WASHINGTON, D.C. - Today, U.S. Senator Jim Inhofe (R-Okla.) introduced legislation to amend Section 115 of the Emergency Economic Stabilization Act (EESA) to require an affirmative vote on the part of Congress to approve Treasury's plan for the remaining $350 billion and require a freeze on any remaining funds of the first $350 billion, stating, "It is imperative that we not allow that amount of money to be added to a deficit approaching $1 trillion this year without any input from the legislative branch."
In a speech on the Senate Floor, Senator Inhofe went on to say, "Congress completely abdicated its responsibility by signing a truly blank check over to the Treasury Secretary. However, the lame duck session of Congress offers us a tremendous opportunity to change course. We should take it."
"Though there are still significant challenges in financial markets, it appears that the threat of financial crisis spinning so out of control that we face another Great Depression-which was the original justification for the grant of such sweeping authority-has subsided. Has the need to allow one person to control hundreds of billions of taxpayer dollars and spend as he sees fit subsided as well? I've never seen in my entire career of public service anything like the spectacle we are now witnessing. Is it unreasonable to ask whether or not the additional $350 billion should not be added to a deficit approaching $1 trillion? Congress should have a debate."
The full text of Senator Inhofe's speech as prepared for delivery is below:
Given the recent news about Secretary Paulson's execution of the TARP program, I firmly believe action is required by Congress. This morning I introduced S.3683, legislation that will freeze any remaining funds from the first installment of the $700 billion and require Secretary Paulson's plan for the remaining $350 billion in authorized TARP funds to be ratified by an affirmative vote in the U.S. Congress.
When Secretary Paulson fist came to the Senate and explained his plan in a conference call on September 19th, I asked a few questions about his proposal. How are you going to determine which assets to buy? At what price? From which institutions? In what manner? Secretary Paulson didn't have any answers to those questions at the time, and they were never satisfactorily answered throughout the entire debate, if one can call it that, of the bailout bill.
In my statement opposing the Paulson Plan last month, I laid out three primary reasons why I voted ‘no'. The first is that I wasn't convinced that the asset purchase program was the right way to do this. The second is that it would lead to increased lobbying for handouts and bailouts by any industry facing financial trouble. And third, that we were handing over $700 billion to essentially one man to spend as he sees fit, something that has never happened before in American history. It's not the way our government is supposed to work.
I stated at the time that my vote was against the Paulson Plan - not against taking extraordinary action to provide necessary confidence to financial markets. As I said, "The Paulson plan would have Washington take $700 billion worth of toxic Wall Street assets from financial firms' balance sheets and put them on the balance sheet of the federal government.... I'm not confident in its success."
The critics were right. On October 14th, in a significant shift, Treasury outlined a plan to directly purchase equity stakes in major financial institutions. The Wall Street Journal noted "critics...say Treasury should have formulated a comprehensive plan earlier in the crisis." This past week, Secretary Paulson announced that he has completed a remarkable about -face, as summarized by November 13th Investor's Business Daily front page headline, which read, "In Major Reversal, Treasury Won't Buy Bad Mortgage Debt." This is a complete reversal. Why did Paulson reverse course? Last Thursday's Los Angeles Times provides the answer: "Treasury Secretary Henry M. Paulson's decision to abandon plans to buy troubled bank assets shows that he has come to two conclusions about what was once the chief focus of the government's $700-billion bailout: The first is that it wouldn't work."
I know many of you have serious concerns about how Secretary Paulson has executed the financial rescue program and I share them with you. Congress completely abdicated its responsibility by signing a truly blank check over to the Treasury Secretary. However, the lame duck session of Congress offers us a tremendous opportunity to change course. We should take it.
