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The Financial Rescue Plan: Protecting Main Street from Wall Street

The New Direction Congress has worked from day one to improve the Administration's financial rescue plan to stabilize our economy to ensure American taxpayers are protected and the interests of Main Street are addressed. 

  • Strong independent oversight, transparency, and accountability requiring Congressional review after the first $350 billion is disbursed;
  • Limits on excessive compensation for CEOs and executives of participating financial institutions;
  • Requiring a plan that would ensure taxpayers are repaid in full--or even make a profit; and
  • Actions to prevent the foreclosures that are driving down home values across America.                                                                                                                                                  

INACTION MAKES A BAD SITUATION WORSE

  • David Leonhardt, New York Times, “Lesson From a Crisis: When Trust Vanishes, Worry”
    The crucial point is that a modern economy can't function when people can't easily get credit. It takes a while for this to become obvious, since most companies and households don't take out big new loans every day. But it will eventually become obvious, and painfully so. Already, a lack of car loans has caused vehicle sales to fall further.

    Could the current crisis lift -- could banks decide they really are missing out on profitable investing opportunities -- without a $700 billion government fund to relieve Wall Street of its scariest holdings? Sure. And is Congress right to fight for a workable program that's as inexpensive and as tough on Wall Street as possible? Absolutely.

    But in the end, this really isn't about Wall Street. It's about reducing the risk that something really bad happens. It's about limiting the damage from the past decade's financial excesses. Unfortunately, there is no way to accomplish that without also extending a helping hand to Wall Street. That is where our credit markets are, and we need them to start working again… [10/1/08]

  • Mike Jackson, CEO of AutoNation, Inc.: “The banks are looking for every excuse possible to say no and they are saying no to good customers. They are saying no to customers with good credit and it's having a significant impact on volume in the automobile industry…Life is going to be miserable on main street if this package is not approved…it has to be done or there will be massive pain on main street.” [Reuters, 9/30/08]
  • Michael Vogelzang, chief investment officer at Boston Advisors LLC: “It's almost inconceivable that there won't be an enormous slowdown in the U.S. markets and with that, increased joblessness, lower employment and higher bankruptcy rates, both personal and corporate.” [Bloomberg, 10/1/08]

  • Lindsey Piegza, a market analyst at FTN Financial: “Manufacturing could be on the brink of a collapse…There are no orders, no jobs and there is really no incentive for businesses to invest. The credit crisis is compounding the problem.” [Bloomberg, 10/1/08]
  • Bruce Bennett, a partner at Hennigan, Bennett & Dorman: “Retailers are facing consumers stressed by increasing prices for staples, including gasoline, and suppliers are nervous about extending credit to weaker retailers…On the one side, they have a consumer spending scenario that's not great and probably going to get worse before it gets better. And the credit crunch makes credit harder to come by, and comes with more challenging terms.” [San Francisco Chronicle, 10/1/08]
  • Reuters, “Companies' layoff plan jumped in September”
    Planned layoffs at U.S. companies rose 7.2 percent from a month earlier in September but jumped 33 percent compared with the same month a year ago, according to a report on Wednesday that cast further clouds over the state of the U.S. labor market…[10/1/08]
  • Nearly seven in ten small businesses reported they have been impacted by the credit crisis. [Bradenton Herald, 9/23/08]
  • Alec Young, equity strategist at Standard & Poor's: “If businesses don't have access to capital, smaller companies in particular, they might get wiped out…” [Bloomberg, 10/1/08]
  • Dennis Lockhart, president of the Federal Reserve Bank of Atlanta: “This contraction in availability and rise of the cost of credit have worsened . . . for corporate and business borrowers. We've heard anecdotes confirming this from contacts throughout the Southeast. In short, Main Street is being affected.” [Washington Post, 10/1/08]
  • Timothy Homan, Bloomberg News, “U.S. Factories Contracted at Faster Pace in September”
    …Companies are cutting back on investments and hiring as consumer spending wanes. A deteriorating labor market also is causing Americans to limit purchases to necessities such as food and fuel… [10/1/08]
  • Wachovia, one of the latest banks to be sold to another institution as a result of its troubles, announced it would stop “managing the Commonfund, a nonprofit that runs $41 billion worth of endowments and short-term funds for 1,900 universities, hospitals and other institutions across the country… The move froze the short-term fund, leaving many of the organizations without access to needed capital… [A spokesman for Commonfund] added that ‘higher education institutions remain very concerned that this rescue bill pass.'” [Washington Post, 10/1/08]
  • AT&T Inc. Chairman and CEO Randall Stephenson said Tuesday that his company was unable to sell any commercial paper last week for terms longer than overnight. Commercial paper, which helps lubricate the flow of business operations, is a short-term IOU available to corporations that banks usually know are good for the money… “It's loosened up a bit, but it's day-to-day right now. I mean literally it's day-to-day in terms of what our access to the capital markets looks like,' Stephenson said.”… [CNNMoney.com, 10/1/08]
  • Tom Herman, Wall Street Journal, “State, Local Tax Revenue Stagnates”
    As economic storm clouds have darkened, state- and local-government budget woes have gone from bad to worse.

    This picture emerges from interviews with municipal-finance officials and a recent report by a Washington-based research group. New surveys indicate tax-revenue growth generally has slowed to a crawl in most states, increasing pressure on officials to cut spending, dip into rainy-day reserves, intensify crackdowns on tax-law enforcement, possibly raise taxes -- or turn to various combinations of these options…[10/1/08]