SUGGESTS MAKING LOANS TO TROUBLED FINANCIAL INSTITUTIONS TO PROTECT TAXPAYERS

Washington, Sep 26, 2008 - Rep. Cliff Stearns (R-Sixth) has been in meetings and conferences on revising the bailout plan developed by Treasury Secretary Paulson. Stearns expressed opposition to the Paulson plan based upon its lack of protection for taxpayers, its giving sole authority to the Treasury Secretary to spend taxpayer funds and decide the disposition of toxic assets, and its failure to provide for congressional oversight and transparency for outside observers.

Stearns today presented the recommendations of Dr. Simon Johnson, professor at the Sloan School of Management at MIT and former Economic Counselor and Director of Research at the International Monetary Fund, to the House Republican Leadership. Explained Stearns, “Dr. Johnson suggests that we loan money to these troubled financial institutions with taxpayers getting interest in return along with warrants (a security giving the holder the right to purchase securities from the issuer at a specific price) much like Warren Buffet obtained when he invested in Goldman Sachs. Then these troubled institutions could sell off their poor-performing securities at deep discounts themselves instead of taxpayers purchasing them.”

“Any institutional lender would demand as much and more,” added Stearns. “In this way, the taxpayer could share in the upside success of the company they rescued, and at the same time the company would have cash reserves. I am hopeful we can use such a framework for a financial plan that will be acceptable to both Parties.”