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C. Akin on Major Legislative Issues for 2008
When Democrats took control of the House in 2007, they started with much fanfare and many promises. However, because of the highly partisan and arbitrary actions of the Pelosi Congress almost nothing was accomplished. Ironically, in spite of the incredible hostility to the War in Iraq and efforts by Liberals in Congress and our national media to undermine our progress, the "surge" worked. Even the Liberal Washington Post reported that the most "unreported story in America" was our virtual winning of the War in Iraq!
In 2008, with the War in Iraq mostly off the table, two major issues dominated our discussion and deliberations. The first was energy, and specifically gasolene at $4/gallon. The second was the proposed $700 billion "Bailout." Both issues are developed below in some detail. If you wish to skip the chronology, you can go to the specific reasons I voted "NO" on "The $700 Billion Bailout."
Today, much of the world economic community is in crisis, a crisis which is the indirect result of Democrats liberalizing loan-making procedures.
President Bush and other Republicans, including Senator McCain, warned of the dangers of Freddie Mac and Fannie May underwriting the loans of people with poor credit or who were borrowing beyond their means. Democrat leaders refused to act.
U.S. Senate rules require 60 votes to pass legislation, and although Republicans had a more than 50% majority in 2003 to 2006, they did not have the 60; therefore they could not get the few extra Democrat votes to rein-in irresponsible loan policies.
The terrible effects of trying to repeal the laws of economics are now causing great suffering and we are not out of the woods. A summary of events follows:
SEPTEMBER '08: Economic Crisis
In mid-September, Treasury Secretary Henry Paulson came to Congress with an unprecedented demand. He told us that the American economy was on the brink of catastrophe. Our only hope was to give him $700 billion, immediately, with no strings attached. Seven hundred billion dollars is $2,000 for every man, woman, and child in America. It is the cost of the war in Iraq for five-plus years, and it is close to what America spends on foreign oil in a year. Paulson's plan was to use the money to buy "toxic assets" from banks and other financial institutions. These assets were considered "toxic" because their value was so uncertain that there was no market for them.
Paulson's demand placed Congress on the horns of a dilemma. One horn was financial Armageddon. The other horn was $700 billion extracted from American citizens. Common sense dictates that when given two bad alternatives one should look for a third way out. Paulson was not interested in discussing any alternatives; he just wanted your money—now. He raised the specter of financial doomsday, apparently as a way of pressuring Congress.
Over the next few days, Congressmen of all political stripes scrutinized the nature of the problem and possible solutions. Conservatives were concerned about the massive increase in deficit spending and the precedent of the Federal Government purchasing bundles of private loans. They were also skeptical that the Federal Government could be trusted to come up with a satisfactory pricing mechanism for securities which were "toxic" because there was no way to establish a value. Even Liberals favoring socialism for the poor were unhappy at bailing out wealthy Wall Street investors and the banking industry.
THE PROBLEM: Made in Washington D.C.
In 1992, Congress had required Fannie Mae and Freddie Mac to increase the number of purchases of mortgages made to lower-income borrowers. In 1996, under President Clinton, the Department of Housing and Urban Development (HUD) gave Fannie and Freddie higher numeric goals for low-income borrowers. By 2000, 50% of the loans were to go to lower income borrowers. Later, Freddie and Fannie bought hundreds of billions of sub-prime securities from Bear Stearns to bring themselves into HUD compliance (and to make profits). At the same time, and separate from Freddie and Fannie, banks were also given loan quotas for lower income households through the Community Reinvestment Act (CRA).
Also, early in 2001, with the economy headed into recession, the Greenspan Federal Reserve began a series of interest rate cuts, bringing the Federal Funds rate down to a rock bottom 1% and holding it there for a year. As the Fed artificially depressed the price of the money, these actions were the equivalent of turbo-charging the lending and real estate markets with pure oxygen, fueling the housing "bubble." However, because housing prices were rising sharply, the defaults stayed relatively low. In the meantime, mortgages and loans were being made, sold, and bundled without regard to the likelihood that the borrowers would be able to repay. The bundled securities were given AAA ratings by corrupt ratings agencies, fueling false confidence. The securities were then cut up in pieces, and sold all over the world.
