Friday, November 21, 2008

Two frustrating hearings

This was an interesting and frustrating week. The week began with some hope of getting explanations from Secretary Paulson and answers from the Big 3 auto executives. Neither promise was fulfilled completely.

Treasury Secretary Paulson, Federal Reserve Chairman Bernanke and FDIC Chairwoman Sheila Bair testified Tuesday morning in front of our Committee. Members, including me, were interested in hearing from this trio why, after expending half of the money allocated, more progress had not been made in loosening the credit markets.

We were also curious as to why some financial institutions are under the impression it is acceptable to use government-provided funds to pay dividends, continue excessive executive compensation and for acquiring other banks.

None of us expected that the Troubled Asset Relief Program would be a magic pill. We did not expect lenders to immediately start making loans again. However, we also did not expect and certainly did not intend for banks to be hoarding their government assistance or using it to further expansion schemes.

The concern we expressed, particularly to Secretary Paulson, was that it didn't seem unreasonable that financial institutions demonstrate SOME degree of responsibility to the American taxpayer whose investment in them was predicated on relieving the clogged credit markets.

I think that what we learned from the hearing is that we have to go back to work. If the financial institutions continue to behave irresponsibly, then we're going to redraft the Act to require them to act responsibly.

Additionally, we are frustrated that not near enough has been done to help keep homeowners in their homes. I think we made it clear that we believed that the FDIC Chairwoman, Shelia Bair, is on the right track with her proposed program to encourage refinancing of troubled mortgages by providing government guarantees. If we do not see movement toward her plan by the Treasury Secretary soon, I believe we will need to require it.

We saw a bit of the pressure we exerted this week paying off as Fannie Mae and Freddie Mac announced this morning they would freeze all foreclosures until after the holidays as they work to renegotiate troubled loans.

Progress has been made. However, I think we left no doubt in the mind of the Secretary and Fed Chairman that we had expected a great deal more progress for $300 billion and that changes would be needed.

As for the Big 3 executives...

I would not have believed it had someone told me before hand the hearing would go as poorly as it did. From the moment these three arrived in Washington via their private airplanes it was all down hill.

I don't mean to be too flippant about this, but if you are going to ask the government for $25 billion of the taxpayers money, it is very helpful to have 1) an explanation for why that amount is necessary and 2) a plan for how the money will save the industry.
These gentlemen provided neither.

Here's an example of what I mean, demonstrated in a question I asked:

CLEAVER: Why $25 billion? I mean why not 26? Are we going to divide three into 25?

ROBERT NARDELLI (CEO of Chrysler): Chrysler is asking for $7 billion.

ALAN MULALLY (CEO of Ford): Sir, it would be the rest based on the market share.

CLEAVER: This is - I mean we're just spending $25 billion loosely. I mean this is loosey goosey, whatever's left, I'll take.They seem to just be picking numbers out of a hat with no real clue as to how much is actually required to right the ship.

As I said last week, the automakers and our District are intertwined and should they go under it would be a disaster for us locally. Nationally, we are talking about 3 million workers who depend on making cars for employment. But the bottom line is, as much as I understand the need, Congress cannot commit billions of taxpayer dollars without first knowing how the automakers intend to use it to keep from sinking and how they are going to re-tool their industry to make it more green and more competitive.

As a result of the hearing this week, we have asked to see plans detailing exactly how the automakers would spend these loans which are due by December 2nd. With the plans in hand, we will return to session and revisit these loan requests by December 8th. I think this is a very reasonable and responsible approach with so much taxpayer money at stake.

Friday, November 14, 2008

Some explaining to do

This week, I returned to Washington to participate in hearings examining the progress the Treasury is (or is not) making to restructure mortgages allowing people to stay in their homes. In a nutshell: they are not yet doing enough, despite a substantial influx in Treasury money to help homeowners.

Treasury Secretary Paulson committed money from the rescue package in order to make financial institutions more financially sound and allow them to begin lending again. Part of the understanding is that the outlay of federal funds would in turn encourage lenders to renegotiate troubled mortgages. Three hundred billion has been spent, and significant progress has yet to be made.

Needless to say, the Financial Services Committee and frankly the American people have a few questions for Secretary Paulson. Next Tuesday we will have an opportunity to ask him directly as Secretary Paulson, Ben S. Bernanke, Chairman of the Federal Reserve and Sheila Bair, Chairman of the Federal Deposit Insurance Corporation will all testify in front of my Committee.

