During a press conference on a bailout for the auto industry held by the Democratic leadership of the House and Senate, Speaker Nancy Pelosi (D-Calif.) said, “Until we see a plan where the auto industry is held accountable and a plan for viability on how they go into the future…we cannot show them the money.” (0:19)
The Democratic leadership from the House and Senate held a press conference to announce that since the auto industry has failed to convince Congress that their suggested rescue plan will not be their last request, there will be no agreement on a bailout this week. However, the CEOs from the Big 3 automakers will have another opportunity to make their case to Congress
“We’re requesting that they submit a plan to Congress through Chairman Frank and Chairman Dodd no later than December 2nd. These two very able men will review the plan if necessary hold hearings during the week of December 2nd to fully vet the auto industry’s proposal,” said Senate Majority Leader Harry Reid (D-Nev.).
Reid stated that Congress was prepared to come back in session the week of December 8th, but only if the Big 3 auto makers submitted a plan that will provide accountability.
“Until we see a plan where the auto industry is held accountable and a plan for viability on how they go into the future…we cannot show them the money,” said House Speaker Nancy Pelosi (D-Calif.).
Pelosi went on to reject the calls that have been made for the automakers to declare bankruptcy.
“This is our response to those who would say ‘let them go, let them go and deal with it after that’. This is an important industry in our country and we intend to save it. We can only do this if we work together and the auto industry has to come up with a plan for innovation, accountability, and viability,” said Pelosi.
Christ Dodd (D-Conn.), Chairman of the Committee on Banking, Housing, and Urban Affairs, describes the recent financial problems facing the auto industry as self-inflicted wounds (0:17).
In a hearing on a bailout for the auto industry before the House Financial Services Committee, Chairman Barney Frank (D-Mass.) points out a distinction between reaction to proposed aid for white-collar jobs and proposed aid for blue-collar jobs. When the AIG and financial-industry bailouts were being debated, there was no discussion of the salaries for the employees, yet in the current debate there has been significant discussion of salaries of auto workers. Frank says people seem to be more willing to accept aid to the white-collar industry than to the blue-collar industry. (0:43)
At a press conference today, Secretary of the Treasury Henry Paulson said that although the financial situation is still fragile, the steps taken have helped America’s system. He stated that the Treasury had acted quickly and in coordination with other systems around the world, but that the market turmoil is not likely to end until the housing crisis is over.
Paulson said that the primary focus must be on recovery and repair, as he stressed the importance of banks continuing to lend. He stated that by the time Congress approved the bailout money, the Treasury realized it was too late and would take too long to invest the money as it had originally intended. Instead, they decided the money would best be used to strengthen liquidity in banks, not housing.
In conclusion, Paulson described the stability of the financial system as their highest priority, He emphasized three steps to accomplishing this goal. First they will seek to reinforce the stability of the financial system; second, seek to support important non-bank financial institutions; third, continue to o explore ways to reduce foreclosures.
“The list of regulatory mistakes and misjudgments is long, and the cost to taxpayers and our economy is staggering,” Chairman Henry Waxman said at the Committee on Oversight and Government Reform hearing on the financial crisis and the role of federal regulators.
Testifying was Alan Greenspan, former Chairman of the Federal Reserve System, Christopher Cox, Chairman of the Securities and Exchange Commission, and John Snow, former Secretary of the Treasury under President George W. Bush.
Greenspan highlighted that in 2005 he had raised concerns that the protracted period of underpricing of risk would have dire consequences. Greenspan went on to say that even though he raised concerns about possible financial problems, he could not have imagined it to be as broad as it was. “The financial landscape that will greet the end of the crisis will be far different from the one that entered it little more than a year ago. Investors will be exceptionally cautious. Structured investment vehicles and other exotic financial instruments are not now, and are unlikely to ever find willing investors. Subprime mortgages will also be on that list, this market for which has virtually disappeared,” Greenspan said.
Greenspan flip-flopped on issues surrounding regulations in banking institutions and what he had previously stated. In previous interviews, Greenspan had stated that he believed it should be left up to the banks to regulate and not the government. Waxman asked Greenspan if he still thought it was a good idea to let the banks regulate instead of having the government step in. “I was partially wrong with saying that banks should regulate themselves. The problem I’m having is that I still don’t understand fully how this crisis happened and why it happened. When the facts change, I will begin to change my view,” Greenspan said, commenting on Rep. Waxman’s questioning.
Cox said that he thinks one of the reasons why the crisis happened was because a lot had changed since 1999 and the time of the Clinton Administration. “Credit default swaps were just emerging in 1999, but now they are between 10 to 15 percent of the financial institutions, and one of the main issues surrounding the financial crisis,” Cox said.
