PermaLinkMy Letter To Congressman Paul Hodes Re Yesterday's Bailout Vote

To: The Honorable Congressman Paul Hodes, NH 2nd District
           submitted via his web site

Today I saw the biggest failure of our representative democracy in my lifetime. Between those who voted "no" out of misguided application of principles, and those who voted "no" out of fear of electoral consequences, Congress failed the American people.

In case you haven't figured it out, for whatever your true motivation was, I am terribly disappointed in your vote today on the financial bail-out. I am a life-long Democrat, and I am active as a volunteer in the Nashua campaign office, but I am so disappointed that I have ripped the Paul Hodes bumper sticker off my car, and pulled the Paul Hodes yard sign out of my lawn.

You can take heart in the fact that I could never support your opponent, but even though you and I are fellow Democrats and fellow Dartmouth almuni, I will find it extremely difficult to support you in this election or any in the future. You have just a few days to regain some of the confidence and support that you have lost from me, and I'm sure from others.

There is no perfect solution to this problem, and there is a critical time factor to consider. The American people lost more than $1 trillion in the stock market today. That's just one day, and it's more than the full cost of the rescue program. I lost relatively little myself, but I am still disgusted by the failure of Congress to act in the face of clear warnings.

I can understand not trusting the President. I can even understand not trusting Secretary Paulson after his initial over-reaching demands for czar-like control. The visible effects of what is happening, however, are undeniable.

Yet another major bank went into forced merger this morning -- before the House vote, so now the top three banks in our country account for 30% of the banking market. This on its own is something that no Democrat should tolerate, but Congress fiddles while Rome is burning and the result of the fire sale is burgeoning monopoly. If these recent mergers were mergers of choice, we would be calling for the Justice Department's Anti-Trust division to put a stop to them!

The evidence is abundantly clear that inaction is worse than imperfect action. Under the bill that was considered today, there would have been time for Congress to step in and improve oversight later. There will be time later, under a Democratic administration -- which I remain committed to working for, to address systemic concerns, to protect against further abuses in the financial services industry, and to provide necessary protection to the American people. But that is job two! This is a first-responder situation, and job one is always to stop the bleeding and stabilize the patient. Congress failed in that job today, and the patient is in danger.


Richard H. Schwartz

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Comments :v

1. Devin Olson09/30/2008 05:45:34 AM

Hey there old friend. Even though you and I disagree on Party affiliation, I wholeheartedly agree with you.

There is no room for "sides" right now. Congress needs to grow some stones and fix this situation NOW.


2. Tim Brown09/30/2008 07:51:56 AM

Echoing @1. On this, Rich - we are in violent agreement. Well-written letter!

3. Bob Balaban09/30/2008 08:23:05 AM

I originally felt as you do, but I have changed my mind about that bailout bill after listening to a number of Congresspeople explain why they voted against it (including 3 MA Democrats, though not my own Congressperson).

In the end, it resembled one of those nice, no-bid Halliburton contracts: total giveaway to the greedy idiots who perpetrated the mess in the first place; the bill asked for nothing from the financial community (one interesting idea was an extra tax on trades) to help pay for it; huge expansion of executive power (like Bush doesn't have enough already...); little or no regulation/oversight on how the Treasury Dept. would spend the money.

Add to that the fact that the pressure and "Crisis" were so hyped that the Congress rushed to "fix" Paulson's original stupid plan, instead of figuring out what was really needed and offering their own. The whole premise of the plan, that the government should buy "toxic assets" at high prices, so that financial institutions who showed poor judgment in the past could wipe their books clean, is very iffy to me, both politically, economically and morally.

4. Lance Lavandowska09/30/2008 09:24:58 AM

I have to agree with Bob Balaban, the proposed plan was fatally flawed and did nothing to address the underlying issues. I wish I could find the link, but the Secretary of Labor (? i think that's right) posted on his blog yesterday about a compromise bill that he expects to pass by weeks end which is much more reasonable.

Don't buy the panic. Yes, the financial markets need shoring up, but we must be careful to do so thoughtfully and with adequate oversight.

5. Axel09/30/2008 10:11:23 AM

I think the later the bailout, the costlier it might be.
So an bailout now and a serious effort for regulations with a institution that may react to ongoing innovations in the financial sector later.
I don't believe that there will no political will to try to find political safeguard mechanism against the risks of todays financial sector.
I imagine the process to find sound regulations not as short track, but long term and careful.
The building of new regulatory institutions and bail out are 2 different beasts. So I hope your politicians will bailout soon, but not forget about serious regulations later.