At about the same time this week that we were questioning bankers about why we weren't seeing more progress in re-writing mortgages, Secretary Paulson made some news of his own. In a press conference he surprised those of us charged with overseeing the $700 billion rescue package by saying he had changed his mind about the need to buy up the toxic assets that have frozen the credit markets.

On Wednesday, Paulson said the Treasury would now use funds to put more capital into the banks rather than buying up bad mortgage assets through the Troubled Asset Relief Program (TARP). I mention the section title of the $700 billion package to emphasize the Congress' intent with the bill — namely to buy troubled assets.

Paulson said that he believes his new plan is a "more powerful and quicker way to deal with the problem."

"Seven hundred billion [dollars] wouldn't go far enough in my judgment. So you get much more leverage by putting capital into the banks. What we were looking to do was to stabilize the system and encourage banks to lend more. And the quickest and most powerful way to do that was with capital."

Now, I am not an economist. So the new Paulson Plan may very well be what is needed.
However, his failure to alert Congress of his shift in strategy does not inspire confidence in the American people. When embarking on a plan meant to build confidence, it would be helpful if the government was all singing from the same hymnal.

There is another problem with the shift in strategy that goes beyond whether it works or not. If, say, after Congress appropriated funds to the Department of Housing and Urban Development, and rather than spending money on homes, the Secretary decided to buy airplanes — we would rightly take issue with that.

Secretary Paulson is right when he says the 509 page bill we passed gave him fairly wide latitude. But, the stated purpose of the rescue package is clear as day in the title — troubled assets.

As of this afternoon, the Treasury has yet to buy a single troubled asset with the $700 billion appropriated to do so. Not one.

Secretary Paulson and Chairman Bernanke will have some explaining to do on Tuesday.

Friday, November 07, 2008

A New Day

This Tuesday, I spent the evening watching history with thousands of you at the Midland Theater downtown. I was struck not only by the joy of the crowd, but by the New Year's Eve-like atmosphere on the street. Cars honked, people yelled and high-fived total strangers.

Tuesday was a night of shared experience, one of those evenings we will tell younger generations about.I thought about my grandfather, Noah Albert Cleaver. He lived over a century and my twins were able to sit on his knee. He had seen women get the vote, two world wars, a depression, integration of the armed services, the rise of the civil rights movement, desegregation, seventeen presidents elected, and his grandson sworn in as mayor of Kansas City.

I am not sure he would have thought that his twin grandchildren would have had the chance to see a black President of the United States elected. Though, I know, he hoped and worked for that possibility.

Tuesday, we all took part in history.

I know many older black men and women were weeping as President-elect Obama took the stage to declare victory. It was impossible not to be moved regardless how you voted. Senator McCain was gracious in the moment and I believe the world again looked to America as the place where all things are possible.

Lines were wrapped around polling places Tuesday as we took part in our great American birthright. At poll after poll as I talked to those waiting in line, I was struck by the patience and resolve of our community to cast their vote. I have shaken hands at polling places many times in my life, and never have I seen such a jubilant and peaceful crowd. We were determined to do our part.

Since then, I've been asked many times what I thought about the election of the first black President. I think America voted once again for the nation they wanted rather than the nation they were. We have a history of choosing hope over fear.

We are not perfect, but we are as close as the world has gotten to the ideal. Tuesday the world remembered why they look to us to lead. Not because of our selection for President, but because as a nation in the middle of hardship we chose to be bold rather than cower.

And on that historic Tuesday night we reminded the world of another uniquely American quality. Since Washington decided to only serve two terms as President and John Adams was elected to succeed him, the will of the people has always led to a peaceful transition of powers. Two diametrically opposed parties can spend over a year on the battlefield of ideas and when the votes are cast and the decision is made one concedes and the other becomes President-elect. Rather than gun shots there are fireworks, and next year on January 20 at exactly noon, one party's President will walk out of the White House as the opposing party's nominee is sworn in --- a remarkably peaceful exchange.

When George Washington was sworn in as the first President he ended the oath with a simple prayer, "So help me God." Now that request is an official part of the oath of all federal offices, including the one you chose to return me to this week. Amazingly fitting.

Congress will return to session next week for what is known as a "lame duck" session. Historically not a lot is accomplished during this session, but this year we cannot afford to wait for January to make progress on righting the ship of state.

Thank you for your faith in me, it is my honor to continue to serve you and our community. I am humbled and grateful.