During the lame duck session, if Secretary Paulson submits his plan to Congress in order to access the remaining $350 billion while we are in session, a doubtful prospect, we could immediately introduce the disapproval resolution pursuant to Section 115 of the Emergency Economic Stabilization Act and push for its enactment. This is unlikely to happen, however. Furthermore, the experts on the matter tell me that the law is ambiguous as to whether Congress would be forced to return to Washington for consideration of a disapproval resolution if Treasury submitted his plan while Congress is adjourned and avoid debate. I have therefore introduced S.3683, legislation to do two things: First, it will amend Section 115 of the EESA to require an affirmative vote on the part of Congress to approve Treasury's plan for the remaining $350 billion, instead of the current statutory process which gives the Secretary far too much latitude. Second, it will require a freeze on any remaining funds of the first $350 billion. It is imperative that we not allow that amount of money to be added to a deficit approaching $1 trillion this year without any input from the legislative branch.
Secretary Paulson stated in a CNBC interview at 2:00pm on Friday, November 14th "the financial markets have been stabilized." If that is the case, it is Congress's duty to have a say in what happens with the remaining authorized amount of $350 billion. Paulson came to us in September and said that if he didn't get $700 billion there was no telling how bad things could get. It was a panic scenario. Now that there is no longer an all-out panic in the financial world, it seems to me that the original rationale for the blank check no longer applies.
It is clear that it was a mistake to sign a blank check to one man for such a tremendous amount of money. Though there are still significant challenges in financial markets, it appears that the threat of financial crisis spinning so out of control that we face another Great Depression-which was the original justification for the grant of such sweeping authority-has subsided. Has the need to allow one person to control hundreds of billions of taxpayer dollars and spend as he sees fit subsided as well? I've never seen in my entire career of public service anything like the spectacle we are now witnessing. Is it unreasonable to ask whether or not the additional $350 billion should not be added to a deficit approaching $1 trillion? Congress should have a debate.
I fully understand the severity of the ongoing financial crisis that erupted this past year. I am also fully aware of the need to take extraordinary action in such situations. From the rescue of Bear Stearns in March to the announcement of the bank equity purchase program in mid-October, the U.S. government has indeed undertaken an extraordinary effort to calm financial markets. In addition, it is likely that the country is about to endure a recession that, though the severity of it is unknown at this point, will likely be more severe than the last two. However, it is clear to me and many of my colleagues that Treasury accessing the remaining $350 billion will do little to avert or ameliorate what is to come.
It is time for the U.S. government to cease announcements of new programs or plans designed to inject confidence in markets. Moreover, I think confidence would be better instilled by halting the capricious manner in which the rescue program has been executed. I understand the need to move in accordance with changing conditions. I simply think the time has come to stop.
One of the major causes of this crisis was the accumulation of far too much debt on the part of some financial institutions. The U.S. government can make the same mistake. We are now anticipating an astounding $1 trillion deficit for this year alone. This truly massive debt accumulation poses a serious inflationary threat to future stability and economic growth. It too needs to stop.
By far the greatest threat to economic growth and prosperity in the years to come is the extent to which the government has recently entangled itself in the marketplace. The government must immediately begin the process of extricating itself from the financial sector of our economy. Many very smart people made some very poor decisions that will continue to cause economic hardship for some time. It is my firm belief, however, that more government attempts to prevent that hardship will not only be futile, but will also move this country further from those first principles which have made us the great nation we are today.
In the meantime we are doing the typical bureaucratic Washington things, such as arguing over whether the Senate banking or Senate Finance Committee has jurisdiction and discussing confirmation of an inspector general who we will need to debate and confirm. I would note that Senator Grassley is calling for investigations right now, so there are clearly others who are concerned about transparency and accountability while we are thinking about appointments and confirmation processes. I would also note that the current inspector general of the US Treasury, Eric Thorson, was quoted in a Washington Post article saying this program is "a mess" and went on to say ""I don't think anyone understands right now how we're going to do proper oversight of this thing." There isn't time to do these things the way we usually do them. We have got to stop the bleeding now and the way to do that is S.3683.