Writing my Congressional Representatives on the "Bail Out" plan

I wrote to D- Con. Udal & R.-Con. Pierce beofre the bail out vote this past Friday. D-Con. Udal has replied to me thus far and I wanted to post my letter and his response.
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Con. Udall,

You don't know how much respect you gained by voting no on the "bail out" bill in Ventana West where I live. To be honest my neighborhood is a McCain/Perce stronghold. However, yesterday I saw a few neighbors post your yard sign in their front yards and were more open to support you at our park.

I must tell you that you must not waver on the "bail out" bill. To put it bluntly sir this is what we call a "jack move" back home. The banks are only holding out opening new lines of credit with each other because they KNOW congress will punk out and grant Bush and Paulson one last demand. TRUST me when I tell you that they will be back with their hands out for more right after Christmas. Bernanke dropped rates several times and each time they demanded more.

Rather than a bail out of the Investment Bankers and Brokerage Houses, let’s protect the people and reset this economy based on the true market value of these properties, as they stand today. Congress should provide 5% fixed-rate 30 year loans for those “owner-occupied” properties, using today’s market values, therefore permitting people to stay in their homes and pay off their new loans. If the house is worth less than the previous outstanding debt, let the private sector deduct the difference from their taxes. This will be far cheaper than the $700 billion blank check currently being considered. If the home owners default under the current $700 billion bail out scenario, then the Banks end up with houses which they can’t unload, which will not be repaid, only a few could afford to buy and our economy suffers even more.

By assisting taxpaying homeowners, the market is stabilized, the states keep much needed property tax revenue, the banks make money and the people who require that “profits be privatize” and now want their “debt socialized” will pay for the mistakes they made in their rush to make a quick buck. In the long run the mortgage holder benefits by receiving a payback on the current face value of the property, we don’t end up with a lot of foreclosed homes and we don’t give another blank check to those who don’t deserve our trust. Bail out the People, not the Investment Bankers and Brokerage Houses. It’s time for Congress to do the right thing for the people of this country.

Second: The government will not be buying up the mortgages themselves, thereby protecting the homeowner. Instead, the government will be buying the mortgage-backed securities sold to other banks, thereby protecting the very institutions that triggered this crisis by engaging in high-risk investments.

Third: this bailout package includes little to no oversight protection. In fact, the Treasury dept. has no idea how it will evaluate the quality of its purchases. There's nothing in this bailout plan to encourage/force the banking industry to learn from its mistakes.

Fourth: markets are, generally, self-correcting through an evolutionary process of rational selection. Banks that engaged in these financial wheeling’s and dealings will be absorbed by those that did not. Credit will still be issued, though perhaps not as wildly as before. People will still spend money, just not as stupidly as before.

Fifth: Government regulations and oversight exist to ensure that individuals are treated fairly and equitably, not to save institutions from the consequences of bad decision-making.

If we are to have a bailout package, then the government should buy the mortgages directly, not the securities that they back, and only in those cases where the buying parties negotiated in good faith and are losing their home through no fault of their own (or at least where the buying party can make a reasonable claim that they were misled into thinking that they could afford more than they could).

Let's start funneling some of that $700b into infrastructure repair and neighborhood improvements to drive up the real estate values of impoverished neighborhoods, to provide better community health care, and improve the quality of schools in lower SES neighborhoods. Let's start teaching financial literacy in schools. Let's look at solving the cause of the problem instead of alleviating the symptoms. Setting a broken bone is painful in the short term, but ultimately is a better solution than putting a Band-Aid on.

What are you guys afraid of?! Bush is out, Cheney is a non-factor and McCain has no respect within his own party. I hate to be blunt but HOLD YOUR NUTS. Be men for peaks sake.

Respectfully,

XXXX
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D-Co. Udall's Response
October 3, 2008

Dear Mrs. xxx:

Thank you for contacting me regarding America's economy and efforts to bail out Wall Street. I appreciate your interest in this important issue. Earlier today, I again voted against a deeply flawed plan to bail out Wall Street with $700 billion of taxpayer money.

