Statement on the Current Financial Crisis

Press Release

"As of Friday afternoon, Congressional leaders are still negotiating a response to the nation's financial crisis. I know from the calls, letters, and emails coming into my offices that people in Wisconsin are equally engaged in the debate. Here at home, people have been feeling the strain of the housing and mortgage market crisis, the high cost of health care, and area job layoffs for months. All the while, the White House was proclaiming that the fundamentals of our economy were strong.

The causes of the current situation are many and they stem from seeds that have been planted over the course of many years. Those who saw regulation and government as the enemy have systematically dismantled structures which protected consumers, investors and our economy.

Among these misguided steps was the repeal in 1999 of the Glass-Steagall Act. That Act was passed in response to the stock market crash of 1929. Glass-Steagall created a wall between commercial banks and securities firms to protect ordinary citizens' deposits from the risks of the securities markets. During my first term in Congress, I was one of only 57 Members who voted against repealing that law.

There's no denying the current crisis. The inability of businesses and consumers to borrow money will affect every American. This financial crisis is the direct result of a political agenda that I oppose - namely, a financial services industry with less regulation, minimal enforcement, no independent oversight, and no transparency.

Unfortunately, the Congress is now being called on to bail-out this administration in the same way that taxpayers are being asked to bail-out financial titans. I believe legislation calling for taxpayer dollars to stabilize the credit market is important, but I will not support legislation that gives the administration a blank check, while providing taxpayers no protection.

At the very least, this legislation must include provisions that:

--protect taxpayers from loss. The assets which would be acquired by the government under such a plan must be appropriately valued and managed to ensure maximum return. The federal government must have a stake in the companies which are afforded relief, so that future profits contribute to help insure that taxpayers lose no money in the transaction.

--provide real oversight. The administration of this program must be carefully scrutinized by Congress, the courts, and other independent entities.

--guarantee transparency. Taxpayers must know exactly how their money is being spent, how valuations are being determined and the manner in which assets are being sold.

--limit executive compensation. Greed played a major factor in this crisis. Any legislation to rescue these companies must provide reasonable limits on compensation for executives and must ensure that none of these failed executives receives a "golden parachute." Taxpayers should be paid back in full before any bonuses are paid to executives.

--provide relief for those facing foreclosure. Homeowners must not be left in the cold while bankers and bond holders are rescued. A program of "foreclosure forbearance" should be established to allow struggling homeowners time to get back on their feet in the same way that this proposal helps big Wall St. firms recover.

In addition, bankruptcy judges should be given authority to restructure mortgages in default because historically, borrowers in trouble were able to renegotiate terms with their local bank, but this is no longer possible. Due to the actions of financial firms that divided mortgages into small pieces and sold them off as bundled securities to potentially hundreds of people, it is impossible for borrowers to even discuss renegotiating the terms of their loans. Consequently, I believe it's appropriate to give bankruptcy judges that authority which will serve both the borrower and the lender.

Restoring common sense regulation

Any meaningful response to the credit crisis must include legislation to ensure that American taxpayers will not be put in this position again. That means restoring real regulation of the financial services industry.

In addition to developing strong new regulations, it is essential that we enforce existing laws. Shortly after President Bush was elected, he worked to undermine the enforcement power of the Securities and Exchange Commission (SEC), cutting both its enforcement staff and funding. Recent attempts to rectify this problem have not been adequate. Meaningfully responding to this crisis will require re-establishing a strong and aggressive SEC.

Holding wrongdoers accountable

In addition to simple greed, it appears that many in the financial sector may have engaged in fraudulent activity. The SEC and the Justice Department must conduct serious investigations to determine whether crimes were committed. If evidence of criminal activity is found, we must prosecute those criminals and recover their illegal gains.

Addressing the challenges faced on Main Street

In addition to responding to the problems on Wall Street, Congress must confront the challenges that ordinary citizens are facing on Main Street.

Every day another 10,000 families face foreclosure of their homes. I support legislation that would help these families restructure their mortgages and stay in their homes.

As of this writing, the Congress plans to work through the weekend on forging a legislative fix and I will be working to protect your interests and protect our fragile economy. As always, I appreciate hearing your views.

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