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.
