General Motors is running ads on all the major networks this week claiming it has repaid its bailout from the taxpayers “in full.” But the claim isn’t standing up to scrutiny from lawmakers and government watchdogs who have found that the automaker was able to repay the bailout money only by dipping into a separate pot of bailout funds.

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(CNSNews.com) – The United Autoworkers Union, which had a total net worth of $1.2 billion in 2007, owns a $27 million resort and conference center that features a $6 million upscale golf course, according to financial statements on file with the U.S. Department of Labor.
 
The retreat, called the Walter and May Reuther Family Education Center, is located on Black Lake in Onaway, Mich. The union-owned retreat includes the Black Lake Golf Club, valued at $6 million according to the financial statement.
 
The resort features conference centers, classrooms, resort amenities and the golf club, which is open to union members, retirees and their guests, as well as the public, on a space-available basis.
http://www.cnsnews.com/public/content/article.aspx?RsrcID=41148

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In a speech on the Senate Floor, Senator Inhofe went on to say, " Congress completely abdicated its responsibility by signing a truly blank check over to the Treasury Secretary. However, the lame duck session of Congress offers us a tremendous opportunity to change course. We should take it."

" Though there are still significant challenges in financial markets, it appears that the threat of financial crisis spinning so out of control that we face another Great Depression-which was the original justification for the grant of such sweeping authority-has subsided. Has the need to allow one person to control hundreds of billions of taxpayer dollars and spend as he sees fit subsided as well? I’ve never seen in my entire career of public service anything like the spectacle we are now witnessing. Is it unreasonable to ask whether or not the additional $350 billion should not be added to a deficit approaching $1 trillion? Congress should have a debate."

The full text of Senator Inhofe’s speech as prepared for delivery is below:

Given the recent news about Secretary Paulson’s execution of the TARP program, I firmly believe action is required by Congress. This morning I introduced S.3683, legislation that will freeze any remaining funds from the first installment of the $700 billion and require Secretary Paulson’s plan for the remaining $350 billion in authorized TARP funds to be ratified by an affirmative vote in the U.S. Congress.
(excerpt…)

Link to S. 3683

Link to Video of Speech

James M. Inhofe
U.S. Senator – Oklahoma

“Today’s announcement that America has lost more than 1 million jobs this year underscores what working families already know: the Congress and the Bush Administration must take swift action to boost the economy, create jobs and help struggling Americans.

“The House has already passed strong economic recovery and job creation legislation in September.  Today’s economic news should send a clear signal to Republicans in the Senate and to President Bush that they must join us in an effort leading economists agree is critical.

“We will also continue our dialogue with America’s automakers and the United Auto Workers in the coming weeks to safeguard the interests of American taxpayers, protect hundreds of thousands of workers and retirees, and use cutting-edge technology to transform blue-collar jobs to green collar jobs for generations to come.  For our economic and national security, it is essential that we preserve our manufacturing and technology base.

“We can create good-paying jobs here at home, provide relief to struggling families and small businesses, and take action to make America more competitive in the 21st century global economy.  It is time for a Main Street Recovery.”

Bob Barr’s take on the housing bailout.

As you can imagine, this legislation has prompted large numbers of Arizonans to contact my office, and most have expressed concerns about the measure. Many of the specific concerns have now been addressed, and I will describe those changes later in this letter.

Many constituents have been led by the media to believe that the measure is a “bailout” of Wall Street. While it is true that the Treasury and Federal Reserve engineered bailouts of Bear Stearns, insurer AIG, and Fannie Mae and Freddie Mac several weeks ago, the economic stabilization bill addresses a different problem in a different way and is not a “bailout.”

The problem the bill seeks to address is the decreasing availability of credit which was brought on by overinvestment and speculation in home buying. Plummeting home values have left many homeowners with mortgages that exceed the market value of their homes, making it uneconomical for them to sell and making it impossible to refinance their adjustable rate mortgages into more affordable loans. As a result, many people have become delinquent on their mortgages and, in many cases, have entered foreclosure.

The financial institutions holding those troubled mortgages have, in turn, found themselves unable to collect on those mortgages or resell them to other investors, even when packaged with mortgages that are being paid in full and on time. Because these assets cannot be liquidated, the banks holding them have all but stopped lending money to consumers and businesses as they try to preserve their capital.

The Credit Crisis

Like it or not, most of our economy runs on credit, and if it’s not available, economic activity can grind to a halt. Most families cannot afford to buy a new car or a refrigerator (let alone a house) with cash.

The credit crunch that is affecting our economy started several months ago, but has accelerated in recent weeks. The Arizona Republic reported on October 1 that “many small businesses can’t get funding for supplies and in some cases are falling behind on their payrolls.”

