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ALERT: 9/24 Joint Economic Committee Hearing Summary

posted by Akin Gump

This post refers to the Client Alert produced by Public Law and Policy. Read the full alert here.

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What follows is an excerpt from the full alert:

Chairman Charles Schumer (D-NY) said there was clear recognition from both sides of the aisle that there is a need to act quickly, and urged the protection of Main Street, saying tightened credit harms the ability of people to get car loans, home loans, and college loans. He also noted that both Senators Barack Obama (D-IL) and John McCain (R-AZ) agree that action must be taken now with caution to not choose a bad solution that will further exacerbate the problem. Schumer said he was puzzled by the resistance of the Federal Reserve Board and the Department of the Treasury to proposals by Senator Jack Reed (D-RI) and others that would seek a bailout-for-stock swap, saying taxpayers should be rewarded if the plan succeeds.  He also said he feels industry should pay for some share of the plan themselves.

Ranking Member James Saxton (R-NJ) attributed the main cause of turmoil to a collapse of the housing bubble which was encouraged by subprime and other risky mortgages. He said some action by the government is now needed to recapitalize the banks and other financial institutions either by injections of equity or removal of toxic investments. He said it was important to guarantee the safety of accounts to assure savers and small businesses that their basic financial needs can be met without disruption.

Vice Chairman Carolyn Maloney (D-NY) asked why public sector help seemed preferable to private sector help.  She said, “The idea that the private sector does not want to buy these assets and this is somehow good for the taxpayers seems dubious,” and added that any plan to use taxpayer funds needs to require businesses to make sacrifices as well.

Senator Sam Brownback (R-KS) joined Schumer in questioning the terms of the Bush Administration’s plan, saying there should be a provision of the plan that would give taxpayers equity in firms that sell assets to the government. Brownback also echoed Schumer’s dedication to “act now” and “act responsibly.” He also asked why the plan could not proceed in tranches instead of putting all of the money in up front and whether there would be any loan modifications for troubled mortgages in the plan.