I couldn't help but follow the budget negotiations of the Pennsylvania State Assembly as well as the Governor Edward Rendell lately, and to be honest...I'm not sure which branch of state government is more depressing! Obviously, we are in a recession unlike any since the greatest generation, but our legislators are biting off the hand that feeds them, and taking the state back to a level of culture, health, arts, and children programming that models itself on a draconian state. Just in case anyone was not fully aware, a few of the funding cuts include:
-All historical and museum funding to non state owned institutions (with a notable exception of Carnegie in Pittsburgh and the Franklin Institute in Philadelphia...hmmm...Rendell's from Philadelphia isn't he?).
-Funding to Public Television (so much for the only family friendly or educational television for those who are not wealthy enough to afford cable or satellite.
-A portion of library funding (oops...can't go to the library when PBS has to cut broadcasting)
-A significant portion of funding to mental health programs within the state (not state mental hospitals, but programs to make those mildly mentally handicapped better able to live independently)
-Effectively making the PA Council on the Arts a non funded agency
These are just a few of the most recent to come out of the State legislature. Can someone please tell me how some of these are on here? Doesn't cutting museum funding decrease hours and thus harm tourism (one of the state's biggest industries)? With tourism in decline, then doesn't local business in those areas suffer? Make less income? Pay less taxes?
Doesn't cutting funding to libraries and Public Television significantly reduce education and literacy? What do we do when these children cannot read as well? More funding is then needed for schools to make up the difference? And those who drop out? Get into trouble? Legal fees? Court Costs? Public Defenders? Prisons?
Doesn't cutting mental health programs cause more individuals to not lead productive lives? Need more care? More state provided care?
Surprisingly enough...there is a cycle to this! We might want to think about asking our legislators if they have thought that far ahead...after all...if not we might all be moving that far behind.
A few things to think about.
Respectfully,
-Mr. Jackson
Tuesday, July 14, 2009
Friday, November 14, 2008
A Request to the Next President
"I was not primarily concerned with either following or not following in his [William McKinley's] footsteps, but in facing in the new problems that arose; and that if I were competent I would find ample opportunity to show my competence by my deeds without worrying myself as to how to convince people of the fact."
-Theodore Roosevelt
Throughout what may go down in history as the most significant election in history thus far, we have heard one reoccurring theme-we need change. We need change from the last eight years. We need change from Mr G.W. Bush. We need change in Washington. We need change from politics as usual. I'm sure you get the idea.
What we haven't heard, however, is what changes we ACTUALLY need. Should we change everything put in place by the last president of close to a decade? Just foreign policy? economic policy? educational policy? We as a country have been so caught up in the idea of change that we have failed to consider what we actually want to change. Just the word "change" makes us sound intelligent in any political conversation as much as the phrase "anti-terrorists" made us sound superior immediately following 9/11. It's not that I'm not for "change" or that I'm unpatriotic...but vagueness only goes so far in political rhetoric or governmental planning.
Immediately after President McKinley was killed in Buffalo, New York in 1901, Roosevelt was asked by several aids how he was going to place his mark on his presidency. Ideas were suggested from major changes in policy to nearly a complete change in cabinet. Although patiently listening to all of these, Roosevelt was adamant that he was a servant of the people and working policy and competent staff were worth more to them than making an "impression of change."
Let's face it ladies and gentlemen. President Bush has been criticized more than any leader in recent history. He has, however, done several things throughout his presidency that are worth commending. George W. Bush's administration has given more money to combat aids through the "President's Emergency Plan for AIDS Relief" (PEPFAR) than any other nation on earth-$15 billion over five years. Through all of the current administration's blunders, there are undoubtedly some success stories worth acknowledging and worth remembering.
I have one request for a nation in transition and a president elect leading the way: there is no doubt we need "change," but we need a plan, rather than just drifting as far away as possible from the norm. I ask for change with a purpose, change with a plan, and change that is worth voting for. Before we become "a nation of change," assess what works rather than just throwing off old ideas in the name of progress. Do not worry so much about setting yourself apart from your predecessors as setting a course to a more prosperous nation. You have won the election and our support. Use it to mend the country rather than continuing to set it apart. Lead...don't just change!
Respectfully,
Mr. Jackson
-Theodore Roosevelt
Throughout what may go down in history as the most significant election in history thus far, we have heard one reoccurring theme-we need change. We need change from the last eight years. We need change from Mr G.W. Bush. We need change in Washington. We need change from politics as usual. I'm sure you get the idea.
What we haven't heard, however, is what changes we ACTUALLY need. Should we change everything put in place by the last president of close to a decade? Just foreign policy? economic policy? educational policy? We as a country have been so caught up in the idea of change that we have failed to consider what we actually want to change. Just the word "change" makes us sound intelligent in any political conversation as much as the phrase "anti-terrorists" made us sound superior immediately following 9/11. It's not that I'm not for "change" or that I'm unpatriotic...but vagueness only goes so far in political rhetoric or governmental planning.
Immediately after President McKinley was killed in Buffalo, New York in 1901, Roosevelt was asked by several aids how he was going to place his mark on his presidency. Ideas were suggested from major changes in policy to nearly a complete change in cabinet. Although patiently listening to all of these, Roosevelt was adamant that he was a servant of the people and working policy and competent staff were worth more to them than making an "impression of change."
Let's face it ladies and gentlemen. President Bush has been criticized more than any leader in recent history. He has, however, done several things throughout his presidency that are worth commending. George W. Bush's administration has given more money to combat aids through the "President's Emergency Plan for AIDS Relief" (PEPFAR) than any other nation on earth-$15 billion over five years. Through all of the current administration's blunders, there are undoubtedly some success stories worth acknowledging and worth remembering.
I have one request for a nation in transition and a president elect leading the way: there is no doubt we need "change," but we need a plan, rather than just drifting as far away as possible from the norm. I ask for change with a purpose, change with a plan, and change that is worth voting for. Before we become "a nation of change," assess what works rather than just throwing off old ideas in the name of progress. Do not worry so much about setting yourself apart from your predecessors as setting a course to a more prosperous nation. You have won the election and our support. Use it to mend the country rather than continuing to set it apart. Lead...don't just change!
