McCain: 'Inaction' not an option
Republican John McCain warned today that if the markets don't work, Americans will suffer, so Congress needs to get back to work on a Wall Street bailout package that will pass.
"Inaction is not an option," he said in Des Moines, Iowa.
"Small businesses can't borrow," he said, and students can't get loans, either.
"It hurts the entire community," he said.
McCain said he urged President Bush to have the Federal Deposit Insurance Corp. to raise insurance on bank deposits from $100,000 to $250,000 to help avert runs on financial institutions.
"We cannot allow the crisis in our financial system to become a crisis of confidence," he said.
McCain pledged to do whatever he can to encourage a deal, but had harsh words for the Congress he has been part of for more than a quarter century.
"We are in the greatest financial crisis of our lifetimes," he said. "Congressional inaction has put every American and the entire economy at the gravest risk. Yesterday the country and the world looked to Washington for leadership, and Congress once again came up empty-handed.
"I am disappointed at the lack of resolve and bipartisan good will among members of both parties to fix this problem. Bipartisanship is a tough thing; never more so when you’re trying to take necessary but publicly unpopular action. But inaction is not an option."
His full prepared remarks are below:
We are in the greatest financial crisis of our lifetimes. Congressional inaction has put every American and the entire economy at the gravest risk. Yesterday the country and the world looked to Washington for leadership, and Congress once again came up empty-handed.
I am disappointed at the lack of resolve and bipartisan good will among members of both parties to fix this problem. Bipartisanship is a tough thing; never more so when you’re trying to take necessary but publicly unpopular action. But inaction is not an option.
Businesses all over the country cannot borrow to finance their own operations and pay their bills. If we do nothing, many may fail.
Sonic Corporation, a drive-in restaurant chain based in Oklahoma, learned on Thursday that one of its lenders, GE Capital, had stopped extending new loans to the chain's franchisees. That will block plans to rebuild restaurants, add equipment and open new locations. When small businesses like Sonic franchisees can't borrow, contractors don't get the remodeling work, equipment-makers lose sales, and restaurants go out of business. It hurts the entire community.
When financing dries up, students can’t get loans.
In Wisconsin, more than 100 Milwaukee Area Technical College students couldn’t access private loans to fund their education. Fortunately the school was able to come up with emergency loans, but this temporary arrangement cannot continue. Markets need to work so that people can get financial help and students can be educated.
Again, inaction is not an option.
In light of the House’s failure to act, this morning, I spoke to the President about two things that the administration has not done, but should do following the inaction of Congress:
First, the Treasury has already used its Exchange Stabilization Fund to back money market accounts. I encourage it to use it this fund as creatively as possible to provide backstop for accounts across our financial system to maintain confidence on the part of savers and investors.
And second, the recent housing bill gave the government nearly $1 trillion in authority to purchase mortgages. Housing and mortgages are at the root of this crisis. I encourage Treasury to take action to shore up mortgage values.
The Administration can take these actions with the stroke of the pen to help alleviate the crisis gripping our economy. I urge them to do so.
Also, the FDIC should quickly be granted the authority to increase the deposit insurance cap from $100,000 to $250,000 so that families do not have to worry about their money. We cannot allow a crisis in our financial system to become a crisis in confidence.
I call on everyone in Washington to come together in a bipartisan way to address this crisis. I know that many of the solutions to this problem may be unpopular, but the dire consequences of inaction will be far more damaging to the economic security of American families and the fault will be all ours.
I will continue to do whatever I can to aid in a constructive answer to the challenge before us.
I think they should give the American people (legal citizen over age 18) a buy out. Look at the email floating around. At 89 bil dollars they could give each citizen (over 18) $297,000.00. If we are 301 mill population in US it will be about 200mill legal and over18 = $297,000 each. Charge 30% taxes Gov. gets back 29.5 bill back only costing 59.5 bill. A lot less than 700 bil. The American people will pay off houses/ buy new houses fixing the housing market. Pay off college loans. Take out new loans, save for college putting the money in the banks. buy new cars, what an economy boost. AIG can be sold off, fixed and go back to business.
This bailout is not for Traditional Borrowers neither even for those who took "No-Down-Payment-Teaser-Rate-ARMs" (Let's call it by the Greenspan term - the "Creative" one.)
It's for Lenders.
Remember, Lenders had actively encouraged those "Creatives".
It made all the financial sense for them.
Let's say a Traditional Borrower and a "Creative" one bought comparable houses, which were worth $500k in 2003.
Our average Traditional Borrower bought it in 2003.
