October 2, 2008 CONGRESSIONAL RECORD — SENATE S10407 

I don’t know if they think unemployed people are lazy. I don’t know if 

they think because we provide them a 

few dollars to get by until they can 

find a job and keep their families 

going, keep their kids in school, keep 

food on their tables, keep a roof over 

their heads—I don’t know what they 

think. They are not going to try to get 

a job if they get a few dollars unemployment? It is not like unemployment 

is like a congressional pension. It is 

not like unemployment compensation 

is like a Carly Fiorina bailout or Carly 

Fiorina’s bonus for failing at her company. It is not like this is a lot of 

money that is going to keep people so 

fat and happy that they do not need to 

work. I do not get why they would do 

that. 

Congress needs to extend unemployment benefits for unemployed workers. 

We need to do it for those workers, for 

those workers’ families, for those communities in which they live. It is in no 

one’s best interests for Congress to 

twiddle its thumbs while more American families sink into poverty. An extension of unemployment insurance— 

not welfare, insurance—was in the economic stimulus package last week. The 

House may very well take up unemployment insurance extension before 

we adjourn. Here is why. 

If we are going to talk about stimulating the economy, there is no better 

way to do it. Every dollar invested in 

unemployment benefits leads to $1.64 in 

growth. This is not money that people 

use to go out and buy a flat-screen TV 

made in China. This money, unemployment extension, is used for food; it is 

used for books for their children and 

clothes for their children. It is used to 

pay the rent. It is used to pay utility 

bills. These are dollars that stay in the 

community, dollars which help the 

local hardware store, help the local 

grocery store, dollars which provide 

other jobs in the community. There is 

no better stimulus than that. 

The Congressional Budget Office says 

extending unemployment benefits is 

cost effective and fast acting. We already have the mechanism. We put 

money in the pipeline. The money gets 

into the community. It doesn’t take 3 

months to send out a check. It is 

money that can be put into the pipeline right away. 

Unemployment benefits are spent to 

sustain families so they do not need 

other forms of public assistance. It 

gives workers the resources they need 

to put gas in their cars to go out and 

look for work. I get letters all the time 

from people who literally cannot afford 

to buy gas so they can go out and look 

for a job, particularly in rural Ohio, 

particularly in places such as Waverly 

and places such as Jackson and places 

such as Ottawa and places such as Tiffin. It is just too expensive to have to 

go looking for jobs in rural Ohio too 

often. 

There is another reason to extend unemployment benefits: patriotism demands it. Our Nation is not defined by 

its borders, it is defined by its people. 

Millions of people are running out of 

unemployment benefits. They need our 

help, and they need it now. We cannot 

claim to be American patriots and ignore the American people. It is not just 

a strong military. It is not just pride of 

country or wearing an American flag 

pin. It is that, too, for sure. But patriotism is helping our people. Patriotism 

is a covenant we have between our 

Government and our people. 

That means if you work hard and 

play by the rules—if you work hard and 

you play by the rules—you are able to 

get ahead. That means if your company 

closed, if your company laid off workers and you happened to be one of the 

unlucky souls who got laid off, it may 

be that the Government, your neighborhood, your country, your community, can help you until you can find 

your new job. Workers, their families, 

their communities—we cannot continue to ignore them. 

When my Republican friends talk 

about patriotism, they talk about 

whatever it is we need to do—tax cuts 

for corporations, to provide jobs, all 

that. They ought to start talking about 

workers because we know the wealth in 

this country is created by productive 

workers. Workers in this country are 

more productive than they have ever 

been. They produce more wealth for 

their employers. It is time that they 

shared—that employers, as their profits go up, even in not-as-good economic 

times, as their profits go up, it is time 

more of that wealth was shared with 

workers. It is time those workers who 

are working their hearts out get a little reward, playing by the rules, get 

some advantage, get some opportunity, 

have the opportunity to get ahead. 