Respectfully,
Mr. Jackson
Friday, October 10, 2008
Fated to Fail: An Examination of Edinboro University’s Student Government Association
You can also find this joint article at Mr. Madison's blog on the Dead President's Forum
Monday, October 6, 2008 the Edinboro University Student Government Association held an “important” meeting in which all clubs and SGA funded organizations had to attend. Arriving at the Pouge Student Center’s Multi-purpose room around 5:00pm, a crowd of students shuffled about trying their designated seats. However empty binders and poorly organized rows seemed to stifle the process.
After a 15-minute delay, the meeting finally got underway. Observing the students sitting in the “house” area, most seemed to be distance and catatonic. It is unlikely that any of the students truly wanted to attend the “mandatory” meeting or even understood their purpose there. Following a 30-minute lecture on the progress of SGA, the budget, and the acquisition of new organizations, it finally came time to discuss the reason all the clubs had been called to attend.
Kristen Zelechowski, the SGA president and campus sorority leader, spoke to the crowd of students in an attempt to explain new voting procedures and allocations. She also mentioned SGA was now requiring 140 representatives from campus groups at the first and third SGA meetings every month with only fourteen of these allowed to vote. The president danced around the real issue time and again, however, until one of the house members popped the proverbial bubble. “Do we have to come to every meeting?”
Unfortunately for the Clubs and Organizations on campus, SGA deemed that every club and organization must have a representative at the first and third meeting of every month. This presented some major problems to the majority of the house. One representative asked “was their any student oversight when this decision was cast?” This question was not answered. Winston Alozie of the congress stated to the house that he disagreed with the legislation and voted against the decision.
There are many reasons why this legislation is fated to fail; the first of reasons being the issue of representation. The house will only be allotted 14 votes in congress. Fourteen votes which are supposed to reflect the opinions of nearly 140 clubs and organizations. This number will not and truly cannot represent the constituency of the greater student body. The second reason why legislation such as this will fail is due to the ridiculous attendance policy. Granted clubs and organizations can cycle through members of their individual groups to attend the SGA meetings, but most clubs and organizations on campus cannot even get students to show up to one meeting a week!
SGA should not be trying to create more bureaucracy, but rather refine the process for clubs and organizations. E-mail, facebook, and online postings are all viable solutions to any communication issues. If this legislation lives, over time student clubs and organizations will begin to see a systematic break down of the “core” members who are involved in just about every other club on campus. These students will grow tired of the excessive meetings and mandates required by the SGA executive board. The small nucleus of students on campus who really care was at the meeting last Monday and most of them did not even want to be there. We need to work on bringing attendance numbers up in our clubs rather than committing our executive board members to more mundane meetings.
The “show up or shut up” mentality of SGA needs to change. They must no longer slap the wrists of clubs and organizations for simply not attending meetings. SGA funds are taken from the activity fees of all students and are destined for redistribution into clubs and organizations. SGA cannot withhold these funds from the very people that gave money to them. SGA will find out fast that student run organizations do not need the crutch of SGA funding if they are not treated with respect. Lastly, The SGA executive board needs to open their eyes and present quantitative evidence supporting a decision supporting the actions they have taken. Just because “they do this at Cal U” doesn’t mean we have to do this here.
With the Utmost Respect,
Mr. Madison
Mr. Jackson
Monday, October 6, 2008 the Edinboro University Student Government Association held an “important” meeting in which all clubs and SGA funded organizations had to attend. Arriving at the Pouge Student Center’s Multi-purpose room around 5:00pm, a crowd of students shuffled about trying their designated seats. However empty binders and poorly organized rows seemed to stifle the process.
After a 15-minute delay, the meeting finally got underway. Observing the students sitting in the “house” area, most seemed to be distance and catatonic. It is unlikely that any of the students truly wanted to attend the “mandatory” meeting or even understood their purpose there. Following a 30-minute lecture on the progress of SGA, the budget, and the acquisition of new organizations, it finally came time to discuss the reason all the clubs had been called to attend.
Kristen Zelechowski, the SGA president and campus sorority leader, spoke to the crowd of students in an attempt to explain new voting procedures and allocations. She also mentioned SGA was now requiring 140 representatives from campus groups at the first and third SGA meetings every month with only fourteen of these allowed to vote. The president danced around the real issue time and again, however, until one of the house members popped the proverbial bubble. “Do we have to come to every meeting?”
Unfortunately for the Clubs and Organizations on campus, SGA deemed that every club and organization must have a representative at the first and third meeting of every month. This presented some major problems to the majority of the house. One representative asked “was their any student oversight when this decision was cast?” This question was not answered. Winston Alozie of the congress stated to the house that he disagreed with the legislation and voted against the decision.
There are many reasons why this legislation is fated to fail; the first of reasons being the issue of representation. The house will only be allotted 14 votes in congress. Fourteen votes which are supposed to reflect the opinions of nearly 140 clubs and organizations. This number will not and truly cannot represent the constituency of the greater student body. The second reason why legislation such as this will fail is due to the ridiculous attendance policy. Granted clubs and organizations can cycle through members of their individual groups to attend the SGA meetings, but most clubs and organizations on campus cannot even get students to show up to one meeting a week!
SGA should not be trying to create more bureaucracy, but rather refine the process for clubs and organizations. E-mail, facebook, and online postings are all viable solutions to any communication issues. If this legislation lives, over time student clubs and organizations will begin to see a systematic break down of the “core” members who are involved in just about every other club on campus. These students will grow tired of the excessive meetings and mandates required by the SGA executive board. The small nucleus of students on campus who really care was at the meeting last Monday and most of them did not even want to be there. We need to work on bringing attendance numbers up in our clubs rather than committing our executive board members to more mundane meetings.
