After Washington Fails to Protect Taxpayers, Franken Holds News Conference to Pledge New Direction

SAINT PAUL [10/02/08] – After last night’s Senate passage of the $700 billion bailout proposal, DFL U.S. Senate candidate Al Franken today outlined how the bailout reflects the need for change in Washington.

“Last night the United States Senate voted to take $700 billion from taxpayers who did nothing wrong and offer it as a sacrifice at the altar of financial mismanagement. This bill doesn’t fix an economy that isn’t working for middle class families. This bill doesn’t even fix the damage that’s been done in the last eight years. It is, in fact, the exclamation point on eight years of the worst stewardship of our economy since Herbert Hoover. A terrible end to a terrible presidency. And if we don’t face up to what’s gone wrong – if, at this sad moment in our history, we fail to recognize what is still wrong with our economy and take concrete steps to fix it – then this will not be the last time Minnesota taxpayers are asked to clean up someone else’s mess.”

Last Tuesday, Franken outlined five principles he wanted included in this proposal, including strong oversight protections and help for consumers.

Today, Franken pledged to support strong changes with three important steps:

1. Franken will work for real regulatory reform that not only regulates the credit default swaps market, but treats oversight as a fundamental requirement of a functional economy, not a nuisance to be eliminated in favor of Wild West profiteering.
2. As Senator, Franken will address the crisis in the housing market that no one in Washington seems willing or able to touch. Franken will support a freeze in foreclosures and, just like we do in Minnesota, assign mortgage lenders a responsibility to treat borrowers as partners, not set them up to be victims.
3. Franken will govern with the philosophy that economic success isn’t about short-term profits for Wall Street, but long-term security and prosperity for Main Street. As Senator, Franken will fight for a new stimulus package designed to create jobs by investing in infrastructure, introduce middle class tax cuts to help Minnesotans raise children, care for their parents, and go to college, and invest in a renewable energy economy that will provide good-paying jobs for millions of Americans and end our dependence on foreign oil.

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Experts Oppose The Bailout

Joseph Stiglitz, Nobel Prize Winning Economist: “There is a kind of suggestion in the Paulson proposal that if only we provide enough money to financial markets, this problem will disappear. But that does nothing to address the fundamental problem of bleeding foreclosures and the holes in the balance sheets of banks.” [Washington Post, 9/26/08]

James Galbraith, University of Texas Economist: “It’s more hype than real risk. A nasty recession is possible, but the bailout will not cure that. So it’s mainly relevant to the financial industry. My sense is it will delay a disaster, given that you only have three months left in this administration. But it will not cure the problem in the financial industry, or prevent the shakeout and downsizing of the industry.” [London Telegraph, 9/26/08]

166 Economists Signed A Letter To Congress Opposing The Bailout. September 26, 2008, Bloomberg reported, “In a Sept. 24 letter to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson’s plan because it’s a ‘subsidy’ for business, it’s ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.” [Bloomberg, 9/26/08]

Robert Lucas, Nobel Prize Winning Economist: “It doesn’t seem to me that a lot decisions that we’re going to have to live with for a long time have to be made by Friday. The situation may get urgent, but it’s not urgent right now. Right now it’s a financial sector problem.” [Bloomberg, 9/26/08]

David I. Levine, UC Berkley Economist: “The structure [of the bailout] is designed for the Treasury to be the first line of defense. A whole lot of people made money supposedly by putting their capital at risk, and those are supposed to be the first line of defense, that’s how capitalism works.” [Bloomberg, 9/26/08]

Erik Brynjolfsson, Massachusetts Institute of Technology’s Sloan School: said his main objection is “the breathtaking amount of unchecked discretion it gives to the Secretary of the Treasury. It is unprecedented in a modern democracy.” [Bloomberg, 9/26/08]

David K. Levine, Washington University (St Louis) Economist: I suspect that part of what we’re seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout.” [Bloomberg, 9/26/08]

New York Times Editorial: The Senate Bailout Bill Does Little To Address The Causes Of The Crisis. On October 2, 2008 the New York Times wrote in an editorial, “Falling house prices are driving the collapse of the financial system. But the bailout bill, even the ‘sweetened’ version that was approved by the Senate Wednesday night, does little to avert the defaults and foreclosures that are pushing house values ever downward.” They continued, “Leaving these Americans out of the bailout bill is unwise and unfair, but neither Congress nor the Bush administration has ever shown anywhere near the sense of urgency to rescue homeowners at the bottom of the collapse as they have for the financiers at the top of it.” Finally, “Congress could change that dynamic, by amending the bankruptcy code to allow the court to modify troubled mortgages. But lawmakers still are afraid to hold the industry accountable. Instead, they are offering Hope for Homeowners that looks to be anything but.” [New York Times, 10/2/08]

