down all the economic traffic. One lane might be your auto loan, the other lane might be your mortgage loan, another lane might be a student loan, in another one might be the trucks carrying your paycheck, or another lane might be the money for your farm credit loan, and you can't get anywhere because there is this pile of junk in the middle of the road. It happens to be an eight-lane road, so the cars and the vehicles -- the economic traffic -- are backed up for 20 or 30 or 40 miles. I was thinking as we were talking about this of another aspect of American life that all of us are familiar with -- not just the backups on the interstate highways caused by wrecks, but what do we do when there is a wreck and we are nearby? We have to go look at the wreck. So everybody stops what they are doing and starts arguing about the wreck, and that slows everything down even more. That seems to be what we are doing in the Congress. It is the equivalent of somebody saying, well, they needed a stop light; or, he should have made a left turn; or, she was driving too fast. The crowd might get bigger around the wreck and say, well, it is a stolen car; or, he didn't have insurance; or, one was driving too close to the other. Someone might have noticed that the wreck happened because this person was on the cell phone or this one wasn't wearing a seatbelt. Someone might say, we need to get some legislators in here and build a wider road or another exit ramp. Someone else might say, let's have a piece of legislation that would lower the speed limit or increase the speed limit. A lawyer might show up and say, well, let's sue the manufacturer and start interviewing witnesses. So we would all be standing around just looking at the wreck. That is kind of what we are doing today in the Congress. We are just standing around looking at the wreck when somebody ought to be moving the wreck off the highway so the economic traffic can proceed. There is going to be plenty of time to talk about who caused the wreck and where the blame lies. There will be plenty of time to do that. But today we should fix the problem. Next week or the next week we should fix the blame. There is a lot of blame we need to talk about, apparently. The New York Times reported yesterday -- well, we know this, to begin with: The Federal Government's compassion got way out ahead of its common sense, going all the way back to the 1970s, by encouraging some people to buy homes who couldn't afford to pay for the homes. Then clever financiers created exotic instruments, and these were based on some of the loans that turned out not to be so good, and some of these exotic instruments turned out to be worth less than the loans. Then, people who should have known better, who should have known what was going on in their own financial institutions or in their own companies, didn't understand what was going on, or they misled people, or they turned a blind eye to it. We need to find out about that. As the New York Times described it 2 days ago in an article, what apparently has happened is that mortgage foreclosures set off questions about the quality of debts across the entire credit spectrum. These questions set off a spiral of claims against insufficient insurance, as in the case of AIG, and of insufficient capital in the case of banks. So we end up with this massive wreck in the middle of the highway, and all of the vehicles carrying our auto loans, our student loans, and our paychecks are stopped while we in Congress stand around looking at the wreck instead of trying to get somebody to get it off the road. So we will have to turn to the Secretary of the Treasury. We could maybe find some other people to get it off the road as well. Senator Domenici, who first suggested that we think of this metaphor of the wreck on the highway, and Senator Kyl, who talked about it a little bit, pointed out that the citizens aren't going to go get the wreck off the highway. They are either going to go call the sheriff or the wrecker or somebody else to come get it. In Tennessee, we call the guy with the salvage company who has a wrecker, and he comes to get it. In our case, I guess what we have to do is call the Secretary of the Treasury. We have to give him enough money, enough authority to be able to buy all the junk in the middle of the highway, get it off the road, and hope he is able to sell it for about what he paid for it -- or at least to minimize our losses. That is why it is wrong to call it a $700 billion bailout, because he may need up to $700 billion to buy all of this stuff in the middle of the highway. But he is going to buy it, and then he is going to sell it. We put in some taxpayer protections to try to make sure that we have clear oversight, and that people don't get golden parachutes as a result of this, and that the Congress is involved, and that there is a board of directors to whom the Secretary must report -- all of these are taxpayer protections. We want to make sure this Secretary, whose job it is to get everything out of the middle of the road, keeps us informed about what is happening. We don't want to be guilty of having turned our backs and not paying attention to dealing with taxpayers' money on this. I think the conclusion we have to come to by the end of the week is that we are not just going to sit around and look at the wreck. We are going to get it off the