The “show up or shut up” mentality of SGA needs to change. They must no longer slap the wrists of clubs and organizations for simply not attending meetings. SGA funds are taken from the activity fees of all students and are destined for redistribution into clubs and organizations. SGA cannot withhold these funds from the very people that gave money to them. SGA will find out fast that student run organizations do not need the crutch of SGA funding if they are not treated with respect. Lastly, The SGA executive board needs to open their eyes and present quantitative evidence supporting a decision supporting the actions they have taken. Just because “they do this at Cal U” doesn’t mean we have to do this here.
With the Utmost Respect,
Mr. Madison
Mr. Jackson
Thursday, October 2, 2008
Letter from Senator Arlen Specter
I will make full notice THE CONTENT OF THIS POST IS NOT MY WRITING. After writing Senator Arlen Specter's office questioning his views on the financial bailout plan shortly before the Senate vote, he replied with this response today. I am posting it below. Obviously the addressee on the letter was omitted for anonymity of our dead presidents. Enjoy!
Respectfully,
-Mr. Jackson
On October 2nd, Senator Specter's office writes:
Thank you for contacting my office regarding the financial rescue legislation. I appreciate your views on this matter.
I reluctantly supported this package because the failure of Congress to act would run the risk of dire consequences, including an economic downturn which could cause more foreclosures, jeopardize retirement accounts, and further restrict credit which is necessary for small businesses to operate. I am philosophically opposed to bailouts. I think that when you have Wall Street entrepreneurs who take big risks to make big profits and they go sour, they ought to sustain the loss themselves and not look to the government for a bailout which ends up in the laps of the taxpayers. However, I supported the plan to avoid economic disaster that would extend well beyond Wall Street.
From the outset, I cautioned against Congress's rushing to judgment. When the initial proposal was made in mid-September, I wrote to Majority Leader Harry Reid and Republican Leader Mitch McConnell by letter dated September 21, 2008 urging we take the time necessary to get the legislation right. By letter dated September 23, 2008, I wrote to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke asking a series of questions which have not yet been answered. Then by letter dated September 27, 2008, accompanied by a Senate floor statement, I made a series of suggestions to the executive and legislative negotiators. Again, there has been insufficient time for a reply. Copies of these letters are available on my website: http://specter.senate.gov.
Whenever we deviate from regular order which has been developed during more than 200 years of serving our country very well, we are on thin ice. On regular order, the legislative process customarily begins with a bill which members of Congress can study and analyze. After the legislation is in hand, there are hearings with proponents and opponents of the bill and an opportunity for members to examine, really cross examine, to get to the heart of the issues and alternatives. Regular order calls for a markup in the committee of jurisdiction going over the language line by line with an opportunity to make changes with votes on those proposed modifications. Then the committee files a report which is reviewed by members in advance of floor action where amendments can be offered and debate occurs. The action by each house is then subjected to further refinement by a conference committee which makes the presentment to the President for yet another line of review. The process used to finalize this legislation drastically shortcut regular order.
The legislation passed by the Senate is enormously improved over the first Paulson proposal. The $700 billion is not to be authorized immediately, but instead there are installments of $250 billion, $100 billion at the request of the president and $350 billion more subject to congressional objection, although the latter phase may be unconstitutional under INS v. Chadha, which requires following regular legislative process with passage by both houses and Presidential approval to overrule Presidential action and perhaps inferentially legislative conditions. For protection of the taxpayers, the proposal contains a provision that if the government does not regain its money after five years, the President would be required to submit a plan for compensating the Treasury "from entities benefiting from the programs." While that provision is a far way from a guarantee or even assurances that such recovery legislation would be enacted, it gives some important comfort to the taxpayers' position.
There are provisions for multiple layers of oversight including a Financial Stability Oversight Board that will meet monthly to oversee the program. The Treasury Secretary will be required to report to Congress on a regular basis on the actions taken, along with a detailed financial statement. These reports will include information on each of the agreements made, insurance contracts entered into, and the nature of the asset purchased and projected costs and liabilities. Additional oversight will be provided by the Comptroller General (reports to Congress), a new Inspector General (audits and quarterly reports), a congressionally-appointed oversight panel (market and regulatory review, and reports to Congress on the program and the effectiveness of foreclosure mitigation efforts), and by the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) (cost estimates). A report will be required from the Secretary of the Treasury with an analysis of the current financial regulatory framework and recommendations for improvements.
There are substantial limitations on having benefits for entities which created the problem and limitations on executive pay. In cases where financial institutions sell troubled assets directly to the government with no competitive bidding and where the government receives a meaningful equity position, the legislation states that, until that equity stake is sold, executives would not get incentives "to take unnecessary and excessive risks" and would have to give up or repay bonuses or other incentives based on financial statements that "are later proven to be materially inaccurate." The bill also would prohibit "any golden parachute payment to senior executives."
The legislation is less stringent in provisions for financial institutions that sell their assets to the government through an auction. Such provisions would apply only to companies that sell more than $300 million in assets and would subject companies and employees to extra taxes. Corporations would not be able to deduct any salary or deferred compensation of more than $500,000, and top executives would face a 20% excise tax on golden parachute payments if they left for any reason other than retirement. In evaluating limitations on executive salaries, it is relevant to note that the Institute for Public Studies found that chief executives of large U.S. companies made an average of $10.5 million last year. That is more than 300 times the pay of the average worker.
The final proposal does provide for debt insurance, as advocated for by House Republicans, but leaves it to the Secretary of the Treasury to utilize that approach so it seems unlikely that it will be implemented in light of the fact that Secretary Paulson has bluntly stated his disagreement with it. Had there been floor amendments, Congress could have structured standards for utilization of debt insurance.
Had we followed regular order with an opportunity to propose amendments, consideration could have been given to my proposal, S.2133, which would have authorized the bankruptcy courts to restructure interest and scheduling of payments. The so-called variable rate mortgages have confronted many homeowners with the surprise that original payments, illustratively, of $1200 a month were soon raised to $2000 which resulted in defaults. Individualized examination by the bankruptcy courts might show misrepresentation or even fraud to justify revising the interest payments and rearranging the payment schedule. Or consideration could have been given to Senator Durbin's proposed legislation, S.2136, which would have authorized the bankruptcy courts to reset the principal balance depending on the value of the home. I opposed that bill because I thought it would discourage future lending, and in the long run raise the cost to homebuyers. But at least, following regular order, there would have been an opportunity to consider Senator Durbin's proposal as well as my suggested legislation.