Since it took more time to Lenders to promote those "Creative" loans, our average "Creative" one bought it in 2005 or 2006 for $800K.
Lender actually pushed those who took "Creative" loans to take as high a mortgage as possible knowing that it's more than any real value of the mortgaged house.
Since Traditional Borrower paid 20% down, he actually took a $400k mortgage in 2003, those who took "No-Down-Payment-Teaser-Rate-ARMs” took $800k in 2006.
Remember, they had bought the same kind of house (sometimes the same physical house).
This means that with those who took "Creative" loans the Lenders have created $800k of credit, while with the Traditional Borrowers -- only $400k.
Lenders had used both mortgages to create Mortgage Based Securities. (MBS)
The whole point is that MBS were presented by the Lenders as a REALLY SECURE securities, because they were backed by REAL estate, (which is nothing but a fraud , since they knew well that the "Creative" loan is non-sustainable.)
Lenders issued commercial loans based on MBS leveraged 20, 30, 40, even sometimes 60 times. Even if it was only 20 times, Lenders collected 20 x interest rates from all commercial credit they created on both loans.
However, Traditional Borrower was repaying his loan causing slow reduction in Lender's assets, while the "Creative" one was paying less than the interest, causing INCREASE in Lender's assets and allowing the Lender creating even more MBS.
So, Lenders created tens of millions of credit to corporations. Corporations (led by incompetent MBAs) spent like drunken sailors.
Lenders collected hundreds of thousands a year in interest payment based on a single securitized mortgage.
Of course, our "Creative" borrower is just an idiot and has to pay for this. But his Lender has manipulated him into this situation.
Now, the main points are:
1. Lenders knew well that this "Creative" loans are not repayable.
2. Lenders had created them because it was very profitable.
3. Lenders knew that the only thing that kept this scheme going on for years was the prospect of future bailout.
4. Lender acted having bailout in mind from the very beginning of this game.
5. As the result, Lenders had provided a lot of "cheap" credit to corporations across the Globe. C*Os of these corporations proved to be as stupid as our "Creative" borrower -- now they should pay for it as well.
There are two major things we should remember in all this mess.
1. Fraud is fraud. We need to punish it even if it will cause a recession and hardship.
2. This particular bubble had caused a huge mis-allocation of resources damaging American (and World) economy for long time. The only economic effect of the proposed bail-out is to extend the mis-allocation of our resources a little longer.
There is only one way to clean up this mess: "Creatives" should loose "their" homes.
C-whatever-Os should loose there jobs, corporations with incompetent management should go bankrupt.
"Creative" Lenders SHOULD go to JAIL!
But, instead the banking industry, Mass Media, Federal Government, Federal Reserve chairman, Congressional leaders are blackmailing the taxpayers and their representatives in order to save those criminals.
We should say NO to them. NO is NO! What part of it they can't understand?
I was at the forum. McCain comes across as a strong/knowlegeable leader. He shows experience and he even asked the CEO of Aviva his opinion on a topic... He shows great leadership in that he seeks the opinions of those that know the financial markets, etc.. McCain did GREAT!
Awells (comment #1),
You must work in Bush's Treasury Dept. Your math is horrible!
Follow me closely here, it's not hard: Using your numbers, 89 billion (89x10^9) divided by 200 million (2x10^8) simplifies easily to 890 divided by 2. That equals...wait for it...445. Your proposal would give $445 to each of your assumed 200 million adults (however you got that number?)
Now look, it is stupid people like you, who can't even do simple math, and who elect other stupid people to run our country, that created the environment in which this pathetic state of affairs could evolve.
Please, go to your local community college and enroll in some remedial, basic education classes.
In the mean time, you'll just have to leave this problem to people who can actually add.
This is not about an election, it's about the security of the economy which is slipping permanently away, and the security of this once great nation.
By the way, this trillion plus bailout is just a twisted version of trickle-down Reganomics. That didn't work, either.
The Democrats blame the Republicans, and the Republicans blame the Democrats, but nobody does anything to actually help America.
Add 700 Billion more to rescue financially unfit corporations, banks, and CEOs on top of the federal Government more or less buying Ginnie Mae, Freddie Mac, Morgan Stanley, Goldman Sachs, and AIG. Are you kidding me? They all belong in jail and instead CONGRESS and the SENATE have just given them another blank check. Which means they belong in jail. I am tired of being robbed and then getting ribbed about it and reminded constantly.
It took the Feds, the Senate, and Congress just THREE WEEKS to put my country another TRILLION DOLLARS in debt, on top of the trillions Halla Burton, the Iraq War and the war against terror have cost us.
This blogger might want to review your comment before posting it.
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