Press Release/Statement

Washington, D.C. – Congressman Duncan Hunter (R-CA) released the following statement regarding the financial “rescue” package under consideration by the U.S. Senate today:

“Bill Isaac, former head of the Federal Deposit Insurance Corporation (FDIC) during the turbulent Savings and Loan crisis decades ago, well instructed the nation with his practical plan to resolve the current credit crunch without spreading huge amounts of cash to institutions around the world. 

“Isaac reminds us that the banking network is a $15 trillion system, providing a huge forest for the Administration’s $700 billion of taxpayer money to get lost.  When asked how the credit crunch would be affected by moving the cash to institutions around the world in return for their toxic debt, Isaac replied that the effect would be negligible. 

“He then recommended practical moves that the U.S. can make now to get money moving again:

1) Banks are reluctant to move loans to fellow banks because of the fear that recipient banks might fail.      

Solution: The FDIC should guarantee the depositors, creditors and bond-holders of all U.S. banks that they will be fully protected in the event of bank failure.  The FDIC has the power to make this guarantee and should now invoke it without limit.

2) Credit is presently restricted because asset evaluation to date has been constricted by “mark-to-market” or fire sale pricing.  While the Securities and Exchange Commission has issued new rules, they are somewhat vague and should be clarified to reflect “mark-to-hold” value. This realistic evaluation of assets would free billions of dollars for new loans.

3) Net Worth Certificates could be issued to institutions that have been analyzed by the FDIC and found to be financially sound.  The certificates would be delivered in exchange for junior notes, which would not displace depositors or share holders.

“Isaac’s three-point plan solves the credit crunch without socializing the system.  It assigns the proper role to government in a free market… ensuring that our citizens have a secure place to put their money and banks themselves also have a secure place to put their money.

“The Isaac plan is practical and protective of depositors and taxpayers alike.  Moreover, he is widely credited with successfully guiding our banking system through turbulent times in the 1980's.  Let’s go with a quarterback who knows how to win.”