Congress last week passed a bill with broad bipartisan support to stabilize our credit markets and preserve the way we do business.
- Provides Tax Relief for American Families, Businesses, and Renewable Energy: Includes the extension of expiring tax provisions that will have a real impact on families and small businesses, including relief from the Alternative Minimum Tax (AMT) that will prevent numerous American families from being hit with a tax increase.
- Eases the Credit Crisis: Provides up to $700 billion in three phases for the Treasury to purchase distressed assets – mostly mortgage backed securities.
- Strengthens the FDIC: In order to protect bank customers, Congress will allow the FDIC to insure deposits up to $250,000 for one year (up from the current $100,000).
You might be wondering if this economic package was necessary. What began as a problem with subprime mortgages quickly spread throughout the entire economy. Credit, the lifeblood of our economy, began to dry up, threatening to undermine the livelihoods of countless Americans. The Secretary of the Treasury and the Chairman of the Federal Reserve warned of dire and unprecedented consequences without urgent action.
These consequences affect real people. I heard from a small business owner who saw the interest rate on his building quadruple in one week. I am aware of communities with good credit that could not sell the bonds needed to support jobs. Because of these kinds of things, inaction was not an option. We worked to find a bipartisan consensus to stabilize the economy, protect taxpayers, and prevent massive unemployment.
The following information should help explain why the U.S. Senate took the action it did. We insisted the legislation protect taxpayers, contain strong oversight provisions and that it limit compensation for Wall Street gamblers who got us into this mess.
Was this plan necessary? Why did the Senate pass this legislation?
Yes, the plan was necessary because of a looming economic crisis. A Heritage Foundation report put it like this: "Households across the nation are beginning to see the leading edge of the storm that is already roiling credit markets here and around the world. The sudden and dramatic drop in the value of retirement accounts after the House's initial refusal to agree to the package was just one symptom of what is to come. Even more important, however, is the continued deterioration of the credit system. Without action, ordinary Americans will face the effects of a dramatic economic contraction, including sharp increases in unemployment."
Why is the plan so expensive?
Most economists agree that the initial cost of this bill will be recouped, and there is a significant chance the rescue bill could actually make money for American taxpayers.
Does this bill limit the pay of corporate CEO's?
Yes. No "Golden Parachutes" for greedy CEO's. For companies taken over by the government, any existing employment contracts for top executives can be terminated. For large institutions participating in the Treasury auctions, there will be penalties designed to limit executive pay – including excise taxes. We made sure greedy corporate CEO's weren't getting taxpayer money after what they've done to the American economy.
Does this bill adequately protect taxpayers?
Yes. The government can insist on partial ownership in participating companies, so that taxpayers can benefit from that company's revival. The President must propose legislation to recoup any lost taxpayer funds after 5 years. It requires the Treasury Secretary to establish an insurance program funded by industry – not taxpayers.
Homeowner assistance programs are available, but only when in the taxpayers' best interest. Taxpayers make the investment so only taxpayers should receive any proceeds. All money will go to debt reduction, and there are no funds for radical liberal organizations like ACORN, [for whom Barack Obama worked in his early days as a "community organizer]."
Does this bill contain enough oversight provisions to ensure it is working properly?
Yes, the bill contains strong oversight measures. In addition to an independent oversight board, congressional oversight, and constant GAO review, there will be a special, independent inspector general charged with preventing abuse in the program. Congress can block half the funds ($350 billion), if it believes the program isn't working.
I keep my money at a community bank. Does this bill help local banks, or just Wall Street?
We included a provision to help community and regional banks. It allows them to treat losses in preferred stock in Fannie Mae and Freddie Mac as ordinary losses for tax purposes.
Does this bill cut taxes?
YES. We insisted this legislation extend tax relief in a number of areas, such as:
Does this bill fund liberal Democrat causes? After all, they control Congress.
- Relief from the Alternative Minimum Tax (AMT) - Prevents numerous American families from being subject to the onerous alternative minimum tax, saving them an average of $2,000.
- Education Tax Incentives – Expands the student tuition deduction and tax incentives for teachers who pay for school supplies out of their own pocket.
- Promote Kentucky Coal for Energy Independence – Includes tax incentives to encourage the development and deployment of coal to liquids technology and to build refineries to process coal to liquids.
- Promotes conservation and clean energy – It includes tax incentives, like those I offered in the Gas Price Reduction Act, for plug-in hybrid cars. It extends tax incentives for entities that generate electricity from wind, solar and biomass. It includes incentives to purchase energy efficient appliances for homes.
NO. At my insistence, this bill does not include any money for radical groups like ACORN. It does not include any automatic tax increases, bankruptcy "Cramdown," or provisions requiring union membership on boards.