road. We are going to get it off the highway. We have to find the right way to do it. I believe most of the American people will understand that, agree with that, and be glad we did it. Most of my calls are like most of the other telephone calls that are coming in. People don't like this. They are angry about it. If you have a wreck, you are mad about that as well. Somebody might have run into you, or you took your eye off the road. Of course we are mad about it. I am angry about it. But I am not just going to sit there and look at the wreck; I am going to try to solve the problem and then fix the blame next week. The good news is that is the attitude of Senator Reid, the Democratic majority leader. That is the attitude of Senator McConnell, the Republican leader. As I hear the House speaking, the Speaker of the House, a Democrat, the Republican leader, they say we are going to go back to work and see what we can do to fix this problem. We understand it is a big problem. Well, the stock market yesterday went way down, 777 points. That used to be something that people could say: Oh, that is a few rich tycoons on Wall Street, but we know better than that today. It was already down, and more than 50 percent of Americans own stocks. So as the Senator from Arizona said, that affects our pension funds, and that affects our IRAs and retirement accounts all across America. And that affects our individual accounts -- so that is real money. That is $1.2 trillion yesterday. We are talking about an economic recovery plan that would have the authority to spend up to $700 billion, but our hope would be that it wouldn't spend very much in the end because we are going to buy and sell assets. Now, the stock market -- and this is good news -- is back up some today, a couple hundred points up. It was down yesterday, it went 777 points down, and is back up a little bit today. The focus is on the stock market, but where the focus ought to be is not on the stock market, but on the credit market. Some things we take for granted: that the Sun will come up, that our breathing will be automatic, and that we will be able to get an auto loan or a student loan or a mortgage loan or farm credit loan, or that when we take our paycheck in and give it to the bank, that represents money. But what if that didn't happen? That is what we are talking about. In the case of offshore drilling, we had to wait until the price of gasoline got up to $4 before we could get rid of the ban on offshore drilling so we could produce more American energy. That was legitimate debate here in the Senate. I hope we don't have to wait for dozens and dozens of banks to fail, for payroll checks to bounce, and for auto loans to dry up before the Congress decides we need to act. What we are trying to do is prevent a more serious problem by taking a measured response, which will cost the taxpayers the least amount of money and clear up the economic traffic so we can start moving again, and so housing can gradually begin to come back. When housing gradually begins to come back, the economy will begin to come back. This is still a great big economy. Even in this slowdown, we will produce about a third of all the money in the world this year, just for the 5 percent of us who live here. So we are perfectly capable, with our great universities, with our energy laboratories, with our great corporations, with our terrific workforce, and with our system of education, of coming back -- and we will come back -- and we will lead the world in a great many areas. But we don't want to cause unnecessary trouble for ourselves by leaving a big wreck sitting in the middle of the economic highway while standing around gawking about it and arguing about whether to change the size of the exit ramp when we can have all those debates next week. Fix the problem this week; fix the blame next week. "Credit markets" is a short word, but a big-sounding word. The Wall Street Journal reported this morning people are so cautious about their money that yields -- the amount of money you make in the credit market -- had sunk so far that most investors will accept almost no return on their money as long as they believe their money is safe. In other words, bury it in a hole or put it under a mattress. You don't make any interest on it, but at least you think it is safe. I think in a country such as ours, if everybody puts their money under the mattress or invests it somewhere where money is safe but produces almost no return, what that will mean is that many of the big boys and the big girls will be all right. A lot of the big corporations have a lot of cash. They don't need to borrow very much money. What it will mean, though, is they will not be expanding. If they are a restaurant company, they will not be building new restaurants and hiring more people. They may even close a few restaurants. But the small business owners, the State and local governments that represent taxpayers, as we do, the one Senator Kyl of Arizona talked about, they are going to be hurt. The State of Tennessee is in the same shape as the State of Arizona. The State of Tennessee has a triple A bond rating and very little debt. But it has to go on the market every now and then to borrow some money. Its short-term borrowing was twice as much last week. It cost twice as much as it did the week before. That cost is passed directly on