PLAN CALLED FOR PUTTING TAXPAYERS AT RISK FOR BAD FINANCIAL DECISIONS OF PRIVATE FIRMS

Washington, Sep 29, 2008 - “Our nation faces a growing financial crisis that deserves strong federal intervention,” said Rep. Cliff Stearns (R-Sixth). “I had hoped to support a proposal to shore up our nation’s financial markets while protecting hardworking taxpayers. However, I believe this legislation would take the wrong course in supporting the troubled financial institutions and would expose taxpayers to excessive risk.”

The House today defeated H.R. 3997, the Emergency Economic Stabilization Act. This bill would have established the Troubled Assets Relief Program (TARP) within the Treasury Department to purchase troubled assets from financial institutions. H.R. 3997 calls for providing $700 billion in federal funding to purchase these assets; $250 billion immediately, $100 billion if the President deems it necessary, and $350 billion after Congress has been given 15 days to object.

‘‘In putting forward $700 billion in public funds, I would like to see Congress pursue a more deliberative process in identifying the ills affecting our financial markets and the appropriate responses,’’ added Stearns. “We need to hold hearings and call in the best financial and economic experts in the nation -- we need to look at alternatives. One plan I recommended was providing low-interest loans to these institutions combined with taxpayers getting warrants so that they too could gain from any future upside. Congress should stay in session to fully explore the threat and all of our options.”

Stearns explained his opposition to H.R. 3997: “One troubling provision would allow foreign investors to benefit from the bail out. For instance, the Bank of China could sell a portfolio of toxic assets to a U.S.-headquartered investment bank and then that bank could sell those same assets to the Treasury Department. Then there is the magnitude of this intervention -- $700 billion, or $6,034 per American household -- that would change our free-market system. I am also concerned that these troubled financial institutions could withhold selling their assets at the discounted rate and wait for the Treasury Department to increase its bid.”

Concluded Stearns, “The government should not be deciding winners or losers. Investors who made mistakes in these markets should be held responsible and those who successfully navigated the market should be rewarded for their wisdom and prudence. If we believe in the free market system, we should allow it to work without adopting never-ending bailouts as a national strategy.”