We have a responsibility to listen to 

Americans who are not employed and 

probably believe they have nowhere to 

turn. They can turn to us. They should 

turn to us. We should not turn our 

backs on them. That is what too many 

people in this institution, too many 

people at the White House, too many 

people in this whole Bush-CheneyMcCain idea of how to run an economy—clearly, they have not done that 

good a job on Wall Street or on Main 

Street. It is the way they may look at 

things. I got elected to the Senate in 

2006 because people thought their country betrayed them. They saw the drug 

companies writing the Medicare laws; 

they saw the insurance industry writing health care legislation; they saw 

the oil industry dictate energy policies; 

they saw Wall Street jam down the 

American peoples’ throats these jobkilling trade agreements. This Government, this administration, has betrayed the middle class. 

We want a government where the 

public can turn to us, they should turn 

to us, and we will not turn our backs. 

No, we will actually embrace them and 

work with them. We can start by extending unemployment insurance. Senator REED has a bill to do that. We 

should pass it. We should move on and 

begin to change this country. 

I yield the floor, and I suggest the absence of a quorum. 

The PRESIDING OFFICER. The 

clerk will call the roll. 

The legislative clerk proceeded to 

call the roll. 

Mr. HARKIN. Mr. President, I ask 

unanimous consent that the order for 

the quorum call be rescinded. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

f 

ECONOMIC STABILIZATION ACT 

Mr. HARKIN. Mr. President, last 

night I reluctantly voted in favor of 

the Economic Stabilization Act. I want 

to emphasize the word ‘‘reluctantly.’’ I 

did so because the Nation’s financial 

system faces serious challenges, and it 

was important for us to act. However, I 

am under no illusion. While this rescue 

plan will likely calm and stabilize the 

financial system, at least in the short 

term, it is not as strong as it should be 

in terms of protecting taxpayers’ 

money, and it does not get at the underlying problem of what got us here in 

the first place. 

Over the last week, I worked with a 

number of other Senators to improve 

this measure that was in the House, 

that the House turned down. For example, I joined with a group of Senators 

in developing and creating a special inspector general to oversee the emergency efforts of the Treasury Department and to investigate the inevitable 

waste, fraud, and abuse as the bailout 

goes forward. I say ‘‘inevitable’’ because when you have $700 billion sloshing around out there and you have one 

person sort of deciding where it goes, 

that just invites a lot of mischief. So 

we have this special inspector general 

to oversee that. That was a good addition. I am pleased that recommendation was included in the final bill. 

I am disappointed that the limits on 

executive compensation in the bill are 

not as strong as I would have liked and 

others would have liked. The final decisions on executive compensation are 

left to the Secretary, who, by his background, training, and everything, is 

certainly no champion of limits on executive compensation. Look at his own 

background, for example. I felt and 

still feel we should have definitive, 

hard limits on executive compensation. 

If they are going to come in here and 

ask the taxpayers to bail them out, 

they are, in fact, becoming, effectively, 

like Government employees, and they 

should not make anything more, I have 

often said, than the highest paid Government employee, who is the President of the United States. If they do 

not like it, they do not have to come to 

us for the taxpayers to bail them out. 

So that is something we are going to 

have to fix. 

Likewise, the final decision on acquiring stock in participating banks— 

that is, getting equity positions—is 

crucial to protecting taxpayers’ 

money. The decision on what we do on 

equity is left up to the Secretary 


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S10408 CONGRESSIONAL RECORD — SENATE October 2, 2008 

again—either this Secretary or whoever follows this Secretary—and this 

Secretary has indicated he does not 

favor the Government taking an equity 

stake. Well, I beg to differ. Again, if 

our taxpayers are being asked to put 

up their money and to put this debt on 

their children and their grandchildren, 

well, they and their children and 

grandchildren ought to have an equity 

stake, and nothing less will suffice. 

Again, that is something else that has 

to be fixed. 

