Washington, DC - After a week in which the already weak and volatile U.S. economy took a dire turn for the worse and the Bush administration announced plans for an unprecedented bailout of financial firms, Congressman Maurice Hinchey today discussed the situation and highlighted a series of immediate and long-term legislative steps Congress should take to stabilize and improve the economy.  Hinchey is the second highest ranking House member on the influential Joint Economic Committee (JEC) and is also a member of the House Appropriations Subcommittee on Financial Services.

"The dramatic downturn in the economy did not happen overnight," Hinchey said. "What's happening on Wall Street and what people are seeing happen to their retirement accounts is the direct result of deliberate efforts by the Bush administration to deregulate the market in order to benefit corporate friends and campaign donors.  The absence of regulations allowed greed to take over the financial markets and has now resulted in the collapse of some of America's largest financial firms and banks.  Strong action is clearly needed to get our financial institutions back on track, but it's imperative that any bailout be accompanied with the restoration and enhancement of oversight and regulatory authority."

The congressman said that in order to get the economy back on track, the government must go beyond bailing out financial entities.  He said the U.S. must invest in itself and create jobs.  Hinchey highlighted legislation that he's working on with his Democratic colleagues and hopes to pass this week.  The economic stimulus bill that Hinchey and his colleagues are seeking would: provide stability to the financial markets; grow our economy and create jobs through investment in our nation’s infrastructure; extend unemployment benefits for the growing number of Americans looking for work; help ensure families don’t go hungry with Food Stamp assistance; ensure Americans do not lose health coverage as a result of state budget crises; provide additional foreclosure assistance to families; and provide home heating assistance at a time of record energy prices.

Last month, 84,000 Americans lost their jobs, including 61,000 manufacturing jobs.  More than 9.4 million Americans are currently unemployed.  That figure includes 1.8 million Americans who have been desperately seeking jobs for over 27 weeks in an economy that is further weakening.  In New York, the unemployment rate is 5.8 percent, which means that more than 110,000 more New Yorkers are unemployed now as compared to this time one year ago.  Those who have jobs are seeing their wages hold steady; failing to keep up with inflation let alone skyrocketing gas prices. 

Hinchey noted that he worked tirelessly to convince House leaders to pass a comprehensive energy bill last week that included an extension and expansion of tax credits for solar products.  The bill passed the House on September 16.  Specifically, the bill extends a 30 percent tax credit on solar products purchased by consumers and doubles the annual cap to $4,000.  The measure also extends the business solar energy tax credit at a level of 30 percent for eight years -- a long-term action that will spur investments and in turn make solar equipment more competitive and less costly. 

The congressman aggressively pushed for the solar tax incentives because they will have a significant impact on the ability of The Solar Energy Consortium (TSEC) in upstate New York to grow and expand.  Last year, Hinchey helped organize and create TSEC, which is a new industry-driven, non-profit organization that provides leadership, organization, resources, and support for the establishment of a major solar energy industry cluster in New York. 

Hinchey noted that with the economy worsening across the country, upstate New York is in a stronger position to fight back with the expansion of TSEC, which is being helped by the passage of the solar energy tax credits.  The congressman noted that TSEC signed two major solar manufacturing partners this year that are expected to create more than 800 new jobs in upstate New York.  Hinchey said that TSEC is negotiating to bring in several other major solar companies, which are likely to make a move and join TSEC because of the financial incentives in the solar tax credit part of the energy bill.   Those potential new partners would bring hundreds, if not thousands, of new jobs to upstate New York at a time when many other parts of the country are struggling economically.

"Not only does solar energy have the ability to bolster our national security and save the environment, it also has the very real potential to spark an economic revolution that will put the U.S. back on track for good," Hinchey said. "It may take a little while longer to convince Big Oil's friends in Washington, but there is no doubt that renewable energy will ultimately solve our energy crisis.  That is why it is so critical that New York is out in front and established as a leader in solar energy research and production.  Right now, we are positioning New York to be front and center of the 21st century's version of the Industrial Revolution -- only this time it will be centered on solar, wind, geothermal, and other forms of renewable energy."

With regard to the national economy, Hinchey discussed how the Bush administration and its allies in Congress spent the last eight years chipping away at important market regulations that had previously protected the U.S. economy from failing and how the absence of those regulations has now led to the worst economic collapse since possibly the Great Depression.  As a member of the JEC and House Appropriations Subcommittee on Financial Services, Hinchey has repeatedly raised concerns about specific aspects of the economy with key members of the Bush administration only to be told such concerns were irrelevant and overblown.

"The U.S. is on the verge of a depression," Hinchey said. "The economy is in the worst shape it has been in since World War II and possibly the 1930's.  As we address this situation, we must remember that it's critical to have investments in our country that create jobs rather than to simply have bailouts that dump more debt onto the shoulders of taxpayers."

The congressman said the Bush administration has effectively destroyed the economy through its use of weapons of mass economic destruction, which include: spending more than $10 billion each month in Iraq instead of for domestic investments that create jobs; tax cuts for the wealthiest Americans and corporations; deregulating financial institutions; and enabling oil speculators to run wild and artificially inflate the price of oil.

Hinchey focused some of his attention on the abuse of the financial system under the Bush administration by hedge funds such as Bear Stearns.  Right now, hedge funds do not have to register with the SEC, yet these funds oversee more than a trillion dollars in assets -- roughly ten times the amount overseen a decade ago.  On average, hedge funds account for 20-30 percent of the trading volume in U.S. stocks.  In June 2007, Bear Stearns announced that two of its hedge funds that were significantly invested in the sub-prime mortgages were in trouble.  Hinchey said that regulation of hedge funds could have helped prevent such short-sighted, greedy investments in sub-prime mortgages. 