to the taxpayers of the State of Tennessee. Half our college students in America have a Federal grant or a loan to help pay for college. I used to be president of the University of Tennessee. I know how important that is. We made some unwise decisions in Congress earlier this year, in my opinion, that limits the amount of student loans that are available to students. But if banks are not lending to each other at night because they are hoarding their money, and if you and I with cash are investing in Treasury bills instead of money markets or other investments that then, in turn, can be loaned to other people, there is not going to be any money for student loans. And lots of people of all ages are going to have a harder time going to college. Or if there is money, they are going to have to pay a much higher interest rate because there is a shortage of money to lend. We know how that works. If there is a small supply, the price goes up. If there is a small supply of money for credit, then your student loan is going to cost more. If you go to the University of Tennessee, Virginia, Notre Dame -- wherever you go -- you are going to pay a lot more and you are paying a lot today. I was at the Volkswagen headquarters' opening in Virginia two weeks ago. The head of Volkswagen Credit told me Volkswagen -- which is the largest European car maker and is also opening a new car plant in Chattanooga, which we are very excited about -- goes to the market every month to get about $300 million. Where do they get that money? They get that probably from people who put money into banks, into money markets. It is our money, upon which they pay some interest. What do they do? They turn around and loan it to you and me so we can buy a Volkswagen. I said something about this a week ago, and some people thought I meant the Volkswagen plant in Tennessee wasn't going to be built. They are going to build the Tennessee Volkswagen plant. In our State, about a third of our manufacturing jobs are auto-related jobs. We have a big Nissan plant, we have a big General Motors plant, and we have 4,000 Toyota jobs and suppliers. So if the big credit companies for automobile manufacturers cannot easily get money or have to pay a lot for the money they get, what do you suppose happens to us? When we go to get a car loan, either we can't get it or the price of it is too high and we don't buy the car. If we don't buy the car, then Volkswagen in Chattanooga or Nissan in Smyrna or General Motors, the Saturn plant, in Spring Hill, or the Toyota suppliers that are all over the State, they don't make as many cars, they don't build as many supplies, and they don't have as many jobs. That is what happens when the credit squeeze comes. Those are some of the personal examples that are happening in Tennessee. We can see them all over the country. On PBS's "Nightly Business Report," September 26, which was Friday, Darren Gersh, Washington bureau chief, reported: You know, Susie, we just heard a lot from Washington, but I want to tell you something I heard from Ohio today. When I was there for the primaries, I met a machinist named Ron Gewax. Well, I talked to Ron this morning and he told me that his boss came to him in tears and said: "Look, Ron, you know, our customers' loans have dried up, we can't -- we're not getting business and we have to let you go." So this credit crunch is now hitting home. That's evidence of how it's hitting home on Main Street. This is a Main Street problem. I know we have been getting a lot of telephone calls saying don't do this, but a lot of my telephone calls are changing. We are elected to come here and understand the problem and act before there is a crisis, not after there is a crisis. When I was Governor of Tennessee in the 1980s, because of some problems with east Tennessee banks that represented illegal activity, we had about 40 - 50 bank failures, one after another. I don't want to go through that again because what that does is cause the stockholders to lose all their money. You say: Well, the FDIC comes in and buys the assets, straightens it out, and banks pay for it through their insurance program. They do, and they have done it in the last couple weeks a couple or three times, but it completely tears up the community when the bank fails. It disrupts relationships. It means individuals and small businesses that have depended on loans have a harder time getting them. It means there are individual bankruptcies as a result of it. If we had 50 bank failures in Tennessee, as we did 20 years ago, that would be a thousand across this country. We don't want to go through that. We don't want to have banks, insurance companies, individuals, small businesses, auto dealerships close. An auto dealership in Tennessee, one of the largest in the country, closed the other day. It was one of 13 dealerships for this particular Chevrolet company. The company had some other problems, but one reason it closed was because it could not get credit for its floor plan for its ability to finance its cars, and it is out of business, all 13 of those locations, and 7,200 employees in those 13 locations are out of a job. Senator Reid, Senator McConnell, Senator Domenici, Senator Kyl, and I wish to say to the American people and the American markets and the world markets that we intend to do our job in the Congress. We are not going to sit around and look