DEMOCRAT TOM UDALL

Anti-bailout votes among hardest I've ever cast

Tom Udall |

10/18/2008 - 10/19/08

In the run-up to the Nov. 4 election, We asked candidates in contested races what they might have learned from the financial crisis, and how they might apply the lessons as representatives of the American people in the offices they are seeking. Here are the responses of U.S. Senate candidates Tom Udall and Steve Pearce, and from Jerome Block Jr., and Rick Lass, candidates for the Public Regulation Commission.


By Tom Udall

Last month, the Bush Administration presented Congress with a three-page proposal calling for a $700 billion taxpayer-funded bailout to deal with the continuing economic crisis. Two weeks later, Congress passed and President Bush signed a revised 451-page law that did too little for homeowners, too much for executives, and nothing to prevent Wall Street from making the same mistakes that caused the crisis.

I voted against the bailout both times it came to a vote in the House.

Make no mistake: America's economy is in serious trouble. A credit crisis is spilling into Main Street, jeopardizing the ability of businesses to meet daily expenses as essential as payroll. More job losses and home foreclosures are likely.

Congress still has a lot of work to do, but cannot follow the same do-nothing, always-deregulate economic philosophies that got us into this mess. This is the philosophy the Bush Administration and his allies in Congress, including my opponent Steve Pearce, have been following for years.

One of the clearest examples of this philosophy at work is President Bush's appointment of people who disdain regulation to positions of oversight. One of these appointments was Christopher Cox, the current head of the Securities and Exchange Commission.

In 2004, Mr. Cox approved a request to exempt large investment firms from a requirement to keep a certain amount of cash on hand as a cushion against bad times. At the same time, the SEC also decided to rely on the companies' own models for determining how risky a particular investment was. The SEC outsourced its oversight functions to the very people it was supposed to be overseeing.

Now that some of the biggest five investment banks have crumbled and two others have reorganized to become commercial banks instead, Mr. Cox appears to have seen the error of his ways. In the midst of the crisis, Cox said, "The last six months have made it abundantly clear that voluntary regulation does not work."

I agree.

The primary result of the SEC changes was that the largest investment banks were encouraged to take huge gambles with our money.

Now those bets are turning out badly, and the risk-taking has come to an end. Banks are refusing to lend each other money, and investors who own the mortgages can't find anyone to buy them. Small businesses are having trouble getting credit. Trust in our financial system has collapsed. Trust in government has collapsed.

In addition, the bailout bill approved by Congress is rife with problems. To begin, the bill's oversight provisions amount to little more than a congressional rubber stamp.

Instead of bailing out Wall Street investors, the bill should have helped responsible homeowners by allowing them to renegotiate their mortgages in bankruptcy court. This would have addressed the root cause of the problem — risky mortgages gone bad — while helping responsible families stay in their homes.

Meanwhile, corporate executives who ran their companies into the ground can still walk away with golden parachutes and lavish compensation packages. Just a few days ago, we learned that executives from AIG spent $440,000 on a lavish retreat to Monarch Beach, Calif., less than a week after the federal government offered $85 billion in taxpayer money to bail the company out.

Finally, the bill did nothing to strengthen regulations to prevent Wall Street from making the same mistakes again.

These shortcomings and others were simply too much for me to justify placing $700 billion of taxpayer money at risk in exchange for an uncertain solution. It was a difficult vote, one of the hardest I've ever cast, but it was the right vote for New Mexico's 3rd District, the people of New Mexico, and our country.