The legislation contains authority for the Treasury Secretary to compensate foreign central banks under some conditions. It provides that troubled assets held by foreign financial authorities and banks are eligible for the Toxic Assets Recover Program (TARP) if the banks hold such assets as a result of having extended financing to financial institutions that have failed or defaulted. Had there been an opportunity for floor debate, that provision might have been sufficiently unpopular to be rejected or at least sharply circumscribed with conditions.
As a step to help keep borrowers in their homes, I proposed language found in Section 119 (b) of the bill to address the concern that some loan servicers have been reluctant to modify home mortgage loan terms because they fear litigation from investors who hold securities or other vehicles backed by the mortgage in question. The loan servicers have a legal duty to the investors to maximize the return on their investments. In testimony on December 6, 2007, before the House Committee on Financial Services, Mark Pearce, speaking on behalf of the conference of State Bank supervisors, discussed a meeting with the top 20 subprime servicers. He explained that "many of them brought up fear of investor lawsuits" as a hurdle to voluntary loan modification efforts. Because the rescue legislation encourages the government to seek voluntary loan modifications, it is important to remove any impediments to such modifications. To that end, the language provides a legal safe harbor for mortgage servicers making loan modifications, if the loan modifiers take reasonable mitigation steps, including accepting partial payments from homeowners.
On reforms to prevent a recurrence of this crisis, we need to question whether the rating agencies adequately analyzed mortgage-backed securities before issuing investment-grade ratings. These agencies appear to have failed. In July of 2007, when it became apparent that ratings issued by the big three rating agencies-Moody's, S&P and Fitch- could not be relied upon, I urged the relevant committees to look into the ratings that those agencies issued in recent years regarding mortgage-backed securities. Financial institutions that issue asset-backed securities obtain ratings for such securities. The failure to issue reliable ratings misrepresented the facts and fed the ability of financial institutions to tout the value of securities even though their value was declining. Congress and the regulators need to take up the rating agencies issue, and consider whether ratings agencies that have utterly failed to detect and reflect the risks associated with the securities they were rating should be accorded any reliance or role in our financial system. Some have suggested they should be regulated and we may need to consider that.
In addition, Congress and the regulators should review "off-balance sheet" transactions and leveraging. There should be a close examination on whether banks are sufficiently transparent and providing accurate accounting that truly reflects risk and leverage. Similarly there should be a review on Credit Default Swaps (CDS), which are privately traded derivatives contracts that have ballooned to make up what is a $2 trillion dollar market according to the Bank of International Settlements. They are a fast-growing major type of financial derivative. Many experts assert that they have played a critical role in this financial crisis as various financial players believed that they were safe because they thought CDS fully insured or protected them, but the CDS market is unregulated and no one really knows what exposure everyone else has from the CDS contracts. Consideration should be given to subjecting all over-the-counter derivatives onto a regulated exchange similar to that used by listed options in the equity markets.
Overleveraging has been a contributing factor in the turmoil that now threatens our financial institutions. We have seen a massive expansion of the practice of leveraged financial institutions (banks, investment banks, and hedge funds) making investments with borrowed money. In turn, they borrow more money by using the assets they just purchased as collateral. This sequence is continued again and again. The financial system, in its efforts to deleverage, is contracting credit. They must guard against future losses by holding more capital. Deleveraging is leading to difficulty on Main Street for individuals seeking to get a mortgage or buy a car. If a financial institution is able to unload its toxic assets onto the government, it will again be able to resume its lending activities that are crucial for economic growth in the United States. Unfortunately, much of the financial crisis has arisen from miscalculations of the risks involved with purchasing large amounts of securities backed by subprime mortgages and other toxic assets. We now see a situation where we are not just talking about a handful of firms. This is a widespread problem that should be addressed by this package and in future reforms of our financial regulatory structure.
In addition, the package crafted by Senate leaders includes two notable changes from the version that was rejected by the House on Monday. It includes a tax package that was previously passed in the Senate by a vote of 93-2 on September 23, 2008, but has since been rejected by the House in a dispute over revenue offsets. It includes tax incentives for wind, solar, biomass, and other alternative energy technologies. It also includes critically important relief from the Alternative Minimum Tax, which threatens to raise the tax liability of over 22 million unintended filers in 2008 if no action is taken. Finally, the package includes a host of provisions that either expired in 2007 or are set to expire in 2008, including the research and development tax credit, rail line improvement incentives, and quicker restaurant and retail depreciation schedules. I supported the Senate-passed tax extenders bill because it struck a responsible balance on the issue of revenue raising offsets.
The package also includes a provision to temporarily increase the Federal Deposit Insurance Corporation (FDIC) insurance limit to $250,000. Currently, the FDIC provides deposit insurance which guarantees the safety of checking and savings deposits in member banks, up to $100,000 per depositor per bank. Member banks pay a fee to participate. The current $100,000 limit has been unchanged since 1980 despite inflation. This approach is supported by both Senator McCain and Senator Obama, by House Republicans, and by the FDIC Chairman Sheila Bair. Raising the cap could stem a potential run on deposits by bank customers, particularly businesses, who fear losing their money. Such fears contributed to the collapse of Washington Mutual and Wachovia Bank.
Congress has been called upon to make the best of a very bad situation. Careful oversight of the authority given to the Treasury Department will need to be undertaken, and a review of our regulatory structure will be necessary as we move forward.
Again, thank you for writing. The concerns of my constituents are of great importance to me, and I rely on you and other Pennsylvanians to inform me of your views. If you require assistance with a federal agency, please contact my state office in your area. The contact information can be found on my website at specter.senate.gov.
Sincerely,
Arlen Specter
Respectfully,
-Mr. Jackson
On October 2nd, Senator Specter's office writes:
Thank you for contacting my office regarding the financial rescue legislation. I appreciate your views on this matter.