In an editorial the following day, the Republic noted that “Arizona business leaders report they are seeing entire lines of credit evaporate.” A USA Today poll in August found that 67 percent of businesses felt a credit crunch, up from 55 percent in February. In the last two weeks, the municipal bond market has seen rates more than quadruple, thus effectively drying up their credit and forcing cities across the country to abandon projects. The Arizona Mortgage Lenders Association has cited examples of consumers losing their home equity lines of credit.

The Arizona Republic reported on October 2 that automobile sales are down sharply: down 34 percent for Ford, 32 percent for Toyota, and 16 percent for GM. Vehicle sales in Arizona are down 23 percent compared to a year ago.

If the credit crunch persists, mortgages will get more expensive. The required down payment for FHA-insured loans is already set to increase from 3.0 to 3.5 percent on January 1. Other lenders might also require higher down payments or higher interest rates and monthly payments.

Without access to affordable credit, manufacturers will begin to find it difficult to finance the acquisition of raw materials or new equipment, or even meet payroll. Farmers won’t be able to finance the large upfront costs associated with purchasing fertilizer and seed to plant their crops. Small businesses will not be able to get funding to extend credit to their own customers who wish to make everyday purchases. Private loans for college could dry up.

I have already begun to hear from many constituents who are being affected by the credit crunch, mostly small business owners who create a majority of new jobs.

What all of this indicates is that the credit crunch is spreading to Main Street and threatens severe economic disruption. Even the state’s resources are at risk. The State Treasurer in Arizona reports the potential loss of millions of dollars from state-backed investment pools.

Restoring the Proper Functioning of Credit Markets

For those of us who fervently believe in the virtues of a free-market economy – where businesses succeed and fail based on their appeal to consumers, the soundness of their business practices, and accountability to their shareholders – the idea of government intervention to try to fix the credit crisis is not an appealing one. But the larger economy is facing a serious emergency, and I believe some kind of bold government action is both necessary and urgent.

After being briefed by the nation’s top economic advisors, and after consulting with officials and business and community leaders in Arizona, I concluded that the stakes are simply too great not to support the economic stabilization legislation. Too many Arizonans could lose their jobs, too many businesses could be forced to scale back or close, and too many homeowners could be forced into foreclosure.

The federal government used none of the fiscal or monetary tools available to it to avert the Great Depression early in the 20^th Century. In fact, it implemented many policies – raising taxes, imposing steep tariffs, and reducing the money supply – that proved to be exactly the wrong things to do as the country was heading into an economic slowdown. The country suffered through a decade of hardship as a result: the economy contracted by nearly a third, unemployment exceeded 25 percent, business investment declined by 83 percent, and incomes fell by 21 percent.

It’s important that we heed the lessons of history, not repeat the serious mistakes that were made.

In short, failing to take appropriate action now could result in an economic catastrophe unknown in our lifetime. That is not a risk I am willing to take with the economic security of hard-working citizens of our state and country. The day that the House of Representatives defeated the first financial stabilization bill, the market lost an estimated $1.2 trillion in value, reducing by 10 percent the value of retirement accounts, pension funds, and the personal savings of millions of Americans. Unless the credit problem is addressed, economic turbulence will continue to erode our economic well being.

The Federal Reserve has already taken a number of steps to avert the crisis, but, as Treasury Secretary Paulson said recently when he promised to use all the tools available to protect our financial system, “our toolkit is substantial but insufficient.”

The Secretary and many other experts (including some I personally know and respect) believe that the most effective way for the federal government to help restore the orderly functioning of credit markets is to buy mortgage-backed and other distressed securities that are clogging the balance sheets of financial institutions, and thus inject needed liquidity back into the financial markets.

The securities that the government would acquire have intrinsic value, although that value is almost impossible to determine today because of the state of the housing market. Think of your own home: you might believe it’s worth about $200,000. But you’d be hard pressed to sell it at all in today’s market. If you had no choice but to sell, you might be satisfied with $150,000, but if you could wait until the market recovers, you might get the full $200,000 that you’d like. The same is true with respect to the mortgage-backed securities held by troubled financial institutions.

The Financial Stabilization Bill

The core concept of the financial stabilization bill is to allow the Treasury Department to purchase up to $700 billion of these mortgage-backed and other distressed securities from financial institutions (at a price analogous to the $150,000 for your home in the example above), hold those assets until the market recovers, and then resell them at a later date, hoping to recoup the investment. (Only the federal government has the ability to buy and hold these assets for the amount of time it will take for the markets to recover and return sufficient value to the taxpayers.)

More specifically, Treasury Secretary Paulson is proposing to have the government purchase many of these mortgage-backed securities through a reverse-auction process.  That is, holders of the securities would offer them for sale to the government at a discounted price, and, because institutions would be competing against one another to sell to the government, they would have every incentive to fairly value the assets.  Once the auctions begin to establish prices for the securities, the private sector will gain greater confidence in their value and reenter the market for them.  All of this will help unlock the capital of financial institutions and make it available for lending again.  Ultimately, when the market recovers, the government would sell the assets it acquires at a fair price, hoping to recoup what it paid, but at least minimizing losses to the taxpayer.