6. Richard Schwartz09/30/2008 10:26:49 AM

@Bob & Lance: The primary flaw I see in your logic is that you are accepting an implicit position that this is the one and only one action that can and will be taken. This is just like the ridiculous obsession that some people have with "making the tax cuts permanent". No law is permanent, ever. It can always be repealed tomorrow, or next year. Yes, there is inertia, but all it takes is the votes to get past it. Pretending otherwise is mere posturing.

Congress could have passed the bail-out yesterday, giving Sec. Paulson the tools needed to take immediate action, and they could have passed additional reforms to address the underlying issues tomorrow, or in January after a new administration is in office. They could add additional oversight as needed, any time. The plan voted on yesterday was already a staged plan, so there is plenty of time for further thoughtfulness.

But that's just the primary flaw. The next flaw is your belief that there's time to come up with something better. On the news this morning, I heard that due to yesterday's record stock market dive, more banks are now in trouble. The Fed can and will keep intervening on an ad hoc basis, deciding strictly according to the Board of Governor's opinions as to which institutions to let fail outright, and which to save using the tools they are already authorized to use. But as long as we're proceeding this way, there is even less oversight than was put into the bill that failed yesterday! There's no systemic fix at all. There is nothing at all as a return for taxpayers, and nothing for consumer protection. The longer we have inaction from Congress, the longer this situation -- which I agree with you is totally unacceptable based on all the things that are missing -- will continue! And there's a worrisome concentration of financial services market share building up in just a few institutions, which we shouldn't tolerate ever, least of all now when "too big to fail" is something we need to stop hearing! And while this keeps happening, confidence erodes, which accelerates the whole cycle.

The whole economy depends on credit. Want to buy a car? Even if you have the cash, good luck getting what you want. With rare exceptions, your dealer finances all the cars on his lot. The transport company finances the fuel used to bring it to his lot. The manufacturer finances the raw materials used to build it. Want to sell products and services? If your customers businesses can't get the credit they need to support their operations, good luck. There will be time to address the fact that our economy is too dependent on a financial services sector that is dangerously intertwined in ways that have magnified a relatively small problem in housing finance into something that is just a few hair's breadth away from being a global economic collapse, but right now the job is to do whatever is necessary to prevent us from getting any closer to that brink.

And as far as "offering their own" plan -- if my Congressman had done that, I would not be as angry with him. Why was only one bill offered up for vote yesterday? Good question! Why did the people who voted "no" not have an alternative ready to propose? Great question! If my Congressman had offered up a plan that stood a chance of passing both the House and Senate, more power to him! But please note: the Democrats can pass anything they are willing to take responsibility for in the House, but they don't have a free hand in the Senate. Even if they could get a cloture vote (which I doubt), they have to contend with the fact that they don't have a majority without Lieberman, and he is out campaigning for McCain... so what do you think the chances are that he'll back a bill that provides all the fixes that House Democrats want and none of what the Republicans want? This is going to have to be a bi-partisan effort no matter what. It is going to have to be a compromise, and it is going to leave a lot of people with bad tastes in their mouth, but it has to happen. It has to happen soon. It should have happened yesterday, one way or another. If not the bill that was voted on, then some other bill.

Last comment for Lance: I have a pretty strong feeling you are talking about the former Secretary of Labor, Robert Reich, who does have a blog:

7. Lars Olufsen10/01/2008 06:24:52 AM

I wonder how many of the Congressmen sold shares before the vote and bought shares the day after.

Now they get to re-vote after making a 10% gain on stocks owned.


8. Richard Schwartz10/01/2008 10:26:56 AM

Great question, Lars! I wonder if the SEC routinely monitors trades by congressmen? I sure hope they do.

9. Tim Brown10/01/2008 06:21:18 PM

There are not exempt from Insider trading laws:

I know that people who work in the Financial industry have compliance systems where trading has to be cleared before-the-fact - it's hard to imagine that government employees in a variety of departments wouldn't have the same thing.

10. Becky10/02/2008 11:19:44 PM

The plan included ONE BILLION dollars for the personal distributory use of Bush. That alone actually naseates me. It is blatant cronyism. Nothing makes that ok. No oversight would ever have been added to that.

11. ninest12304/23/2016 04:47:37 AM

12. chenlixiang08/11/2017 08:56:26 AM lauren.html

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