Tough Economic Times Calls For Tough Medicine
By Congresswoman Debbie Wasserman Schultz
For the last several months our economy has been hit by a perfect storm. We’ve seen the cost of gas skyrocket to around $4 a gallon. Prices are up at your local grocery store. Then, the middle of September saw the collapse of some of our nation’s oldest banks, investment firms and AIG, one of the world’s largest insurance companies.
Early this month, Congress took action to prevent our economy from collapsing. The Financial Rescue Package that we passed, and I supported, includes provisions to help American homeowners, small businesses, community banks, retirement savings plans, and women- and minority-owned businesses.
We worked hard to craft a proposal that ensures the taxpayers are protected with strong oversight and assure taxpayers benefit from future growth. Democrats fought against the handover of a blank check to this Administration and Wall Street and we succeeded. Irresponsible actions and lack of oversight got us here, but, if we do nothing, we risk a collapse of the financial system that would hurt almost every American, from massive layoffs to rampant inflation.
Without decisive action, credit markets would freeze and Main Street would suffer. Families wouldn’t be able to take out basic home and car loans, small businesses wouldn’t be able to make their payrolls, furniture and construction firms wouldn’t be able to afford offering customers low interest rates and families’ credit card interest rates would soar. The plan we passed allows the government to buy up certain assets so the economy – and our credit markets – will continue to function. But this isn’t a Wall Street giveaway. Our plan protects taxpayers by giving the government warrants on future profits generated by companies as a result of this plan.
The Financial Rescue Plan passed is a 3-part plan:
- Rescue the troubled credit and financial markets to stabilize our economy and insulate Main Street from Wall Street.
- Reimburse the taxpayers as the plan begins to work.
- Reform how business is done on Wall Street, which means no more golden parachutes for CEOs and investigate financial regulators and institutions for possible fraud and wrongdoing.
The plan directs the future President to deliver a plan after five years so that we can recover any remaining assets from Wall Street firms and reimburse taxpayers.
It is especially promising for homeowners. Home foreclosures reached 1.5 million in 2007 and are predicted to rise to 2.5 million in 2008. Home prices have fallen for 18 straight months, to a level that is 17 percent below a year ago. That is why the Financial Rescue Package includes major efforts to stem the tide of foreclosures.
The government is implementing a plan to reduce foreclosures as it buys troubled financial assets like mortgage backed securities. To help keep more families in their homes, the bill substantially expands eligibility for badly-needed mortgage refinancing under the FHA’s Hope for Homeowners program. As the new owner of a stake in hundreds of thousands of mortgages, the government can now work more directly and effectively with loan servicers to make problem loans more affordable. The bill requires the Treasury, Federal Housing Administration, Federal Reserve and FDIC to work together on opportunities to increase loan modifications for at-risk mortgages. To stop the crazy practice of taxing families who lose their home, the bill extends provisions enacted earlier in this Congress to stop tax liability on mortgage foreclosures.
I liken voting for the Financial Rescue Package to when I need to give my children medicine when they are sick. They may not like the taste of the medicine, but they have to take it to get better and if they don’t take it, they will likely feel worse. Greed, lack of oversight and policies enacted by the Bush Administration allowing Wall Street to “regulate itself” got us here, but I firmly believe that every single family in South Florida was in jeopardy. Whether you are a retiree relying on your 401k and Social Security, a waitress in a restaurant whose business is down because people aren’t eating out as much, or a father who’s facing a layoff and doesn’t know how his family will get by, I voted to support the Financial Rescue Package because we needed to step in and protect the South Florida’s families.