Snow believes that if Congress would have done more in 2005, the financial crisis may be completely different. He said that with a “stronger regulatory set in place back then, and if our Government would have gotten more involved with the issues surrounding credit default swaps, taxpayers would be looking at the economy differently today.”
One statement all three panelists and Chairman Waxman agreed on was that the crisis will pass and America will reemerge with a far sounder financial system. Chairman Waxman concluded with the statement that he hopes to further these investigations, and find a “clear cut reason why all of this happened.”
“The leading credit rating agencies, Standard and Poor’s, Moody’s, and Fitch are the financial gatekeepers to the economy,” Representative Henry Waxman (D-Calif) Chairman of the Committee on Oversight and Government Reform, said during the hearing on credit rating agencies and the financial crisis.
Jerome Fons, former Executive of Moody’s Corporation, stated that the major rating agencies had missed the impact on subprime mortgages of falling house prices and declining underwriting standards. “A large part of the blame can be placed on the inherent conflicts of interest found in the issuer-pays business model and rating shopping by issuers of structured securities,” Fons said.
Raymond McDaniel, Chairman and Chief Executive Officer of the Moody’s Corporation, said that Moody’s published warnings about the increased risks and took action to adjust their assumptions for the portions of the residential mortgage banked securities market that were asked to rate. McDaniel went on to say that they did not anticipate the magnitude and speed of the deterioration in mortgage quality and quickness of restrictive lending.
Waxman concluded with “The credit rating agencies occupy a special place in our financial markets. Millions of investors rely on them for independent, objective assessments. The rating agencies broke this bond of trust, and federal regulators ignored the warning signs and did nothing t protect the public.”
Continuing the hearing process on the financial crisis,the members will hear from federal regulators, including SEC Chairman Christopher Cox, followed by a hearing with Fannie Mae and Freddie Mac on November 20th.
“The evidence is overwhelming. This crisis is a direct consequence of years of regulatory failures by government officials” said Senator Christopher Dodd (D-Conn.) Dodd continued, “the dominant players were not Fannie and Freddie, but the Wall Street firms and their other private sector partners; the mortgage brokers and the unregulated lenders”. At the U.S. Senate Committee on Banking, Housing, and Urban Affairs hearing on “The Genesis of the Current Economic Crisis”, the overall consensus of Senators and panel members was that government regulation failures and Wall Street investors were to blame.
Dodd said, “no one can say that the nation’s financial regulators were not aware of the threats posed by reckless sub-prime lending to homeowners, communities, and indeed the entire country. That threat had already been recognized by Congress”. Senator Robert Casey (D-Pa.) said he was troubled by the fact the Treasury Department wants to commit $250 billion to aid banks without “planning to modify a single loan”. Casey suspects that banks are now holding back on modifying loans because they’re waiting to see if they can sell them to the Treasury Department first, which he believes is the worst things that can happen right now.
The Honorable Marc H. Morial, President and CEO of the National Urban League, said that he wanted to, “set the record straight about what I call the Financial Weapon of Mass Deception: the ugly and insidious and concerted effort to blame minority borrowers for the nation’s current economic straits”. Morial blamed a few conservative reporters such as Fox News’ Neil Cavuto and the Washington Post’s Charles Krauthammer for, “telling the world that this crisis in not the result of a failure of regulation, but the fault of minority borrowers who bit off more than they could chew”. Morial said, “while minorities and low-income borrowers received a disproportionate share of sub-prime loans, the vast majority of sub-prime loans went to white and middle and upper income borrowers.”
Former U.S. Comptroller General Under Presidents Bill Clinton and George W. Bush says that leadership would help get over this economic crisis, and he’s not impressed with the current presidential candidates. (0:49)
Former U.S. Comptroller General under Presidents Bill Clinton and George W. Bush David M. Walker said the U.S. needs to “get our financial house in order.”
Talking about the bailout package, Walker said the government gave the Treasury Department $700 billion not for what they knew, but “for what they didn’t know.” Walker added that American citizens were not initially okay with the bailout package because it “overreached and under-communicated.” He said the American people were not given reason as to why this was being done.
Reacting to the presidential candidates’ economic proposals, Walker said both candidates would make the national debt worse. He said both would do “zip” in digging the U.S. out of its current fiscal hole.
Walker said it is possible that the subprime loan crisis could spread to the government. He warned that if it did, “No one’s going to bail out America.” To avoid this possibility, he recommended the next president create a “credible, capable, bipartisan fiscal commission.”
