For Immediate Release

October 3, 2008

Rep. Dicks' Statement in Support of the Emergency Economic Stabilization Bill

WASHINGTON, D.C. – Amid the sharp debate over the emergency economic stabilization bill being considered this week in Congress we have heard dire predictions from both extremes warning of a financial Armageddon if we don’t approve the bill or of squandering billions of taxpayer dollars if we do.  Beyond the intense rhetoric though, there is a growing body of evidence of serious impacts in every American community this month as the shrinking credit market has already affected consumers’ ability to buy cars, purchase inventory for their businesses, afford college loans and obtain home mortgages.  

    And it’s only going to get worse until Congress takes some action that will have a direct effect on the credit markets and on our confidence in the integrity of the U.S. banking system.

    Unfortunately in the search for an appropriate remedy, I fear that “perfect” may have become the enemy of “good.”   Warren Buffet put it bluntly in an interview when he was asked his opinion of the legislation we’re considering this week.  He said “I don't think it's perfect, but I don't know that I could draw one that's perfect. I would rather be approximately right than precisely wrong. And it would be precisely wrong to turn it down.”

    The Gallup poll conducted this week for USA-TODAY indicated that more than half of all Americans – 56 percent – say their financial situation has already been harmed by the financial meltdown of the two weeks, with 20 percent of our population saying they have been seriously harmed.  The longer term outlook is even more gloomy.

    In Washington State, the failure of one of our biggest banks -- Washington Mutual – last week has been a local reminder of the gravity of this crisis, as was the Wachovia failure a few days later.  Thousands of financial industry employees, including Washington Mutual employees in the Puget Sound area, will likely lose their jobs in this collapse, which has largely resulted from bad decisions made by executives that most Americans consider to be grossly overpaid.  It’s understandable for Americans to be angry, and to oppose any direct bailout of Wall Street. 

    But a lot of the people who are being hurt by this crisis today are not overpaid bankers or stock market executives.   They are working class families in our towns whose small businesses can’t get credit for inventory or payroll, and people down the street who are not able to obtain a car loan to replace a broken down automobile. 

    Economists remind us that auto sales are typically one of the first indicators of economic trouble.  Last month, car sales dropped by 27 percent from September 2007, the slowest pace of auto purchases since 1991.  The chief economist at J.D. Power and Associates, Bob Schnorbus, estimates that the credit crunch alone is responsible for more than 40,000 people being denied loans every month.  And as the crisis has deepened in recent weeks, even people with good jobs and credit are having difficulty arranging auto financing.

    The financial disruption is also affecting student loans – the primary way through which we as a nation open the doors of higher education to middle and lower class Americans.  The buyout of Wachovia has limited the access of nearly 1,000 colleges to $9.3 billion the bank has held for them in a short-term investment fund.  Many of these schools are struggling to meet their payrolls and other commitments, including scholarships, as we start another school year. 

    Over the longer term, if credit contracts further, so will the availability and affordability of student loans.  If it closes the doors of higher education to American kids, this short-term financial crisis has the potential to result in a long-term loss of competitiveness in the global marketplace.

    Small businesses are also feeling the burden.  As my colleagues know, small businesses account for roughly half of the nation’s total economic output and employ about 40 percent of the total U.S. workforce.    The chief economist for the Small Business Administration noted in an interview this week that these businesses are either being denied capital to grow and add jobs or they are simply afraid to seek capital because they are scared of the direction of the economy.  More than anything else, cutting off capital to small businesses will be an enormous drag on the economy and job creation over the long term.

    The credit squeeze is already having a downstream impact on our economy.  Consumer spending this quarter appears to be declining for the first time in 17 years.  Last month, unemployment reached a five year high -- 6.1 percent -- and new filings for unemployment hit the highest level since just after the Sept. 11th attacks.  Factory orders are down, and manufacturing activity has fallen to the lowest level in seven years.   

    Two major employers in the rural areas in my District – Port Townsend Paper and Grays Harbor Paper – are victims of this loss of confidence.   These firms, both critical to employment in their respective cities, have stated that they are already taking steps to protect themselves from a recession, holding off on investments and new hires as they prepare for a decline in sales. 

    So with mounting evidence that the impact of this crisis is being felt well beyond Wall Street, I am supporting this bill.  I am not doing so in order to boost the salaries of Wall Street executives, but so that janitors and nurses and secretaries and teachers and car dealers in my district can keep their jobs.  I am supporting this bill so that kids and their parents will still have the access to affordable loans to go to college – an advantage I had as a young man.  

    I am not suggesting this is a perfect solution.   But like Warren Buffet, I would rather be approximately right than precisely wrong. And I am absolutely convinced that we must take action very soon before the credit crisis deepens and before it affects the lives and livelihoods of even more of our friends and neighbors.  The time to act is now.  This is the only option before us.  We must pass it.

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