Today's legislation has changed little from the bill I voted against on Monday. While I believe Congress should act to help middle class families-and I voted again today for economic stimulus legislation that will help produce jobs for American workers-we should not do the wrong thing just to say we did something. With a proposal this large, we have to get it right. Today's bill, like the bill the House rejected on Monday, falls short. However, despite my opposition, the bill passed by a vote of 263 - 171.

Below is my statement from today's Congressional Record.

Madam Speaker, Four days ago, I opposed a bailout plan that did too little for homeowners, too much for executives, and nothing to prevent Wall Street from repeating the mistakes that got us into this crisis. That bill would have put the U.S. taxpayer on the hook for $700 billion to bail out Wall Street, the very people whose irresponsibility helped to undermine America's economy and threaten the jobs and life savings of millions of American families.

Make no mistake: America faces a serious crisis. We must do something, but we cannot let fear drive our decision-making. Our solution should meet the demands of the day without producing more suffering in the future. We have the time to get this right, but the proposal we considered on Monday had significant problems.

At that time, I suggested several commonsense changes to Monday's bill. Those changes have not been made.

I said we must do more to protect taxpayers. Today's bill still falls short.

I said we should do more to protect responsible homeowners and their neighbors from foreclosures and plummeting property values. This bill still falls short.

I said we must ensure executives who ran their companies into the ground cannot walk away with millions in taxpayer-funded golden parachutes. This bill still falls short.

And I said that while American taxpayers continue to struggle we should not bail out foreign companies whose governments are doing nothing. Again, this bill still falls short.

Perhaps most importantly, this legislation does nothing to protect us from facing a similar crisis in the future. Today's situation is the direct result of a culture in Washington that allowed Wall Street to gamble with America's future. This legislation sends the message that when Wall Street's gambles do not pay off, the taxpayer will bail them out. Imagine for a moment that you send a friend into a casino and tell him: if you win, you keep the winnings; if you lose, I'll pay your losses. You would expect nothing but irresponsibility, and that is exactly what this bill will give us. We need commonsense rules to protect against that irresponsibility, and this bill provides none.

For all these reasons, I will vote against today's proposal, just as I voted against extremely similar legislation four days ago. The only difference between this bill and the bill we rejected on Monday that has anything to do with America's financial markets is an increase in FDIC insurance limits. This may do something, but it is nowhere near enough to justify supporting today's bill.

Whether or not this legislation passes today, Congress must keep working on a new framework for our financial system. Experts have produced good proposals on a variety of issues. Some have even passed this House. But we also need to begin working on a systemic overhaul of our regulatory structures, our financial rules, and the incentives that govern our markets. In this hour of crisis, we have a rare opportunity to protect future generations from the turmoil we have seen. We must seize this opportunity.

Unfortunately, the Senate has chosen to add unrelated provisions rather than fixing a deeply flawed proposal. I want to note that my vote today does not suggest any disagreement with the important package of tax cuts that was added in the last few days. I have consistently supported tax cuts for the middle class, including fixes for the Alternative Minimum Tax. I have advocated mental health parity legislation, and voted for it repeatedly. I have fought for tax credits to spur green industries and produce jobs. And I have worked to protect the Secure Rural Schools and Payment In Lieu of Taxes programs that would be extended by this bill. However, even with these provisions, I cannot support a $700 billion taxpayer bailout-a plan that will have a large and widespread impact for generations-that has been rushed through with so many serious flaws and so many problems left unaddressed.

Today's vote is difficult, but I believe it is what's right for New Mexico's Third Congressional District, and the people of New Mexico and our nation.

Thank you, Madam Speaker.

Thank you again for sharing your thoughts with me. Please feel free to contact me with concerns about any federal issue. You may visit my website at www.tomudall.house.gov for more information.

Very Truly Yours,
Tom Udall
Member of Congress