Washington, D.C. -- Speaker Nancy Pelosi sent the following letter today to Treasury Secretary Henry Paulson urging him to send a clear signal to financial institutions about to receive $250 billion in capital infusions from the federal government that part of such capital should be used to relieve the credit crunch, as intended by Congress and the Administration.
Below is a text of the letter:
October 17, 2008
Secretary Henry Paulson
Department of the Treasury
1500 Pennsylvania Ave., NW
Washington, D.C. 20220
Dear Secretary Paulson:
I am writing to express concerns with Treasury's implementation, under the Emergency Economic Stabilization Act (EESA), of the Administration's Capital Purchase Program to purchase $250 billion in equity shares of nine major financial institutions. Press reports today suggest that financial institutions may hold all of this newly acquired capital in their books for extended periods of time, instead of using part of it to facilitate the flow of credit in our financial markets. Such an approach is counter to Congress' intent in EESA - restoring liquidity and stability to our nation's financial system and relieving the credit crunch that is hurting America's families and businesses.
I was encouraged by your public statement Tuesday announcing a series of actions intended to bring confidence to our financial markets. In that statement, you said: “The first step…is a plan to make capital available on attractive terms to a broad array of banks and thrifts, so they can provide credit to our economy.” However, the terms for the Capital Purchase Program failed to set the expectation for financial institutions that the federal government's massive capital infusions are intended, consistent with the intent of Congress and your public statements, to bolster the market's vital function of facilitating credit flows in our financial system.
While I recognize the need to strike a balance between encouraging participation in the Capital Purchase Program and respecting financial institutions' business decisions and capital needs, as you move forward with this program and others under EESA, I urge you to send a clear message to participating financial institutions about Congress' intent to relieve the credit crunch and get our economy moving again, which reflects the purpose of the legislation as originally proposed by the Administration.
Speaker of the House