In addition, I am disappointed that 

banks are still not required by law to 

open their books so we can determine 

how they valued the assets the Government will be purchasing. We need full 

disclosure and transparency from participating institutions. If we are going 

to invest taxpayers’ money in these 

banks and acquire their debt portfolios, 

then we need to know the details of 

their methods and their proprietary 

models for placing values on those 

portfolios. It is not enough for them to 

give us the balance sheet. That is not 

enough. What we need to know is how 

they got there in the first place, what 

models they used internally to decide 

how they would place the value on a 

certain asset, how they decided how 

much to pay for a certain asset and 

how much to sell that asset to someone 

else. 

Therein lies perhaps some of the answers to the questions of how we got 

here in the first place. Again, there is 

nothing in this bill that would require 

them to do it, but they have to be 

forced to do that. You will hear: There 

is transparency; we put transparency 

in the bill. The transparency is in 

terms of the Secretary buying the assets and how that is done and it is all 

open and aboveboard. There is nothing 

in this bill that requires transparency 

to look at their books to see how they 

got there in the first place. 

Ask yourself this question: You have 

a company. For a number of reasons, 

you are going underwater, you are 

going bankrupt. You go to a bank to 

get a loan to get back on your feet, 

hopefully to get up and operating 

again. Is the bank going to be satisfied 

with looking at your balance sheet, 

your assets and debits? No. The bank is 

going to want to know what got you in 

trouble. Why are you here seeking our 

help? What were you doing there that 

got you into this trouble? Let’s look at 

all your books. No bank is going to 

loan you money based upon your balance sheet, if you are underwater, declaring bankruptcy or about to. 

We are the bank now, the taxpayers. 

The Federal Government is now the 

bank. When they come to us and they 

have assets and they put in this reverse 

auction, we ought to say: OK, let’s take 

a look at your books; not just your balance sheet, but how did you get to the 

valuation of those assets? How did you 

come by those assets? What did you 

pay for those assets? Why didn’t you 

pay that much for those assets? What 

was the model you used when you went 

to the computers and all these 

‘‘brainiac’’ people decided how much 

they would pay for these assets? That 

is a very important point to know. 

And, if we are to protect the taxpayers, 

we need to fully understand all of the 

details about these financial paper we 

may be buying which may prevent our 

overpaying. 

I brought that up with Secretary 

Paulson in a meeting. I couldn’t believe his response. His response was: 

We can’t do that because a lot of times 

they don’t even know how they got 

there. 

That is true. You can ask a lot of 

Senators who were in that meeting 

when I asked the question. That was 

his response. They don’t even know 

how they got there. 

I am sorry. They do know how they 

got there. If they flipped a coin, they 

ought to tell us that is what they did. 

But I don’t think that happened. It 

happened because they had internal accounting structures and computer 

models that they used to decide how 

much to pay for an asset, to buy it or 

not, how much to put it on their books 

as, maybe sometimes how much to sell 

it at. That is what we need to know. 

Don’t tell me they don’t have that information. They do. I know it is proprietary but, nonetheless, if they are coming to us asking us to buy these assets, 

we have to know how they got there. If 

we know that, then that helps us next 

year when we come back to change the 

fundamentals, to put in more regulation, more oversight of financial markets, which we have to do. But if we 

don’t know how they got there, how 

are we going to know, as makers of 

public policy and protecting the taxpayers in the future, what we need to 

do in the regulatory scheme? I am disappointed that we don’t have that. 

There is one other aspect of this bill 

that troubles me. That is the fact that 

we put all the $700 billion basically out 

there on the table. Again, Secretary 

Paulson was asked by Senator SCHUMER of New York, was he going to 

spend all that $700 billion in the first 

couple weeks. He said, no, it will take 

about $50 billion a month. This raised a 

lot of questions in my mind and the 

minds of others. If it is $50 billion per 

month, why do we to have give you 700? 

Why don’t we give you $50 billion for 

the next 4 or 5 months, and then we 

will sunset it and take a look at it, see 

how it works. If it works, come back. 