I reluctantly supported this package because the failure of Congress to act would run the risk of dire consequences, including an economic downturn which could cause more foreclosures, jeopardize retirement accounts, and further restrict credit which is necessary for small businesses to operate. I am philosophically opposed to bailouts. I think that when you have Wall Street entrepreneurs who take big risks to make big profits and they go sour, they ought to sustain the loss themselves and not look to the government for a bailout which ends up in the laps of the taxpayers. However, I supported the plan to avoid economic disaster that would extend well beyond Wall Street.
From the outset, I cautioned against Congress's rushing to judgment. When the initial proposal was made in mid-September, I wrote to Majority Leader Harry Reid and Republican Leader Mitch McConnell by letter dated September 21, 2008 urging we take the time necessary to get the legislation right. By letter dated September 23, 2008, I wrote to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke asking a series of questions which have not yet been answered. Then by letter dated September 27, 2008, accompanied by a Senate floor statement, I made a series of suggestions to the executive and legislative negotiators. Again, there has been insufficient time for a reply. Copies of these letters are available on my website: http://specter.senate.gov.
Whenever we deviate from regular order which has been developed during more than 200 years of serving our country very well, we are on thin ice. On regular order, the legislative process customarily begins with a bill which members of Congress can study and analyze. After the legislation is in hand, there are hearings with proponents and opponents of the bill and an opportunity for members to examine, really cross examine, to get to the heart of the issues and alternatives. Regular order calls for a markup in the committee of jurisdiction going over the language line by line with an opportunity to make changes with votes on those proposed modifications. Then the committee files a report which is reviewed by members in advance of floor action where amendments can be offered and debate occurs. The action by each house is then subjected to further refinement by a conference committee which makes the presentment to the President for yet another line of review. The process used to finalize this legislation drastically shortcut regular order.
The legislation passed by the Senate is enormously improved over the first Paulson proposal. The $700 billion is not to be authorized immediately, but instead there are installments of $250 billion, $100 billion at the request of the president and $350 billion more subject to congressional objection, although the latter phase may be unconstitutional under INS v. Chadha, which requires following regular legislative process with passage by both houses and Presidential approval to overrule Presidential action and perhaps inferentially legislative conditions. For protection of the taxpayers, the proposal contains a provision that if the government does not regain its money after five years, the President would be required to submit a plan for compensating the Treasury "from entities benefiting from the programs." While that provision is a far way from a guarantee or even assurances that such recovery legislation would be enacted, it gives some important comfort to the taxpayers' position.
There are provisions for multiple layers of oversight including a Financial Stability Oversight Board that will meet monthly to oversee the program. The Treasury Secretary will be required to report to Congress on a regular basis on the actions taken, along with a detailed financial statement. These reports will include information on each of the agreements made, insurance contracts entered into, and the nature of the asset purchased and projected costs and liabilities. Additional oversight will be provided by the Comptroller General (reports to Congress), a new Inspector General (audits and quarterly reports), a congressionally-appointed oversight panel (market and regulatory review, and reports to Congress on the program and the effectiveness of foreclosure mitigation efforts), and by the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) (cost estimates). A report will be required from the Secretary of the Treasury with an analysis of the current financial regulatory framework and recommendations for improvements.
There are substantial limitations on having benefits for entities which created the problem and limitations on executive pay. In cases where financial institutions sell troubled assets directly to the government with no competitive bidding and where the government receives a meaningful equity position, the legislation states that, until that equity stake is sold, executives would not get incentives "to take unnecessary and excessive risks" and would have to give up or repay bonuses or other incentives based on financial statements that "are later proven to be materially inaccurate." The bill also would prohibit "any golden parachute payment to senior executives."
The legislation is less stringent in provisions for financial institutions that sell their assets to the government through an auction. Such provisions would apply only to companies that sell more than $300 million in assets and would subject companies and employees to extra taxes. Corporations would not be able to deduct any salary or deferred compensation of more than $500,000, and top executives would face a 20% excise tax on golden parachute payments if they left for any reason other than retirement. In evaluating limitations on executive salaries, it is relevant to note that the Institute for Public Studies found that chief executives of large U.S. companies made an average of $10.5 million last year. That is more than 300 times the pay of the average worker.
The final proposal does provide for debt insurance, as advocated for by House Republicans, but leaves it to the Secretary of the Treasury to utilize that approach so it seems unlikely that it will be implemented in light of the fact that Secretary Paulson has bluntly stated his disagreement with it. Had there been floor amendments, Congress could have structured standards for utilization of debt insurance.
Had we followed regular order with an opportunity to propose amendments, consideration could have been given to my proposal, S.2133, which would have authorized the bankruptcy courts to restructure interest and scheduling of payments. The so-called variable rate mortgages have confronted many homeowners with the surprise that original payments, illustratively, of $1200 a month were soon raised to $2000 which resulted in defaults. Individualized examination by the bankruptcy courts might show misrepresentation or even fraud to justify revising the interest payments and rearranging the payment schedule. Or consideration could have been given to Senator Durbin's proposed legislation, S.2136, which would have authorized the bankruptcy courts to reset the principal balance depending on the value of the home. I opposed that bill because I thought it would discourage future lending, and in the long run raise the cost to homebuyers. But at least, following regular order, there would have been an opportunity to consider Senator Durbin's proposal as well as my suggested legislation.
The legislation contains authority for the Treasury Secretary to compensate foreign central banks under some conditions. It provides that troubled assets held by foreign financial authorities and banks are eligible for the Toxic Assets Recover Program (TARP) if the banks hold such assets as a result of having extended financing to financial institutions that have failed or defaulted. Had there been an opportunity for floor debate, that provision might have been sufficiently unpopular to be rejected or at least sharply circumscribed with conditions.