at the wreck and argue about who is to blame. We can do that next week and the next week and the next week, and we should do that. We obviously need different kinds of regulations. No one seems to have understood what these exotic instruments based on mortgages were, or how they were sold, or whether they are properly valued. We need to figure that out. We need to deal with that. Maybe the Securities and Exchange Commission, the Federal Reserve, and other agencies need to do more. These rules and regulations we have today are primarily a result of the calamities in the 1930s -- the Great Depression. I am sure many of them need to be changed. Next week, we need to fix the blame and find a long term fix for the problem. Today, tomorrow, and the rest of this week, we need to continue our discussion of the Paulson plan, which has been significantly amended by the congressional negotiators over the last week to protect the taxpayers. Then we need to act on it before the end of the week. The majority leader has very wisely given Members of the Senate -- many of whom are here and some have gone back to their States – these extra days to read the legislation, to consider it, to come to the floor, to debate the legislation, and to make up our minds whether we like this Paulson plan, as significantly amended to protect the taxpayers. I am going to vote for it, even if the stock market continues to go up today and tomorrow, which I hope it does. I do not want to see a credit freeze come. I want to get the wreck off the highway. I want to get the vehicles carrying the auto loans, and the mortgage loans, and the farm credit loans, and the money for payroll checks, moving again. We can get that moving again. It is a small step we will have to take. Then we will have the time to have aggressive supervision of the Secretary of Treasury, who will then have all the authority he needs to get the wreck off the highway and get things moving. And we can set about making sure we create a proper regulatory system for the kind of world in which we live. I am greatly encouraged by the tone and the words and the actions of the Democratic leader and the Republican leader in the Senate. I look forward to working with them over the next three days. We intend to finish our job before we go home this week. We intend to get that wreck off the highway so the economic traffic can start flowing again. I would like to add to my remarks, briefly, these opinions and these examples about the credit crunch. In the Washington Post this morning there is an article by Michael A. Fletcher and V. Dion Haynes, in which they say the following: Meanwhile, tightening credit has made it harder and more expensive for many small businesses to borrow money, a process that many analysts say could accelerate with the turmoil on Wall Street. Dee Smith, who runs a small contracting firm that renovates and sells homes in Charlotte, Mich., said a bank he has dealt with for more than a decade has decided to finance a smaller share of his projects. While the bank would once give him construction loans for 80 percent of a property's appraised value, it now will pony up only 75 percent. That might seem like small change, but Smith said it has shaken up his entire business. Because he cannot afford to put out the extra cash, he said, he has laid off four of his six workers. Meanwhile, because of the slowdown in the housing market, he's been unable to sell three houses he has renovated.... Laura Richards said sales are down 10 percent at her two California Tortilla restaurants in Bowie and Annapolis.... That is in Maryland. She said she's trying to attract customers with promotions.. Worse still, with banks tightening credit, she's been forced to put off expansion plans. "Any plans of opening new restaurants are on the back burner until we see what's going on on Wall Street," she said. "Originally, I said that five locations was a goal. Now I'm trying to manage my down side. It will take two or three years to get back to where I was a year ago." Although some corporations are sitting on large sums of cash -- and those with top bond ratings are enjoying favorable access to credit markets -- others are paying much more for short-term loans, if they can get them at all. And on the front page in, the main article in the Washington Post business section, Tuesday, September 30, Heather Landy and Renae Merle write: Underlying the panic is a seizing-up of the credit markets that provide companies with financing for expenses such as payroll and inventory. Analysts said banks are lending less as they try to conserve cash for their own balance sheets, while nervous investors are forcing companies to pay higher interest rates to borrow in the debt markets. The article quotes someone as saying: The credit markets are kind of like the oil for an engine that allows companies to buy something and finance it. And if they don't have the ability to finance that at a reasonable cost, then all of the sudden their profit margins are going to get squeezed and they're perhaps not going to be able to hold as much inventory, and this is happening around the globe. The article continues quoting: You need to be able to have credit, and it needs to be at a reasonable price for the economy to function. Mr. President, I ask unanimous consent to have the article printed in the Record following my remarks.