Bill Nelson, U.S. Senator from Florida: Media Release: Nelson: no bailout if deal stiffs taxpayers

"This is not the time for political rancor, but for casting aside partisanship. When Congress does that, I think most will see we shouldn’t be bailing out banks that caused the problem in the first place - without guaranteeing that taxpayers don’t get the short end of the stick. If we hand the administration seven-hundred billion dollars, then we also must assure there’s tough oversight, profit-sharing for taxpayers, fair refinancing for homeowners facing foreclosure; and, we must make sure none of the money ends up back in the CEOs’ pockets."

Sen. Nelson's detailed plan for dealing with the economic crisis:

The Honorable Christopher J. Dodd

Chairman

Senate Committee on Banking, Housing, and Urban Affairs

534 Dirksen Senate Office Building

Washington, D.S. 20510

Dear Chairman Dodd:

I fully understand and appreciate the gravity of your responsibility as chief author of legislation that will hopefully stabilize our financial markets. I share your desire to make sure that any relief we provide will protect taxpayers and does not reward those who profited while pushing us toward this crisis.

Accordingly, I strongly believe that any legislation authorizing the Treasury Department to purchase mortgage-related assets must contain the following provisions:

1. Initiate a special investigative unit within the FBI to probe the business practices of major ratings agencies. While many stakeholders share the blame for today's financial crisis, bond rating agencies helped facilitate the enormous growth of the mortgage-backed securities industry, and gave securities consisting of subprime-related mortgages "AAA" ratings. Investors relied on these credit ratings to make purchases. The public deserves to know how these rating agencies concluded that such risky investments could receive such high credit ratings.

2. Do not allow foreign-owned financial institutions to participate in the Treasury's purchase of mortgage-related assets. While I understand that we face a potentially global crisis, I cannot support a bill that forces American taxpayers to bailout foreign-owned financial institutions.

3. Authorize the Treasury to purchase only mortgage-related assets, not other troubled assets. The current crisis resulted from a massive housing bubble that ended with millions of homeowners defaulting on their mortgages. I cannot support a bill that expands relief to include other troubled assets that had little to do with causing this crisis.

4. Require the Treasury to pay fair market value for any mortgage-related assets. I cannot support a bill that overpays banks for troubled assets, giving financial institutions and Wall Street bankers a taxpayer-funded windfall. We should inject necessary liquidity into the market, but we should not reward those responsible for our current circumstances.

5. Instruct the Treasury to require an equity interest or option, e.g. warrants, from any financial institution that chooses to participate in the program. In the case of the AIG bailout, the government required warrants in exchange for assistance. If we are going to buy bad debts from banks, helping them to avert bankruptcy, then the taxpayers must share in any potential rewards.

6. Establish multi-tiered and independent oversight of all government purchases of mortgage backed securities. I strongly support your vision for oversight by an internal board at Treasury that includes congressional appointees, an independent inspector general, and the relevant committees of Congress.

7. Create and fund more efficient government-sponsored refinancing mechanisms for homeowners facing foreclosure. Financial institutions seeking to participate in the program should be required to refinance or modify any mortgages they or related companies hold for homeowners in danger of foreclosure. Consider using Fannie Mae and Freddie Mac to refinance mortgages. If we are going to bailout Wall Street executives, we should provide real foreclosure relief to ordinary families. I cannot support a bill that fails to do so.

8. Authorize funds based on performance. Provide $250 billion initially but set targets for success that, if met, trigger authorization of additional funds. We must be good stewards of taxpayer money, and I cannot support a bill that provides a blank check that is not based on performance.

9. Develop clear and strong regulations for other securitized debt obligations, such as securitized credit card and auto loan debt. As we commit massive amounts of taxpayer money to resolve one crisis, we cannot allow another to brew.

10. Develop a second economic stimulus package that focuses on long-term investments, and make adoption of that stimulus package a condition for passage. This package should be focused on investment in infrastructure to help create jobs and spur local economies.

11. Set reasonable limits on compensation--including incentives and severance pay--for executives of financial institutions that seek to sell mortgage-related assets through the Treasury's program. Taxpayers should fund neither golden parachutes nor large bonuses for individuals whose behavior precipitated this crisis. If financial institutions wish to participate in the Treasury's program, they must accept reasonable limits on executive compensation.

I know that these uncertain times place us all under significant pressure to act, but I want to make sure that we act sensibly. We absolutely cannot put a quick solution ahead of the right solution. I appreciate your consideration of these crucial issues. As we move forward, I stand ready to offer any assistance that you may need.

Bill Nelson

U.S. Senator

cc: The Honorable Richard C. Shelby

Ranking Member

Senate Committee on Banking, Housing, and Urban Affairs

Senator Nelson's floor speech on the administration's economic bailout plan, speech, September 24, 2008

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