In 2003, an article in the New York Times reported, "The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." The Democrat response? "'These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis,' said Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee."
By 2004 and 2005, Senator McCain and others saw the danger and introduced legislation to tighten regulation of Freddie and Fannie. The Democrats blocked them. Freddie and Fannie, along with the Wall Street investment community, gave massive campaign contributions to Senator Clinton, Senator Obama, and others.
Bubbles always burst; the bursting of the housing bubble touched off an avalanche of defaults. The Government took over Freddie and Fannie, who over these last 13 years had assumed the insurance of over half of the home mortgages in America!
The cost of this experiment in social engineering is going to be high. The Government never should have gotten into the home mortgage business in the first place. However, as throughout history—when dealing with liberals, the road to tyranny is paved with good intentions. Freddie and Fannie should have been broken up and sold on the open market.
THE BANKING PROBLEM
As many of these mortgage-backed securities and other instruments are no longer trusted, they cease to be traded in the marketplace. Some of these assets are the property of banks, and the Federal accounting rules state that a capital asset on a bank's books must be daily "mark to market." Because there is no market, law requires these assets to be shown as "zero" in value. This, in turn, causes a problem for the bank, because if a bank's capital gets too low, the bank must be closed.
SECRETARY PAULSON'S "SOLUTION"
Paulson wanted $700 billion for the Treasury to purchase some of the "toxic" mortgage-backed securities to establish value for these assets. He believes that once the market is re-established, banks will once again feel safe enough to make loans.
OTHER APPROACHES
About one hundred Conservative Congressmen, including me, sought other alternatives. We met with the man in charge of handling the Savings and Loan crash under President Ronald Reagan, former FDIC Chairman Bill Isaacs. He explained that there were indeed some tools to solve the banking problem without the massive public "Bailout."
One of Chairman Isaacs' suggestions was to simply change the accounting rules so that assets owned by the banks could be shown at some reasonable number of cents on the dollar instead of zero. This would help the banks' capital problems and therefore allow the banks to make loans again into the local communities. This approach had the added benefit of having each owner of an asset live with his own financial decisions.
FINAL VOTING
The first high profile vote took place on Monday morning, September 29, 2008. Shocking and dismaying both Republican and Democrat leadership, the "Bailout" failed—over two-thirds Republicans voted "NO" and over a hundred Democrats!
This vote reflected the tremendous number of constituent contacts most offices were receiving. My office received more contacts on this than on any other issue since I have been in Congress; 99% daily of our contacts were highly opposed.
In the next few days, the Senate approved the "Bailout" and added a bunch of "tax extenders"—extending various tax breaks that should have been in separate bills. The House was then called in again for votes on Thursday, October 2, with the final vote on the "Bailout" scheduled for Friday, October 3. During this time, an unprecedented level of lobbying by financial special interests descended on Washington Congressmen for their support of the "Bailout." The public viewed the "tax extenders" with great suspicion; however, the worst part of the bill was still the "Bailout" portion.
During this time, I received some very high-pressure calls from some old friends and generous supporters. One company that had for years agreed with me on every vote, threatened that if I didn't vote "YES," it would end my relation with them. Other high-dollar contributors told me never to contact them again if I voted "NO."
WHY I VOTED "NO"
Our economy is in a critical condition, and the price tag on the "Bailout" is very high. The number of constituent contacts our office received set an all-time record. In all these regards the vote was a challenge for all Congressmen. Many of us prayed for wisdom to do the right thing. In these tough votes, I always try to set aside the politics, and figure what is best for my constituents and for America in general. In this case, I asked myself the following questions:
—Would bill solve problem it was meant to address? Doubtful
—Did bill prevent financial practices causing problem in the first place? No
—Did bill seek to solve problem using simplest and least expensive solutions first, only resorting to spending public money as last resort? No
—Did bill punish those making responsible financial decisions? Yes
—Did bill reward those making poor financial choices? Yes
—Was bill major Federal Government intrusion into private markets? Yes
—Did bill add hugely to national debt? Yes
—Would bill set pattern for future public bailout of private losses? Yes
On the basis of these questions, a "NO" vote was the principled position for anyone with a Conservative perspective. My "NO" was consistent with my other votes, including the high profile vote against the expansion of Medicare in spite of the President's cell calls.
