Stability and Recovery for the U.S. Economy

Our nation’s financial sector faces its greatest crisis since the Great Depression.  Over the last two years, real estate prices have dropped dramatically, causing trillions of dollars of losses.  These unprecedented losses combined with a systemic lack of confidence in our financial institutions have prevented banks from lending and frozen our credit markets.  The threat of a broad financial collapse is real.  Credit for small businesses, home loans, student loans and car loans will dry up, people will see their retirement account balances plummet, and companies all over the country will have trouble meeting their payroll without decisive action.  In sum, action was necessary to stabilize our markets and avoid widespread economic meltdown.
 
Record of Reform – Long before the current crisis, Senator Sununu led the fight to reform the oversight of financial institutions, including mortgage giants, Fannie Mae and Freddie Mac, whose massive portfolios threatened the safety and soundness of our financial system.  If more of John’s colleagues had listened to his prescient warnings, the crisis we now face may very well have been avoided.

John held his first hearing about risks Fannie Mae and Freddie Mac posed to our economy nearly ten years ago.  In 2003, along with Senators Hagel (R-NE) and Dole (R-NC), he introduced legislation to strengthen the oversight of Fannie and Freddie.  In 2005, John again introduced a bill that would have given a new regulator strong powers to set capital standards, reduce the size of Fannie and Freddie’s portfolios, and set strict limits on their business practices.  This bill passed the Senate Banking Committee on a straight party-line vote. With no Democratic support, however, the bill died.  Finally, and only after reaching a crisis point, the Democrats agreed to include many of John’s reforms in legislation signed into law this summer.

Opposed to Bailouts – John has been very clear: taxpayers should not bail out Wall Street investors or speculators who made risky decisions.  He opposed government action to rescue Bear Stearns, Lehman Brothers, and AIG. 

Economic Recovery Plan – The plan approved by Congress to address this crisis is not perfect, but it is necessary.  The only reason Congress has taken action is so that families and individuals all over this country do not suffer any more due to mistakes made by others.  The ultimate cost of the recovery program to taxpayers should be a fraction of the $700 billion authorized.  The government will purchase assets which generate income and can be sold at a later date.  While there may be some loss associated with the program, a profit is possible and any gains would be used to pay down the national debt. 

The original plan proposed by the administration needed significant improvement.  John fought for the inclusion of key consumer taxpayer protections, including:

• Strong Oversight – Plan requires Treasury to report to the GAO and Congress, authorizes an Inspector General for the program, mandates judicial review of the Secretary’s actions, and creates a Congressional Oversight Panel of outside experts to review the state of the financial markets, the regulatory system and the asset purchase program
• A temporary structure
• Requires that any gains will be used to pay down the debt
• Requires the President to submit a proposal to Congress to recoup restitution from the financial industry for any potential taxpayer losses
• Requires Treasury to receive warrants for company shares in exchange for participating in the asset purchase program
• Limits executive compensation and restricts golden parachutes so that Wall Street executives who benefit from taxpayer dollars don’t receive unjust enrichment.
• Eliminates unnecessary funding for groups like ACORN

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