Thank you for contacting me regarding the Emergency Economic Stabilization Act of 2008. I welcome your thoughts and comments on this issue.

On September 19, 2008, Treasury Secretary Henry Paulson announced a plan by the Bush Administration to stabilize the financial services sector of the economy. This plan included broad authority for the Treasury Secretary to purchase troubled financial instruments with very limited oversight and few protections for taxpayers.

In July, I voted against a similar proposed bailout of Fannie Mae and Freddie Mac because it did not provide taxpayer protection and limits on executive compensation for a government owned entity. For the same reasons, I was not willing to support the Administration’s initial proposal, and I encouraged my colleagues to continue work on a plan that would protect taxpayers, provide strict oversight, and place limits on the benefits to executives who accept taxpayer assistance.

In the days following the Treasury Secretary’s announcement, concerns about the danger to the broader economy deepened. The high-profile failure of numerous financial institutions caused the commercial lending market to accumulate and hold cash. The credit markets effectively froze, making it difficult for consumers to obtain loans for purchases such as homes and automobiles. The lack of lending in these areas began to place further pressure on the troubled housing market and threatened to spread deeper into the economy. Similarly, many small and mid-sized businesses were finding it difficult to obtain financing to meet their payroll obligations and purchase inventory. Many cities were entering the bond market and getting no bids, even with AAA ratings. The current liquidity crisis still poses a real potential for significant job losses. After consulting with numerous financial experts, small businesses, and bankers in Texas, it became clear to me that normal commercial lending activity would not resume without action by Congress.

Despite this realization, I was still not inclined to support the Paulson plan. After weeks of negotiation, however, a bi-partisan compromise was reached. While there are provisions in the bill that I do not favor and would not have drafted, overall the need for action to stabilize the market and to protect the retirement savings of millions of Americans weighed heavily on my mind. Ultimately, I supported the Senate bill along with 73 of my colleagues. The bill we passed was a major improvement over the initial plan announced by Secretary Paulson.

We increased the deposit insurance cap from $100,000 to $250,000 so that families will have added protection for savings and retirement accounts. While the initial proposal authorized up to $700 billion to purchase distressed assets, the measure we passed takes a more cautious approach, initially authorizing $250 billion and requiring the approval from Congress and the President for additional funding. Importantly, the bill we passed includes restrictions on the benefits received by executives whose companies are selling some of their distressed assets to the government. In return for purchasing the assets, taxpayers will obtain an ownership stake in the companies. Many leading economists believe that the real estate market will turn around in the foreseeable future and government owned properties and assets will be sold at a profit. A provision in this bill that I supported requires any profits realized to be placed in the nation’s treasury to reduce the deficit. If, however, after five years the government is facing a loss in the program, the President must submit a plan to Congress recommending how the money will be recouped from financial services companies. I believe that these protections are a dramatic improvement over the Administration’s initial proposal.

The bill passed by the Senate included an important package of tax policy provisions. One of these provisions is an extension of the state and local sales tax deduction, which is a matter of fairness for states like Texas that do not have a state income tax. The average Texan will save $520 when they file their federal income tax forms next year. We also shielded low and middle-income taxpayers from higher taxes associated with the flawed alternative minimum tax (AMT) and included tax incentives to spur energy production and innovation including the wind energy production tax credit and the research and development tax credit.

As Texans, we have learned to take responsibility for our actions and being asked to pay for the mistakes of others is something many, including myself, find deeply troubling. However, after careful deliberation, I believe that the risks associated with doing nothing outweighed the risk of passing a less than perfect bill that nevertheless includes important protections for taxpayers. Economic evidence clearly suggested the problems were spreading into the broader economy. That is why I voted for the Emergency Economic Stabilization Act.

I appreciate hearing from you. Please do not hesitate to contact me on any issue of concern to you.

Sincerely,
Kay Bailey Hutchison
United States Senator

Me: I will not be voting for Kay Bailey Hutchinson when she runs for Governor

Senator Hutchinson,

I am a lowly research scientist at Baylor College of Medicine and I don’t normally keep track of the news. I am, however, quite aware of the bailout and the economic implications of acting and not acting. Ben Bernanke is the most powerful man in the world right now, and that is quite peculiar. I am well aware of the implications of a tight credit market. Nonetheless, I urge you to block this bailout as the consequences of acting could be far more damaging to the future of this country.

Fannie and Freddie are at the forefront of this mess. These banking geniuses have figured out a way to exploit the loopholes, and were encouraged by this and previous administrations to provide credit to people who can’t afford it, for decades. Fannie and Freddie attempted to profit mightily off of it, and these other banks followed suit. We must decrease the size of these GSEs for the good of our economy long term.

This isn’t 1930. We have FDIC now. I currently have my assets in FDIC accounts. Millions and millions of Americans have opted for this. Speculators have not, and have instead bought risky investments. If they were so smart, how could they not see that people could not afford the adjustments on their mortgage rates? However, they must be geniuses if they can sucker our entire government into bailing them out. Senator Hutchinson, please be reasonable about this. We must not create a market for financial greed without risk. We, the citizens, elect representatives to represent us and appropriate our tax dollars judiciously. If the bankers come hat in hand, they must not be allowed to dictate the terms of the negotiation. Bailing these banks out now will only kick the can down the road for the next few years or months, until the next crisis comes along. Since the founding of this nation it’s credit rating has been top notch. Would not the addition of another trillion dollars or more (this is just the beginning) of debt endanger this status?

We cannot afford this bailout. It is as simple as that. When the bankers beg for a blank check, we simply have to tell them, “No, you cannot have it”.