Minnesota Lawmakers Oppose The Bailout Plan

Rep. Tim Walz Suggested He Would Oppose The Senate Passed Bailout Plan. In October 2008, Walz said, “There wasn’t enough regulation to prevent it in the 1st place in the future and there wasn’t enough guarantees that if this plan is not the right plan that the tax payer’s not stuck with it.” [KEYC, 10/1/08]

Rep. Collin Peterson Opposed The Initial House Bailout Plan. On September 30, 2008 Rep. Collin Peterson told the Pioneer Press blog Political Animal, “Like the overwhelming number of Minnesotans who spoke to me about the Wall Street bailout bill, I didn’t think this proposal was the right solution and so I voted against it. I don’t disagree that we have a problem in our credit markets and that Congress needs to take an active hand in getting us out of this mess, but handing the secretary of the Treasury a 700 billion taxpayer-dollars blank check to buy up Wall Street’s bad debt was not the right solution. At the end of the day, the bill we defeated today would have left American taxpayers on the hook for Wall Street’s excesses and bad judgment, and it would not have done much of anything to see that taxpayers recouped their money, nor would it have provided sufficient safeguards to assure us that this would never happen again.” [Pioneer Press blog Political Animal, 9/30/08]

Rep. Tim Walz Opposed The Initial House Bailout Plan. On September 30, 2008 Rep. Tim Walz told the Pioneer Press blog Political Animal, “My job is to protect the American taxpayer, and this plan doesn’t go far enough in looking out for the middle class. It doesn’t go far enough in holding Wall Street accountable. If Wall Street is going to get our money, we need to have some protections in place, and this plan doesn’t go far enough. Finally, it does not do enough to help address the real cause of our economic crisis: the tidal wave of foreclosures that are hurting families and neighborhoods all around the country.” [Pioneer Press blog Political Animal, 9/30/08]

A Bipartisan Group Of Senators Opposed The Bailout Plan

Maria Cantwell (WA) Opposed Senate Bailout Bill Citing Approach that “May Not Solve the Market’s Underlying Financial Problems.” In a statement, Senator Maria Cantwell said, “I believe that bold action is needed to solve our current financial crisis. I am just not for this action… I am not supportive of a structure where the government only gets companies’ bad assets. This approach leaves the government with less resources, the troubled companies with less working capital, and in the end may not solve the market’s underlying financial problems.” [Cantwell Senate press release, 10/1/08]

Russ Feingold (WI) Opposed Senate Bailout Bill and Criticized It for “Leaving Taxpayers to Bear the Burden” for the Financial Crisis. In a press release, Sen. Russ Feingold said he opposed the Senate’s bailout bill because “it fails to offset the cost of the plan, leaving taxpayers to bear the burden of serious lapses of judgment by private financial institutions, their regulators, and the enablers in Washington who paved the way for this catastrophe.” Feingold also said, “The bailout legislation also fails to reform the flawed regulatory structure that permitted this crisis to arise in the first place.” [Feingold Senate press release, 10/1/08]

Mary Landrieu (LA) Opposed Senate Bailout Bill Because It “Falls to Short of Having the Safeguards Needed.” In a press release, Sen. Mary Landrieu said of the Senate bailout bill, “Significant improvements have certainly been made since the audacious first draft of the bailout plan. But in its current form, it falls too short of having the safeguards needed to ensure American taxpayers aren’t left shouldering the burden of problems left uncorrected.” [Landrieu Senate press release, 10/1/08]

Bill Nelson (FL) Opposed Senate Bailout Bill by Saying It Fails to Ensure that Taxpayers “Don’t Get the Short End of the Stick.” In a press release, Sen. Bill Nelson (D-FL) said, “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.” [Nelson Senate press release, 9/30/08]

Debbie Stabenow (MI) Opposed the Senate Bailout Bill, Calling it “Fundamentally the Wrong Approach.” In a press release, Sen. Debbie Stabenow said she “opposed the Emergency Economic Stabilization Act of 2008 because it is fundamentally the wrong approach to fixing our economy. We need to start from the root of the problem – helping families stay in their homes and keep their jobs. While I’m glad it included alternative energy provisions that I championed as a member of the Senate Finance Committee, it did not do enough for the people of Michigan, and so I could not, in good conscience, support this bill.” [Stabenow Senate press release, 10/1/08]

