Johnny Isakson, United States Senator

Johnny Isakson's Position Statement on Economic Stabilization Legislation

On October 3, 2008, the president signed into law a bipartisan financial package designed to stabilize credit and restore confidence in U.S. financial markets. I believe this legislation is critical to allowing us to unclog the financial markets, free up credit to the average American and over time restore the American economy to what it has been and always will be – the best entrepreneurial capitalistic system in the world.

Our country’s recent economic hardship is the most important issue we have faced in a half-century. And when our country is struggling, doing nothing is unacceptable. I believe this legislation is in the best interests of the American people, their savings and their future. While it will not be a quick fix, the law does address the core problem of mortgage-backed securities. As it is implemented, it will begin to stabilize the market and free up capital for the credit markets.

The legislation authorizes the Treasury Secretary to immediately use up to $250 billion to purchase distressed assets from institutional investors. If needed, the Secretary may then access an additional $100 billion to purchase these distressed assets but only with presidential approval. An additional $350 billion may be accessed if the president first wins approval from Congress.

While the legislation does create an increase in debt in the short run, it affords the opportunity over time for the money to be returned to the taxpayer at a profit. Because the market for mortgage-backed securities has frozen, the value of these assets held by community banks, credit unions and insurance companies has collapsed. By establishing a market for these securities, liquidity will return to the market and these securities will regain value once more. While these securities will be discounted at purchase, they should grow in value when held to maturity. Any profit that the government makes from these securities will be used solely to decrease the national debt.

The legislation includes a number of provisions to ensure oversight by Congress and accountability to the taxpayers, including prohibitions on executive compensation to ensure bad actors are not rewarded. Specifically, companies that receive more than $300 million from this plan will have limits placed on their top five executives. These limits include a ban from receiving a “golden parachute” as well as limits in the tax deductions executives may take on compensation over $500,000.

The legislation also continues the suspension of “mark-to-market” accounting rules that is already in place today. The bill does not allow bankruptcy judges to restructure the terms of existing mortgage loans. Additionally, it does not provide funds for affordable housing community organizers such as ACORN.

The legislation also included the full text of H.R. 6049 as passed by the Senate by a vote of 93 to 2 on September 23, 2008. I supported this bill when it originally passed the Senate and strongly support its inclusion in this package. This language will prevent tax increases on students, teachers and families, including 24 million taxpayers who will be protected from having to pay an average of $2,000 of Alternative Minimum Tax on top of what they already owe. These are all extensions of tax credits, deductions or exemptions from current tax laws.

The tax extenders package also will extend tax incentives for renewable energy and strengthens America’s effort to build a more stable and sustainable energy supply. It provides clean energy tax incentives totaling approximately $17 billion. It also continues efforts to curtail tax shelters and close loopholes. This bill provides extensions of expiring family and business tax cuts and other policies – including badly needed tax relief for victims of natural disasters, an expansion of the child tax credit, and long-awaited legislation providing parity for mental health treatment in the U.S. health care system.

I believe this bill does precisely the one thing that we can do to help unlock the credit markets and help the average working Georgian, the average Georgia retiree and the average Georgia child who is looking to the future to benefit from what right now is a very difficult situation. This financial crisis has cost Americans their jobs and put small businesses at risk. It has ransacked individual retirement accounts and frozen the credit available for businesses, home purchases and car purchases. The people affected by the legislation sent us to Washington to make these kinds of tough decisions. I am glad the majority of the members of Congress did not simply turn a blind eye and hope for the best.