Here is the text of the e-mail I received from Senator McCaskill in response to my letter about the bailout:
Dear Mr. Diederich:
Thank you for contacting me regarding the turmoil in the financial markets and federal government’s response to it. I appreciate hearing from you, and I welcome the chance to respond.
The situation in the credit markets is dire, and that has left us with some tough choices. We have seen a series of financial institutions fail and that brought us to a crisis point where lending all but stopped. Problems spread beyond investment banks and Wall Street trading firms. Retirement funds and even some money market accounts, which are supposed to be safe places for savings, have been threatened. Meanwhile, interest rates for the short term financing that businesses rely on to make payroll rose to levels that they could barely afford. Many have found that they could not get financing at all, and some small businesses in Missouri have shut their doors as a result.
Missourians are right to be angry about this situation. Financial firms packaged risky subprime loans into securities which they said were as safe as government bonds, and investors made reckless bets on these new products. The new products were so complex that, when they started to go bad, no one knew which securities were affected and to what extent. What’s more, some firms had borrowed huge amounts of money to buy these products, which put their creditors on the hook as well. Confidence dropped to zero throughout the whole market. The federal government was asleep at the wheel during all of this. Regulation was inadequate and oversight was nonexistent.
I do not like how we got here, and I do not like what we have to do to get out. It stinks that the American people are now being asked to post $700 billion to clean up this mess. It all stinks to high heaven. But doing nothing would be much worse. While many Missourians have not felt it yet, the credit crisis has already caused some farmers and small businesses to lose the lines of credit they rely on to function day to day. Many city and state governments have been unable to find financing for important projects, such as sewer projects and hospital improvements. With no action, even Missourians with good credit might not be able to get a home loan, a student loan, an auto loan or a loan to expand their small business.
Still, I took no pleasure in voting for the Emergency Economic Stabilization Act, but I did so because the credit crisis poses a very real threat to the economic security of all Americans. This bill will attempt to address the credit crisis in a systemic way and get credit flowing again. The bill will allow the Treasury to purchase up to $700 billion in distressed assets, such as mortgage backed securities. The Treasury hopes that this will restore confidence and free up lending by removing some of these distressed assets from the banks’ balance sheets and replacing them with capital. The Treasury also hopes to recover the $700 billion through the sale of these assets and possibly return a profit to the American people.
Like many Americans, I have my doubts about this plan. However, I was pleased that Congress inserted many provisions designed to protect the taxpayer and ensure oversight of the program. The bill places strict reporting and disclosure requirements on the Treasury. It requires the companies that participate in the program to give the government equity shares, allowing the taxpayer to benefit if the company recovers and its stock price goes up. It puts limits on compensation paid to CEO’s at participating companies and there are provisions to work with homeowners to restructure loans and keep them in their homes to the greatest extent possible. While it is far from perfect, it is much better than the blank check the Secretary of the Treasury initially proposed.
I know this plan will not be a silver bullet. We will need to do a lot more to get our economy back on track, including investing in education, job training, and renewable energy. We also need to get to work to establish strong, common sense rules and regulations to undo the damage of the last decade of deregulation that turned our financial markets into the world’s largest casino. As your Senator, I will be pushing hard to address all of these issues.
Thank you again for contacting me. I hope you will continue to reach out in the future with your thoughts and advice.
Senator Claire McCaskill
Notice that she completely ignores my question about the Community Reinvestment Act, insisting that the problem was NOT ENOUGH regulation of the market.