Congressional leaders, responding to concerns that people, like you, had expressed, worked with the Treasury Department to produce a modified version of the bill that would provide more accountability, transparency, and oversight, and add new taxpayer protections. Changes were made to:

** Provide better oversight: The bill would create a Financial Stability Oversight Board to enhance oversight of the program and ensure that assets are acquired at the best price for taxpayers.

** Better protect taxpayers: The bill would help protect taxpayers against potential losses, among other things, by prohibiting the Treasury Secretary from purchasing troubled assets unless he receives stock options from the firms selling those assets. This will allow taxpayers to share in the firms’ future profits (when the economy recovers) in exchange for the risk taken by the government now. After five years, the President would also be required to provide Congress with a report on how to recoup any losses that the program has incurred.

** Dedicating revenues to debt reduction: The bill would require that any amounts recovered by the government from the resale of assets be used to reduce the national debt.

** Ensure that executives of troubled institutions do not profit from the government’s asset acquisition plan: Many chief executives of troubled institutions have already been fired, along with their boards, and the FBI and Securities and Exchange Commission have initiated criminal investigations into wrongdoing. The financial stabilization bill further limits executive compensation and golden parachutes for executives who participate in Treasury’s troubled asset program.

After the House of Representatives failed to pass the bill on September 29, the Senate made the following additional changes:

** Increased protection for savers: The Senate bill would increase the federal deposit insurance limit from $100,000 to $250,000 to help maintain confidence that individuals’ savings are safe and secure.

** Regulatory reform: The original bill would allow the Securities and Exchange Commission to suspend so-called “mark to market” rules that had artificially undervalued the assets held by financial institutions and worsened the credit crunch. (Senate action was accompanied by an announcement by the SEC on September 30 that it was taking a step in that direction by issuing a clarification to give banks more flexibility in valuing their assets.)

** Tax relief: A separate bill to stop the Alternative Minimum Tax (AMT) from hitting some 25 million Americans with an estimated $2,000 tax increase passed the Senate on several occasions earlier this year with broad, bipartisan support, but had not passed the House. To make sure the AMT fix is enacted before the next tax-filing season, the Senate added it to financial stabilization bill. The measure also extended a series of other expiring provisions of existing tax law.

Unlike an early draft of the legislation, the final version of the bill includes no taxpayer funding for special interest groups, like the Association of Community Organizations for Reform Now, better known as ACORN. Many people believe that ACORN helped pressure lenders to extend mortgages to people who could not afford them, helping to precipitate the credit crisis. And contrary to some reports, there were no pork projects or special spending earmarks added to the bill to buy Members’ votes.

I hope this gives you a better idea of my rationale for supporting the bill. Others opposed it, some arguing it didn’t include this or that provision they favored. I, too, would have liked to add other provisions. But, it is important to remember that members of the Majority Party wanted very different provisions (like the funding to groups, like ACORN) that, in my view, would have been very bad. The necessary compromise was to leave out our respective political agendas and stick to the bare bones needed to get credit markets unstuck at the least cost to the taxpayers.

I should also say that even if this program works as intended, our economy will likely continue to languish for other reasons. Congress and the new administration will need to address some of those issues and longer term regulatory issues in the future.

If you have any additional comments or questions, please let me know, and I will be glad to respond.

Sincerely,

JON KYL

United States Senator

Starting with the so-called Anti-Drug Abuse Act in 1988, the IRS has possessed this authority temporarily, with occasional multiple-year lapses. A 1999 internal report said the IRS had 126 “trained undercover agents” working in field offices at the time. This is the first time that such undercover authority would be made permanent.

Sens. Max Baucus (D) and Chuck Grassley (R) have been pushing to make it permanent for a while, claiming (PDF) in April that: “Undercover operations are an integral part of IRS efforts to detect and prove noncompliance. The temporary status of this provision creates uncertainty, as the IRS plans its undercover efforts from year to year.”

There’s another section of the bailout bill worth noting. It lets the IRS give information from individual tax returns to any federal law enforcement agency investigating suspected “terrorist” activity, which can, in turn, share it with local and state police. Intelligence agencies such as the CIA and the National Security Agency can also receive that information.

The information that can be shared includes “a taxpayer’s identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer’s return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return.”

That provision had already existed in federal law and automatically expired on January 1, 2008.

What’s a little odd is that there’s been little to no discussion of the IRS sections of the bailout bill, even though they raise privacy concerns. Treasury Secretary Henry Paulson said this week: “I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy.” He never mentioned the necessity of additional IRS undercover operations.