Congress, I am sure, would be more 

than happy then to debate it and extend this. I thought that was a good 

proposal. In other words, put out 5 

months’ worth, put out $250 or $300 billion, sunset it, come back in February. 

Let’s see how it is working. Is this 

working? Is it not working? Then make 

the decision whether we want to put 

another $350 billion of taxpayer money 

out there. 

What happened, finally, in the bill is 

a scheme that they put out, I think, 

$250 billion right now. The Secretary 

can get another $100 billion by the 

President snapping his fingers, saying: 

I want it. He gets $100 billion. Then, to 

get access to the other $350 billion, 

there has to be a request from the 

President. Then Congress has 15 days in 

which to deny it. They get it, but we 

have 15 days in which to deny it. 

You might say: Well, that is some 

protection. It is. Except if we deny it, 

the President can override it. He can 

veto that. Then we have to have a twothirds vote to override the veto in both 

Houses. So this is heavily skewed toward letting the executive branch decide on the full $700 billion. This is 

something we ought to come back and 

fix when we return in January. Again, 

there were some questions raised about 

that $700 billion. 

I was interested to read in Forbes, 

September 23, it says: 

In fact, some of the most basic details, including the $700 billion figure Treasury 

would use to buy up bad debt, are fuzzy. ‘‘It’s 

not based on any particular data point,’’ a 

Treasury spokeswoman told Forbes.com 

Tuesday. ‘‘We just wanted to choose a really 

large number.’’ 

So the $700 billion, where did it come 

from? They wanted a large number. 

Tell that to the taxpayers. 

I ask unanimous consent that this article from forbes.com entitled ‘‘Bad 

News for the Bailout,’’ be printed in 

the RECORD. 

There being no objection, the material was ordered to be printed in the 

RECORD, as follows: 

[From Forbes.com, Sept. 23, 2008] 

BAD NEWS FOR THE BAILOUT

(By Brian Wingfield and Josh Zumbrun) 

Lawmakers on Capitol Hill seem determined to work together to pass a bill that 

will get the credit markets churning again. 

But will they do it this week, as some had 

hoped just a few days ago? Don’t count on it. 

‘‘Do I expect to pass something this 

week?’’ Senate Majority Leader Harry Reid, 

D-Nev., mused to reporters Tuesday. ‘‘I expect to pass something as soon as we can. I 

think its important that we get it done 

right, not get it done fast.’’ 

Sen. Sherrod Brown, D-Ohio, says his office 

has gotten ‘‘close to zero’’ calls in support of 

the $700 billion plan proposed by the administration. He doubts it’ll happen immediately either. ‘‘I don’t think it has to be a 

week’’ he says. ‘‘If we do it right, then we 

need to take as long as it needs.’’ 

The more Congress examines the Bush administration’s bailout plan, the hazier its 

outcome gets. At a Senate Banking Committee hearing Tuesday, lawmakers on both 

sides of the aisle complained of being rushed 

to pass legislation or else risk financial 

meltdown. 

‘‘The secretary and the administration 

need to know that what they have sent to us 

is not acceptable,’’ says Committee Chairman Chris Dodd, D-Conn. The committee’s 

top Republican, Alabama Sen. Richard Shelby, says he’s concerned about its cost and 

whether it will even work. 

In fact, some of the most basic details, including the $700 billion figure Treasury 

would use to buy up bad debt, are fuzzy. 

‘‘It’s not based on any particular data 

point,’’ a Treasury spokeswoman told 

Forbes.com Tuesday. ‘‘We just wanted to 

choose a really large number.’’ 

Wow. If it wants to see a bailout bill passed 

soon, the administration’s going to have to 


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October 2, 2008 CONGRESSIONAL RECORD — SENATE S10409 

come up with some hard answers to hard 

questions. Public support for it already 

seems to be waning. According to a Rasmussen Reports poll released Tuesday, 44 

percent of those surveyed oppose the administration’s plan, up from 37 percent Monday. 