As a step to help keep borrowers in their homes, I proposed language found in Section 119 (b) of the bill to address the concern that some loan servicers have been reluctant to modify home mortgage loan terms because they fear litigation from investors who hold securities or other vehicles backed by the mortgage in question. The loan servicers have a legal duty to the investors to maximize the return on their investments. In testimony on December 6, 2007, before the House Committee on Financial Services, Mark Pearce, speaking on behalf of the conference of State Bank supervisors, discussed a meeting with the top 20 subprime servicers. He explained that "many of them brought up fear of investor lawsuits" as a hurdle to voluntary loan modification efforts. Because the rescue legislation encourages the government to seek voluntary loan modifications, it is important to remove any impediments to such modifications. To that end, the language provides a legal safe harbor for mortgage servicers making loan modifications, if the loan modifiers take reasonable mitigation steps, including accepting partial payments from homeowners.
On reforms to prevent a recurrence of this crisis, we need to question whether the rating agencies adequately analyzed mortgage-backed securities before issuing investment-grade ratings. These agencies appear to have failed. In July of 2007, when it became apparent that ratings issued by the big three rating agencies-Moody's, S&P and Fitch- could not be relied upon, I urged the relevant committees to look into the ratings that those agencies issued in recent years regarding mortgage-backed securities. Financial institutions that issue asset-backed securities obtain ratings for such securities. The failure to issue reliable ratings misrepresented the facts and fed the ability of financial institutions to tout the value of securities even though their value was declining. Congress and the regulators need to take up the rating agencies issue, and consider whether ratings agencies that have utterly failed to detect and reflect the risks associated with the securities they were rating should be accorded any reliance or role in our financial system. Some have suggested they should be regulated and we may need to consider that.
In addition, Congress and the regulators should review "off-balance sheet" transactions and leveraging. There should be a close examination on whether banks are sufficiently transparent and providing accurate accounting that truly reflects risk and leverage. Similarly there should be a review on Credit Default Swaps (CDS), which are privately traded derivatives contracts that have ballooned to make up what is a $2 trillion dollar market according to the Bank of International Settlements. They are a fast-growing major type of financial derivative. Many experts assert that they have played a critical role in this financial crisis as various financial players believed that they were safe because they thought CDS fully insured or protected them, but the CDS market is unregulated and no one really knows what exposure everyone else has from the CDS contracts. Consideration should be given to subjecting all over-the-counter derivatives onto a regulated exchange similar to that used by listed options in the equity markets.
Overleveraging has been a contributing factor in the turmoil that now threatens our financial institutions. We have seen a massive expansion of the practice of leveraged financial institutions (banks, investment banks, and hedge funds) making investments with borrowed money. In turn, they borrow more money by using the assets they just purchased as collateral. This sequence is continued again and again. The financial system, in its efforts to deleverage, is contracting credit. They must guard against future losses by holding more capital. Deleveraging is leading to difficulty on Main Street for individuals seeking to get a mortgage or buy a car. If a financial institution is able to unload its toxic assets onto the government, it will again be able to resume its lending activities that are crucial for economic growth in the United States. Unfortunately, much of the financial crisis has arisen from miscalculations of the risks involved with purchasing large amounts of securities backed by subprime mortgages and other toxic assets. We now see a situation where we are not just talking about a handful of firms. This is a widespread problem that should be addressed by this package and in future reforms of our financial regulatory structure.
In addition, the package crafted by Senate leaders includes two notable changes from the version that was rejected by the House on Monday. It includes a tax package that was previously passed in the Senate by a vote of 93-2 on September 23, 2008, but has since been rejected by the House in a dispute over revenue offsets. It includes tax incentives for wind, solar, biomass, and other alternative energy technologies. It also includes critically important relief from the Alternative Minimum Tax, which threatens to raise the tax liability of over 22 million unintended filers in 2008 if no action is taken. Finally, the package includes a host of provisions that either expired in 2007 or are set to expire in 2008, including the research and development tax credit, rail line improvement incentives, and quicker restaurant and retail depreciation schedules. I supported the Senate-passed tax extenders bill because it struck a responsible balance on the issue of revenue raising offsets.
The package also includes a provision to temporarily increase the Federal Deposit Insurance Corporation (FDIC) insurance limit to $250,000. Currently, the FDIC provides deposit insurance which guarantees the safety of checking and savings deposits in member banks, up to $100,000 per depositor per bank. Member banks pay a fee to participate. The current $100,000 limit has been unchanged since 1980 despite inflation. This approach is supported by both Senator McCain and Senator Obama, by House Republicans, and by the FDIC Chairman Sheila Bair. Raising the cap could stem a potential run on deposits by bank customers, particularly businesses, who fear losing their money. Such fears contributed to the collapse of Washington Mutual and Wachovia Bank.
Congress has been called upon to make the best of a very bad situation. Careful oversight of the authority given to the Treasury Department will need to be undertaken, and a review of our regulatory structure will be necessary as we move forward.
Again, thank you for writing. The concerns of my constituents are of great importance to me, and I rely on you and other Pennsylvanians to inform me of your views. If you require assistance with a federal agency, please contact my state office in your area. The contact information can be found on my website at specter.senate.gov.
Sincerely,
Arlen Specter
Monday, September 29, 2008
"Slipery Slope to Socialism"
I never thought I'd say this, but I think (on this issue anyways) I may actually agree with a Republican from Texas. Now I know my fellow dead presidents who know me well are laughing at this comment, but my fellow Americans...Today Rep. Jeb Hensarling said it perfectly as Congress voted on the $700 billion dollar bailout plan, ultimately voting it down 228-205. In his address shortly before the vote, he pointed out this plan was "too much bailout and not enough workout." Mr. Hensarling, I could not agree with you more.
This bailout, as I mentioned in previous posts, made Treasury Secretary Henry Paulson the manager of the largest mortgage company in the world, influencing the world economy, and potentially keeping a few politicians happy for a short time. Let me remind you of something, however...a short time is not good enough.
As bank after bank looks for buyers and prays their faulty management decisions don't catch up with them, should we let the government put us in debt even further? Hensarling has it perfectly, informing us we will be "inheriting the mother of all debts." Is it worth complaining about the $500 you lost because of bad investment choices? Many may say so, but when your taxes go up to keep someone else who didn't do their homework from losing their shirt, let me ask you again what you think. As Hensarling said it, "If you lose your ability to fail, soon you will lose your ability to succeed."