The Conservatives who voted "YES" mostly justified their vote based on the emergency of the situation and that they had to "give in on principle" in order to "preserve a greater good." I appreciate urgency and agree that the crisis is real enough. However I believe it is very dangerous to abdicate principle for expediency.
THE BOTTOM LINE
I have always believed that the best commitment I can make to my country and constituents is to study and define the problems, to listen to solutions, to vote my conscience, and to be ready to give an account of why I voted in a given way. The only real asset a statesman has is his integrity. I am thankful for a clear conscience on a vote that will be a measure of principle for years to come.
The vote cost me a number of major contributors—I was voting to save all of our money! I believe time will vindicate those of us who voted "NO" on this "Bailout." In fact, less than a week following the vote and onward, skepticism has continued in the markets, domestically and globally, as to whether the $700 billion "Bailout" will actually help.
Our markets are in a tailspin today as a result of do-good Democrat policies that ignored the basic principles of economics. It is not helpful to put a family into a house they can't afford. We have paid a trillion-dollar-plus penalty because Democrat legislators blocked the reining-in of Freddie and Fannie. I shudder to think of the damage more liberal economic policies will do. The repeal of the dividend, capital gains and the death tax cuts will cause years of harm to our economy and the job market. The House Democrats have already voted a number of times for their repeal! It will be devastating to have the Democrats gain total control of all three branches of the Federal Government. Additionally equipped with the tool of "Executive Order," we will see much damage to many realms of our current freedoms.
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The public became painfully aware of America's need for energy development during the summer of 2008 when gas prices exceeded $ 4 per gallon. This crisis did not happen over-night but was created over a period of 30 years by Liberal Democrat policies.
During the past 30 years, Republicans have been tarred and feathered by the Liberals for our support of oil drilling, nuclear energy, and the development of new technologies such as coal liquidification, hydrogen, and bio-fuels. Now the energy chickens are coming home to roost.
Researching party voting records over the past 8 years, Republicans support a broad spectrum of energy proposals 90% of the time; while Democrats only support them 13% of the time. (Specifics on this data is available from the DC Federal office.) This says that there is as much political separation in the U/S/ House on energy as there is on abortion!
We currently spend about $600 billion/year for foreign oil. Republicans want to bring those dollars back into America. There are three things needed for developing American energy. First are natural resources, with which America is abundantly endowed. Second is innovative technology to develop those resources in an environmentally sensitive manner, which America also has. Third is the political will to "just do it."
In this last regard, Congress has failed. Because of hostile laws enacted by liberals, our nuclear industry still uses 1960 technology, with no new plants coming on-line for decades. We have not permitted a new oil refinery since the Vietnam era. Our dependence on foreign oil has grown each year as liberal environmentalist lawsuits delay or block companies from drilling. In addition, Senate Democrats have blocked Republican energy bills year after year, right up to the current energy crisis.
Congressman Akin has spported numerous energy proposals (see DC official site) that promote the development of a broad spectrum of energy sources; this would include the traditional as well as renewables, and conservation. As the marketplace allowed the new technologies would slowly or quickly replace less competitive sources.
By September of 2008, Pelosi felt enough pressure to pass a bill that pretends to permit drilling on the outer continental shelves, but was drafted to ensure that not one drop of oil would ever be extracted. She did this by requiring that states authorize the drilling, but by banning them from receiving any revenues from that "authorized" drilling. (States like Alaska, Texas and Louisiana previously received about 30% of the royalties from off-shore wells along their coasts.) It was one of the most dishonest charades I have seen in Congress. If the American public had been there to witness the hypocrisy, it would have been the end of the Pelosi regime.
VOTERS BEWARE!
The experiences of the past months make it abundantly clear that the Democrats will not take the steps to develop an energy infrastructure in America. Their failure to act will result in increasing energy costs, which in turn will threaten our economy. The Democrats have developed a radical preoccupation with "global warming" (now called "climate change"). They are concerned with "the planet" but not with the needs of the people living on it.
This preoccupation with "global warming" will compound the original energy problem, and will damage our fragile economy, raise living costs and inflict hardship on poorer families. Voters beware!
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