Weekly Column of U.S. Senator Lamar Alexander (R-Tenn.) for October 5, 2008 - Clearing the Wreck on our Economic Highway
Posted on October 5, 2008
I’m glad that Congress has worked together to approve a bipartisan bill that will allow the Treasury Secretary to begin cleaning up the wreck on our economic highway caused by bad mortgage loans. If Congress didn’t act on this legislation this week, there was a real risk that credit would freeze and Americans would not be able to get auto, student, mortgage, or farm credit loans – or even to cash their paychecks. The whole point of this rescue plan is to do everything we can to protect taxpayers. Under the amended plan, the Secretary of the Treasury will have authority to buy and sell troubled mortgage assets to get the economy moving again. Taxpayers will be protected by tough oversight to minimize losses while profits the government makes from selling those mortgage assets later will go to pay down the debt. Most Americans realize that the largest reason for this emergency legislation is mortgage loans that people can’t pay back and securities based upon those mortgages. This has caused a serious downturn in the housing market and is squeezing banks which in turn have slowed or stopped making loans – this is disastrous for our economy. The credit crunch has come so fast and taken such an unexpected turn that it is hard for most Americans to know what to make of it. Think about it as someone who should have known better dumping thousands of bad mortgage loans and other assets in the middle of an eight-lane interstate, threatening to bring to a halt all economic traffic. Vehicles carrying these essential credits that Americans rely on every day have ground to a halt on the economic highway, blocked by a big pile of bad mortgage loans. So we end up with this massive wreck in the middle of the economic highway. Think of the federal government as the salvage crew and Secretary Paulson as the driver of the wrecker. His job is to buy the salvage and get it off the highway as soon as possible so the traffic can start moving again. If he does this, then the lanes will open again, and the vehicles carrying your auto and car and mortgage and farm credit loans and payroll checks will start moving again. And think of yourself, the taxpayer, as the owner of the salvage company – doing everything possible to make sure the driver of the wrecker can get the pile of bad loans off the highway and sell them for at least as much as it cost him to pick them up. People don’t like this. They’re angry about it. I’m angry about it too, but I’m not going to just sit around and look at the wreck. Instead, we are trying to solve the problem. There’s going to be plenty of time to talk about who caused the wreck. We are not spending $700 billion. The Secretary may buy up to $700 billion in troubled mortgage assets – enough to restore confidence – but he may buy much less. Over time, he will then sell these assets. There might even be a profit which, under the plan, would go to reduce the federal debt. Passing this bill this week will help clean the wreck off the highway. Next week we need to begin to take steps to remodel our regulatory agencies – most of which were designed to deal with the calamities of the 1930s. And we need to find out if there was fraud or misleading actions so that we can do our best to make sure this doesn’t happen again.