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Congressman Tom Petri voted with the majority today as, by a vote of 205-228, the House rejected the $700 billion financial markets bill. He issued the following statement:
We were unnecessarily rushed into voting for a half-baked plan, and now that it has been rejected, we should have the opportunity to consider problems in the financial markets more carefully.
The immediate problem is a loss of capital in the banking system. The American economy remains highly liquid, but banks find it increasingly difficult to lend as their capital is marked down under current SEC rules.
The proposal placed before Congress would have used $700 billion of taxpayer money to buy illiquid assets, but would have done little to address the question of bank capital.
Banks need capital in order to continue to make loans. Government regulators currently have tools that would address this problem. The Federal Deposit Insurance Corporation has the authority to stand behind all obligations of all banks - thus guaranteeing that each depositor will be paid.
A number of other countries, including Japan, Sweden and Chile, have encountered similar problems, and we should take the time to learn from them. We should also learn from the Savings and Loan crisis of the 1980s, which was successfully handled through a more deliberate and considered approach than we took today.
We need to reach out for the best informed judgment there is and not be rushed into a quickly thrown together plan.
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