We can't have it both ways folks. Either we let the government infringe upon our liberties...our "freedom to fail," or we take it like the strong willed people we are and pick ourselves back up again. The choice is ours.
"Ultimately The federal government will become the guarantor of last resort and that madame speaker does put us on the slippery slope to socialism." -Jeb Hensarling-9/29/2008
Let's pretend for a moment that this bailout passed. The government becomes the largest financial entity in the world...too large to fail...but who will bail it out from its already inherent flaws? We've gotten so entangled into financial matters that if the U.S. Treasury falters...we are up a creek with a very small paddle. Our money is used as a standard worldwide, but no longer is backed up by actual wealth...no gold...no silver...only the dreams of a people and enough prayer to make even the most devout sick to their stomachs. Why should we let a government who has led us astray financially for decades tread this path further?
It is said the rank and file of Congress has revolted this week. I must agree and thank God they have! I must commend those 228 men and women who had the foresight to realize this plan, regardless of the concern of the moment, was wrong for our country...wrong for the long term. Mr. Hensarling is to be praised for telling it like it is...the first step to socialism. The National Bank Plan is dead and let's hope there is no revival!
To watch Rep. Hensarling's comments in the House, please visit: http://www.youtube.com/watch?v=CdsuQAHGIjs
Respectfully,
Mr. Jackson
This bailout, as I mentioned in previous posts, made Treasury Secretary Henry Paulson the manager of the largest mortgage company in the world, influencing the world economy, and potentially keeping a few politicians happy for a short time. Let me remind you of something, however...a short time is not good enough.
As bank after bank looks for buyers and prays their faulty management decisions don't catch up with them, should we let the government put us in debt even further? Hensarling has it perfectly, informing us we will be "inheriting the mother of all debts." Is it worth complaining about the $500 you lost because of bad investment choices? Many may say so, but when your taxes go up to keep someone else who didn't do their homework from losing their shirt, let me ask you again what you think. As Hensarling said it, "If you lose your ability to fail, soon you will lose your ability to succeed."
We can't have it both ways folks. Either we let the government infringe upon our liberties...our "freedom to fail," or we take it like the strong willed people we are and pick ourselves back up again. The choice is ours.
"Ultimately The federal government will become the guarantor of last resort and that madame speaker does put us on the slippery slope to socialism." -Jeb Hensarling-9/29/2008
Let's pretend for a moment that this bailout passed. The government becomes the largest financial entity in the world...too large to fail...but who will bail it out from its already inherent flaws? We've gotten so entangled into financial matters that if the U.S. Treasury falters...we are up a creek with a very small paddle. Our money is used as a standard worldwide, but no longer is backed up by actual wealth...no gold...no silver...only the dreams of a people and enough prayer to make even the most devout sick to their stomachs. Why should we let a government who has led us astray financially for decades tread this path further?
It is said the rank and file of Congress has revolted this week. I must agree and thank God they have! I must commend those 228 men and women who had the foresight to realize this plan, regardless of the concern of the moment, was wrong for our country...wrong for the long term. Mr. Hensarling is to be praised for telling it like it is...the first step to socialism. The National Bank Plan is dead and let's hope there is no revival!
To watch Rep. Hensarling's comments in the House, please visit: http://www.youtube.com/watch?v=CdsuQAHGIjs
Respectfully,
Mr. Jackson
Sunday, September 28, 2008
New Bill released just a few moments ago
A new version of the bill has just been released. Please follow the link below to see it on CNN.com. Interesting how Mr. Paulson's 4-page bill has been turned into a slightly less powerful (for him) 110-page document.
http://i.cdn.turner.com/cnn/2008/images/09/28/ayo08c04_xml.pdf
http://i.cdn.turner.com/cnn/2008/images/09/28/ayo08c04_xml.pdf
The New National Bank?...Not learning from history!
I've often tended to wonder if politicians ever consider history when drafting legislation...I mean, after all if something was a horrible idea in let's say the 1830s, attention might be needed if considering the same or similar idea in 2008. After Secretary of the Treasury Henry Paulson and Chairman of the Federal Reserve Ben Bernanke released their plan to buy $700 billion in bad mortgages last week and pushed both houses of Congress to pass it before most could even read the text, I'm convinced historians in our elected officials we cannot make. Let's take a look at a few reasons Jackson hated the bank in the first place and how our U.S. Treasury aims at becoming the thing we despised.
1. The U.S. Treasury- The Next National Bank?
Henry Paulson's plan to bail out the financial sector might seem necessary to some before doing their homework, but it in effect places control over the world economy into the hands of one man...yes ladies and gentlemen...you guessed it...Henry Paulson. Paulson wishes to designate $700 billion dollars to buying faulty mortgages and mortgage backed securities...a tall order. Suddenly the U.S. government has streamlined the U.S. Bank into part of the executive branch if this works. The Bank of the U.S. was based largely with government intervention, but had several private sector directors on its board. This will have NONE! After including the government conservatorships of Fannie Mae and Freddie Mac as well as the credit facility American International Group (AIG), Paulson (and his replacement) will be in effect at the helm of the largest mortgage handler in the world. A different kind of bank, but just as government controlled (more so in fact) and just as dangerous to capitalism and economic freedom.
2. Concentrating the nation's finances into a single institution
Jackson wanted to kill the Bank of the United States largely because it placed the financial health of the nation in the hands of a Board of Directors. If the Federal Reserve isn't enough of a National Bank (which is the case...scarily enough), this will concentrate enough power into one man...make sure that sinks in...ONE MAN...to sink or swim the world economy. Please note the language of the bill as follows in regards to the review process:
"Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
Just in case you did not catch that...The Secretary of the Treasury's decisions in regards to this $700 billion blank check are not reviewable by ANY court or administrative agency. Ladies and gentlemen if that does not scare some of you slightly, I would be surprised. This section of the bill alone exempts this bill and Mr. Paulson from the very checks and balances placed in the Constitution to keep branches of government from becoming too powerful. And we want to allow one Cabinet Secretary to have this kind of power?
