Rep. John L. Mica on the Emergency Economic Stabilization Act 

The current problems in the financial market did not occur overnight.  We must carefully review what led to financial problems and insure that responsible actions are taken to stabilize investor confidence.

Unfortunately, Congress allowed banks to invest in speculative ventures when it repealed provisions of the Glass-Steagall Act in 1999.  I was one of a few Members of Congress to vote against that legislation.  For your further information regarding this vote: www.politico.com/news/stories/0908/13887.html

My vote reflected my past business experience and my strong belief that financial institutions should not stray from their primary role.  It is now abundantly clear why financial institutions should not be allowed to engage in speculative investments.

Lax lending practices in the 1990s encouraged irresponsible lending and borrowing.  The subprime crisis started then by allowing investment banks and lenders to make loans to unqualified borrowers.  Unregulated new securities products spread throughout financial markets.  Now, the taxpayer is asked bail out those reckless practices.

In 2002, because of my concern about loose lending standards by Fannie Mae, I cosponsored the Uniform Securities Disclosure Act.  This legislation extended Federal securities reporting requirements to mortgage-backed and housing securities.

By lowering Fannie Mae cash reserves from 10 percent to 2.5 percent, Clinton HUD Secretary Andrew Cuomo (1997-2001) allowed those agencies to take on huge subprime exposure.

The stewardship of Franklin Raines as Fannie Mae CEO, Clinton’s former OMB Director, significantly contributed to today’s problems.  Raines overstated earnings by $10.6 billion to receive massive bonuses.  Raines raked in nearly $100 million between 1998 and 2004.  Dramatic reform that I called for in that institution was ignored.

For video of Congressional hearings relating to Fannie Mae access: www.youtube.com/watch?v=_MGT_cSi7Rs

The race to create “no doc” and “no income” loans helped foster our financial crisis.  Many Republican proposed reforms were continually blocked by Congressional Democrats, as former President Bill Clinton recently confirmed. 

President Bush in 2003 proposed major lending reforms.  The initiative was so significant the New York Times stated “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.”  Senate Democrats blocked this effort.

In 2005, when Republicans passed Fannie Mae reforms in the Senate Banking Committee, Democrats uniformly voted no to increase Fannie Mae regulation and then killed the measure.  In the last two years, the Bush Administration sought reforms and the Congressional Democrat majority 17 times rejected every request.

Hardworking taxpayers were being asked to bail out bad decisions.  My votes against recent proposals were based on my strong belief I must represent Americans who have done the right thing, met their financial obligations and now have been asked to bail out those that have been irresponsible.  I have serious concerns about the collapse of our credit markets.  However, only a plan that responsibly respects the taxpayer will have my support.

During the aftermath of the 9-11 attack as Chairman of the House Aviation Subcommittee, the responsibility fell on me to assist in securing finances of our faltering aviation industry.  I am pleased to report that the tough workout plan I helped establish just completed its mission.  Rather than loans we established a guarantee plan with rigid guidelines.  This year all loans were repaid with taxpayers earning $323 million.  We can and we must do a better financial relief package.

I will work to insure that those who defrauded taxpayers and investors must be held accountable.  I remain committed to protect your hard earned tax dollars and at the same time work to help stabilize and expand our economy.