The congressman pointed to the Gramm-Leach-Bliley Act of 1999, which repealed the Glass-Steagall Act of 1933, as the source of much of the deregulation of the financial markets. Glass Steagall was put in place in order to keep investment banks separate from commercial banks.  Hinchey was one of just 57 members of Congress to vote against the Gramm-Leach-Bliley Act.  The bill essentially enabled both banks and investment firms to offer financial services.  The bill allowed banks to not only sell mortgages, but also to take those mortgages and put them in risky investment schemes.  Hinchey agrees with many economists who have now concluded that the current sub-prime mortgage crisis came about as a result of this legislation. 

"I think the American people now have a greater appreciation for why my Democratic colleagues and I worked so hard several years ago to block President Bush's plan to privatize Social Security," Hinchey said. "If the president's privatized plan were in effect today, people would have fallen straight through the safety net of Social Security and landed flat on their back with nowhere to turn.  It's imperative that Social Security remain a government-sponsored program that acts as a financial safety net for older and disabled Americans -- not a private, get rich fast investment scheme." 

In addition to the cost of bailing out financial institutions, Hinchey pointed out that the U.S. is still dealing with the enormous debt associated with President Bush's tax cuts for millionaires and the major corporations.  Through 2008, the government will have borrowed $1.6 trillion to pay for the Bush tax cuts, which disproportionately benefit the wealthiest Americans who are not in dire need of tax relief.  In 2007, one third of the total benefits of the tax cuts went to the top one percent of households.  Approximately 20 percent of total benefits went to less than a third of that one percent of households earning $1 million or more per year. These households received an average tax cut 103 times larger than that of middle-income households.  If the Bush tax cuts were made permanent, it would cost the federal government an additional $3.4 trillion over the next decade, if the funds were borrowed, which is likely.  It would cost the government three times more than the amount necessary to close the proposed Social Security funding gap through 2075.

"If the United States were a corporation, it would be bankrupt right now," Hinchey said. "Instead, the government is bailing out financial institutions that were greedy and overextended themselves.  It may be an unfortunate necessity, but it's clear that the U.S. is overextending itself when it comes to how much debt it has accrued.  From tax cuts for everyone who doesn't need one to the deregulation of the financial market, the Bush presidency has virtually destroyed our economy.  President Bush said he doesn't want people to point blame because he knows full well that he's the culprit."

Hinchey is one of only 10 House members on the Joint Economic Committee (JEC), which is a House-Senate panel that holds hearings, performs research, and advises other Members of Congress on the economy.  The congressman has pressed U.S. Federal Reserve Chairman Ben Bernanke at JEC hearings on the state of the economy, only to have the chairman refute those concerns. 

When Chairman Bernanke previously came before the JEC, Hinchey told him that the problems with the economy reminded him of the stagflation that gripped the country in the 1970's -- the combination of stagnation and inflation used to describe a period of out-of control price inflation combined with slow-to-no output of growth, rising unemployment and eventually recession.  However, Chairman Bernanke disagreed and said he anticipated that economic performance would be much better than the 1970's.  Hinchey said today that the collapse of major investment firms and banks, a record trade deficit, an extremely week dollar, and recent unemployment figures highlight the county's current economic crisis and reinforce the fact that the country is mirroring the economic circumstances of the 1970's despite what Bernanke's statements to the contrary.   Hinchey will get another chance to question Bernanke when he appears before the JEC later this week.

In March 2008, Hinchey directly challenged U.S. Treasury Secretary Henry Paulson to defend the administration's use of weapons of mass economic destruction against working and middle class Americans.  During a hearing before the House Appropriations Subcommittee on Financial Services, Hinchey blasted Paulson and the entire Bush administration for advocating and enacting tax cuts targeted for the wealthiest Americans, subsidizing the oil industry at a time when the industry is experiencing record profits, and for not doing enough to help millions of Americans from losing their home or seeing the value of their home plummet.  All Paulson would say in response to Hinchey and the rest of the subcommittee was that the country is on the right track.  This past Friday, Paulson announced the administration's intention to bailout the financial services sector.

Hinchey also took time today to discuss the Commodity Markets Transparency and Accountability Act, which passed the House last week.  That bill that would begin the job of closing down questionable speculative commodity trading practices, with a particular focus on crude oil, by directing the Commodities Future Trade Commission (CFTC) to ensure that the standards and procedures used by foreign commodity markets where oil and gas futures are traded, meet the standards of U.S. commodity markets.  

Under current law, U.S. traders can execute transactions for the same crude oil contracts on the New York Mercantile Exchange and London's InterContinental Exchange, but U.S. regulators only have jurisdiction over the New York exchange. This allows traders to go between the two markets, which leaves only half of a transaction being regulated. Foreign boards of trade that have access to U.S. energy traders are not subjected to the same speculative position limits as traders on domestic exchanges. This break in regulation has been referred to as the "London Loophole" which this bill will help to close.

This bill directs the CFTC to ensure that foreign markets, including London's InterContinental Exchange, apply similar requirements for daily publication and openness of trading information that currently apply to trading energy commodities delivered into the United States. The CTFC may now get a full picture of the swaps markets and subject dealers to strict reporting and recordkeeping requirements. Position reporting for over-the-counter trading will be compulsory, similar to on-exchange contracts. Any foreign exchange that is unable or unwilling to provide this information to the CTFC or accept the safeguards to protect U.S. energy commodities, within 18 months, will be forced to remove their computer terminals from U.S. soil, crippling the exchange's access to American customers.