3. The Blank Check...is it really $700 billion?
I just can't seem to get away from the lack of Constitutionality in this bill. Without the checks and balances entitled to Congress and the Judiciary...or even Administrative Agencies within the Executive Branch for that matter, Paulson and Bernanke have $700 in shopping money to take the place of the private sector...the language in the bill, however, is vague enough to even remove the certainty in the dollar amount. See below:
"Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time"
Yes...you saw it..."$700,000,000,000 outstanding at any one time." This is a credit card folks. We as taxpayers give the Treasury $700 billion, not in a lump sum but a $700 limit credit account and allow him to not only spend it, but as these outstanding mortgages are paid off, Paulson or any future Secretary of the Treasury can then respend any money returned to the government. This is not a one time deal if looked at with a fine tooth comb...it is a long term federally funded program aimed at taking more control over the economy out of the private sector and weakening capitalism in America on at least a two year basis, with the possibility of even longer lasting effects. See below:
"Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act."
It increases the Statutory limit on public debt...that's the money the government expects your great grandchildren to pay back in taxes and cut programs. Why on earth if this money is to be paid back, are we willing to allow the permanent (or semi-permanent) cap on Federal debt to increase to over eleven trillion dollars?
"Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000."
Finally, Capitalism in America can be considered maimed for at least two years by this statement alone:
"Sec. 2-(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them; "
One must ask themselves after examining this, if they, as a people, are willing to lose their financial freedom for at least two years-if no rechartering of the program occurs (the National Bank was to be rechartered indefinitely before its expiration in the 1836 and bankruptcy five years later). As you can see, regardless to the risks of allowing the private sector to straighten itself out...our only option is to do just that. We cannot risk losing our freedoms as a people, be it financial or otherwise, for the sake of a government band aid on the banking system. History has subtle advice to give if we will listen and I'm rather positive the government is wearing earplugs. I'm not sure I want to trust a former banker (Paulson was the CEO of Goldman Sachs) to wield his largest account yet...ours.
Respectfully Yours,
-Mr. Jackson
To read the complete text of the Treasury proposed bill from the New York Times, please visit: http://www.nytimes.com/2008/09/21/business/21draftcnd.html
1. The U.S. Treasury- The Next National Bank?
Henry Paulson's plan to bail out the financial sector might seem necessary to some before doing their homework, but it in effect places control over the world economy into the hands of one man...yes ladies and gentlemen...you guessed it...Henry Paulson. Paulson wishes to designate $700 billion dollars to buying faulty mortgages and mortgage backed securities...a tall order. Suddenly the U.S. government has streamlined the U.S. Bank into part of the executive branch if this works. The Bank of the U.S. was based largely with government intervention, but had several private sector directors on its board. This will have NONE! After including the government conservatorships of Fannie Mae and Freddie Mac as well as the credit facility American International Group (AIG), Paulson (and his replacement) will be in effect at the helm of the largest mortgage handler in the world. A different kind of bank, but just as government controlled (more so in fact) and just as dangerous to capitalism and economic freedom.
2. Concentrating the nation's finances into a single institution
Jackson wanted to kill the Bank of the United States largely because it placed the financial health of the nation in the hands of a Board of Directors. If the Federal Reserve isn't enough of a National Bank (which is the case...scarily enough), this will concentrate enough power into one man...make sure that sinks in...ONE MAN...to sink or swim the world economy. Please note the language of the bill as follows in regards to the review process:
"Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
Just in case you did not catch that...The Secretary of the Treasury's decisions in regards to this $700 billion blank check are not reviewable by ANY court or administrative agency. Ladies and gentlemen if that does not scare some of you slightly, I would be surprised. This section of the bill alone exempts this bill and Mr. Paulson from the very checks and balances placed in the Constitution to keep branches of government from becoming too powerful. And we want to allow one Cabinet Secretary to have this kind of power?
3. The Blank Check...is it really $700 billion?
I just can't seem to get away from the lack of Constitutionality in this bill. Without the checks and balances entitled to Congress and the Judiciary...or even Administrative Agencies within the Executive Branch for that matter, Paulson and Bernanke have $700 in shopping money to take the place of the private sector...the language in the bill, however, is vague enough to even remove the certainty in the dollar amount. See below:
"Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time"
Yes...you saw it..."$700,000,000,000 outstanding at any one time." This is a credit card folks. We as taxpayers give the Treasury $700 billion, not in a lump sum but a $700 limit credit account and allow him to not only spend it, but as these outstanding mortgages are paid off, Paulson or any future Secretary of the Treasury can then respend any money returned to the government. This is not a one time deal if looked at with a fine tooth comb...it is a long term federally funded program aimed at taking more control over the economy out of the private sector and weakening capitalism in America on at least a two year basis, with the possibility of even longer lasting effects. See below:
"Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act."
It increases the Statutory limit on public debt...that's the money the government expects your great grandchildren to pay back in taxes and cut programs. Why on earth if this money is to be paid back, are we willing to allow the permanent (or semi-permanent) cap on Federal debt to increase to over eleven trillion dollars?
"Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000."
Finally, Capitalism in America can be considered maimed for at least two years by this statement alone:
"Sec. 2-(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them; "
One must ask themselves after examining this, if they, as a people, are willing to lose their financial freedom for at least two years-if no rechartering of the program occurs (the National Bank was to be rechartered indefinitely before its expiration in the 1836 and bankruptcy five years later). As you can see, regardless to the risks of allowing the private sector to straighten itself out...our only option is to do just that. We cannot risk losing our freedoms as a people, be it financial or otherwise, for the sake of a government band aid on the banking system. History has subtle advice to give if we will listen and I'm rather positive the government is wearing earplugs. I'm not sure I want to trust a former banker (Paulson was the CEO of Goldman Sachs) to wield his largest account yet...ours.
Respectfully Yours,
-Mr. Jackson
To read the complete text of the Treasury proposed bill from the New York Times, please visit: http://www.nytimes.com/2008/09/21/business/21draftcnd.html
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