Jon Tester (MT) Opposed Senate Bailout Bill, Saying It “Doesn’t Deserve My Vote.” In a press release, Senator Jon Tester said of the Senate bailout bill, “I don’t believe it’s tough enough to protect American taxpayers and small businesses. It doesn’t require the common sense regulations needed to prevent this mess from happening again. It doesn’t go far enough in stripping golden parachutes from the bad actors on Wall Street. And it passes too much debt on to our kids and our grandkids.” [Tester press release, 10/1/08]

Ron Wyden (OR) Opposed the Senate Bailout Bill Because It Left “Too Many Questions Unanswered.” In a press release, Sen. Ron Wyden (D-OR) said, “In my judgment, the bill we are considering tonight leaves far too many questions unanswered, and misses the mark in addressing both the causes and potential cures for the current crisis… For that reason, I am voting against this bill tonight with great reluctance, and hope that the Senate is given a second opportunity, as the House will receive, to put forward a more thoughtful response that will deserve and garner the trust of the American public.” [Wyden Senate press release, 10/1/08]

John Barrasso (R-WY) Opposed the Senate Bailout Because It Lacked “Accountability, Oversight, and Taxpayer Protection.” In a press release, Sen. John Barrasso (R-WY) said, “As I have said from the beginning of this debate, providing a $700 billion rescue package to our financial institutions is a significant risk to taxpayers. Any government assistance must protect taxpayers – not reward failure. This rescue package did not meet my three core principals – accountability, oversight and taxpayer protection. [Barrasso Senate press release, 10/1/08]

Mike Crapo (R-ID) Opposed the Senate Bailout, Saying He is Unconvinced That “Taxpayers Were Protected.” In a press release, Sen. Mike Crapo (R-ID) said, “I voted no because I am not convinced that the Administration’s proposal in its current form is the right solution, that taxpayers were protected… I concluded that this proposal fails the fairness test and left the taxpayers with too much risk.” [Crapo Senate press release, 10/1/08]

Elizabeth Dole (R-NC) Opposed the Senate Bailout Because It Fails to Address the “Root Cause” of the Financial Crisis. In a press release, Sen. Elizabeth Dole (R-NC) said, “Because of unrelated spending additions, this bill now comes at a cost of over $800 billion, and it is still a government takeover of our economy with no protection for taxpayers. It raises the debt ceiling to $11.3 trillion. It bails out foreign investors before American homeowners struggling to pay their mortgages. And it does nothing to address the root cause of this mess, the housing crisis. I was against the Administration’s original plan. I was against the bill that failed in the House. This latest revision is an improvement but still contains the flaws of the earlier proposals, and I will not support it.” [Dole Senate press release, 10/1/08]

Mike Enzi (R-WY) Opposed the Senate Bailout Bill Because It Lacked a “Substantial Chance of Success.” In a press release, Sen. Mike Enzi (R-WY) said, “Ultimately, I do not believe this is the best solution for our economy or the taxpayer. Something does need to be done to save our economy, but this package is just a very costly band-aid for big banks that will do very little to help patients who needs major surgery. A rescue plan of this scale requires a clear plan of action with a substantial chance of success. This plan has neither.” [Enzi Senate press release, 10/1/08]

Roger Wicker (R-MS) Said Senate Bailout Bill Did Nothing to Prevent Crisis from Occurring Again. In a press release, Sen. Roger Wicker (R-MS) said, “But at its core, this is still the same plan that calls on taxpayers to go $700 billion further into debt in an attempt to fix this problem, while doing absolutely nothing to prevent it from happening again. I have strong philosophical differences with this approach, and I will not vote to support it.” [Wicker Senate press release, 10/1/08]

Even Senator Chuck Grassley (R-IA) Who Supported The Bailout Say It Doesn’t Do What It Needs To Do. According to Iowa Republican Chuck Grassley, “Despite assertions to the contrary, the executive compensation provisions in H.R. 1424 are window dressing rather than a legitimate attempt to prevent golden parachutes and multi-million dollar paychecks for failed leadership. The legislation before us also falls short in making reforms to the laws and regulations plaguing the housing and financial sector.” [Grassley Release, 10/2/08]

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