Madam Speaker, we’re here today with the unenviable task of considering H.R. 3997, the Emergency Economic Stabilization Act.  During this difficult economic crisis, I am proud of this Congress for coming together at a critical moment to reach a bipartisan compromise to rescue our financial markets and, indeed, our entire economy.  However, no one is celebrating today about the tough decisions that had to be made. 

Over the last week hundreds of Rhode Islanders have contacted my office expressing serious concerns about the proposal and a firm belief that the taxpayers’ needs must be a priority.  I share their anger and frustration that for far too long, many on Wall Street were given carte blanche to make increasingly risky investments -- investments which, in some cases, the firms themselves didn’t even fully understand.  There is plenty of blame to go around, from Wall Street to government regulators to Congress.  Unfortunately, the actions of these firms do not take place in a bubble: they are inextricably linked to the every day transactions of every day American families.  Our economy is in dire shape and drastic action is needed.  If we do not act now, a domino effect could easily trigger major job losses and a significant period of economic downturn with negative consequences not just on Wall Street, but on every street in our country.

This crisis originated with faulty lending practices and the creation of subprime mortgages made to people who often could not afford to pay them back.  These subprime mortgages were then pooled together into packages that were transformed into highly-rated securities purchased around the world.  The eventual collapse of the subprime mortgage market then infected the prime mortgage market, which in turn poisoned the entire financial system.  In response, Treasury Secretary Hank Paulson proposed a plan under which the federal government would buy – at a deep discount –so-called “toxic” assets, which currently no one is willing to buy.  These assets include home mortgages which have been bundled into such complex packages that there is great uncertainty about their underlying value.  Secretary Paulson considers these purchases to be investments by the federal government, which could return a substantial proportion of their value to American taxpayers once the market has settled down. 

I recognize the urgency of the situation and understand that Secretary Paulson and all responsible government leaders are trying to ward off even worse outcomes.  This year, we have seen the fall of some of the largest investment banks in the world -- Bear Stearns, Lehman Brothers, and Merrill Lynch -- and the last two standing --Morgan Stanley and Goldman Sachs-- last week chose to be switched over to commercial banks, seeking greater protection at the price of greater regulation.  Meanwhile, the federal government loaned $85 billion to American Insurance Group, Inc. (AIG), the 18th largest company in the world, when it was unable to access credit for its daily operations.  On September 26th, we also saw the biggest bank failure of our country’s history when Washington Mutual collapsed.  Just this morning, Wachovia was bought out by another bank.  Even Bank of America recently decided it would no longer extend new lines of credit to McDonald's franchisees, which have been turning a profit for years and run a clean balance sheet.

When the credit market seizes up at the highest levels, it is not just a problem for Wall Street. It quickly impacts all of us, making it harder for average families to secure car loans, home loans or mortgage refinancing.  It means that small business owners can’t access the quick capital they need to make payroll or invest in their companies.  It impacts the student loan market, where more than 50 firms have abandoned or cut back their student loan programs.  And it threatens the pensions and savings that our retirees are counting on.  While no one wanted to be in this position, I do believe that passing this rescue plan is essential for Rhode Island families.

However, I have been vocal about my own concerns with the Administration’s original proposal, and I have outlined priorities that must be included in any bill I would be able to support.  I am pleased that the legislation before us today is a vast improvement over the initial plan Secretary Paulson presented ten days ago, and it contains significant protections for families across the country who had nothing to do with creating this crisis but are feeling its effects in many ways.  First, this bill protects taxpayers by requiring strong Congressional oversight over expenditures under the plan; giving taxpayers a share of profits in participating companies; and requiring a President to ensure taxpayers are repaid in full, with Wall Street making up any difference.  Furthermore, we have ensured that CEOs do not benefit from risky behavior by severely limiting executive compensation and “golden parachute” packages for any firms that take advantage of the government assistance.  Finally, the bill requires the government to implement a plan to reduce foreclosures as it buys troubled financial assets like mortgage backed securities.

At its core, H.R. 3997 authorizes $700 billion for the Treasury Department to buy distressed mortgage-backed securities, expiring on December 31, 2009.  Of that total, $250 billion would be for immediate release, with another $100 billion upon a presidential certification of need. The final $350 billion could be made available if the president transmits a written report to Congress requesting the funds, and Congress would have the right to disapprove this last installment. Spending authority would be overseen by a new Financial Stability Oversight Board, which will review the Treasury Department’s actions and its effects on the financial markets and the housing market, and by a special inspector general office to conduct and supervise audits and investigations of the actions taken under this bill.  Treasury must also report to Congress 60 days after it begins using this authority, and every 30 days thereafter. 

Furthermore, H.R. 3997 establishes a joint congressional oversight panel to review the current state of the financial markets and the regulatory system. This panel will submit a report on the current regulatory system and its effectiveness at overseeing the participants in the financial system and protecting consumers.  This provision is critical, since going forward, we must ensure that our financial sector is no longer allowed to put ordinary Americans in danger by pursuing high-risk behavior with little to no oversight.  We must investigate companies that took advantage of lenient regulation or possibly acted outside of federal regulations entirely.  And we must learn from our mistakes, establishing new regulations and ensuring the laws already on the books are enforced. 

Madam Speaker, let me assure my colleagues and my constituents that if I thought the bill before us today was nothing more than a hand-out to high-flying Wall Street investors who suddenly found themselves in trouble and decided they didn’t like losing money, I would be the first in line to cast a no vote.  Unfortunately, this problem is much bigger and much less selective about who it might hurt.  We need to take action, and we need to do it now.  This legislation represents a good, bipartisan solution to a situation none of us wanted to find ourselves in.  I want to thank Speaker Pelosi, Chairman Frank and many other colleagues for their tireless work on this bill.  I encourage all my colleagues to vote for this bill.

Thank you, Madam Speaker.