Treasury Secretary Henry Paulson and 

Federal Reserve Chairman Ben Bernanke, 

who testified before the Senate committee 

Tuesday, will get a chance to fine tune their 

answers Wednesday afternoon, when they appear before the House Financial Services 

Committee. 

A spokesman for House Speaker Nancy 

Pelosi, D-Calif., says she is optimistic that 

the House will pass a bill this week. But that 

doesn’t mean the Senate, which is by nature 

more sluggish than its larger counterpart on 

the other side of Capitol Hill, will be so 

quick to act. 

Mr. HARKIN. With all my concerns, 

why did I vote for the bill? For the following reasons: We did get a change in 

the Federal Deposit Insurance Corporation insurance on banks. It was raised 

from $100,000 to $250,000. That is even 

too low. That is an inflationary increase. That is where FDIC would be 

today in their insurance on deposits in 

banks if, in fact, it had kept pace with 

inflation. Quite frankly, it would be 

more than that. I think it ought to be 

at least $1 million. Some people are advocating that it ought to be removed 

completely. Ireland did that. They 

raised their deposit insurance completely off all the banks. I don’t know 

if I would go that far, but it ought to 

be at least a million or so because I 

think depositors would be more comfortable choosing smaller retail banks 

and community banks. Smaller independent banks have more conservative 

investment standards. They are better 

regulated. They are more likely to lend 

to small businesses and manufacturers 

which are the backbone of our American economy. Again, many of the 

independent banks in Iowa and around 

the United States do a darn good job of 

investing depositors’ money. They invest it in local businesses, manufacturers, startup companies or expansions, 

the backbone of the American economy, sort of where the rubber meets 

the road, where people get jobs. Yet 

they are limited to $100,000 right now. 

At least this raises it to $250,000, and it 

should be a lot more. Depositors would 

feel more comfortable putting money 

in those banks. 

Right now big depositors feel very 

comfortable putting $20 million in 

Citibank. Why? Their deposits are not 

guaranteed, but they know Citibank is 

too big to fail. We now know some of 

these banks are now going to be— 

JPMorgan Chase—too big to fail. Let’s 

put all our money there. The Government is not going to let them fail. 

Quite frankly, I believe very strongly 

that a lot of our smaller, independent 

banks do a much better job of investing 

our money than some of the New York 

banks that used to be investment 

banks but now want to become depository banks. I was happy to at least 

raise the FDIC to $250,000. I think it 

should be higher, but at least that is 

better than nothing. 

The fact is, the choice was either to 

vote for the bill, despite its flaws, or do 

nothing, and doing nothing was not an 

acceptable option. I am hopeful that in 

the short term this rescue package will 

work to calm markets and restore confidence in the financial system and 

loosen up on what is called the liquidity crisis. We are hearing of instances 

where small businesses in Iowa cannot 

get the funds that they need. We are 

hearing about construction projects 

that are being cancelled. That is costing jobs in my state. I hope it will have 

an effect worldwide of calming things. 

But I also hope and insist that we come 

back early next year to strengthen and 

improve the rescue framework. I will 

be working with others to do that. As 

I said, we need to strengthen the equity position of taxpayers. We have to 

redo that $700 billion and how that is 

parceled out. We have to be stronger on 

executive compensation and equity. 

We need to look, at that point in 

time, at whether we want to also use 

this money, rather than going in at the 

top, maybe to go in at the bottom, to 

help homeowners with their mortgages. 

I have often said there were two ways 

of approaching this bailout. You put it 

in at the top, and it trickles down or 

you put it in at the bottom and it percolates up. I would prefer putting it in 

at the bottom and letting it percolate 

up. We know that trickle-down economics has failed this country time 

and time again. As one worker told me 

once, he said: You know, I have heard 

all about this trickle down. I have been 

waiting. I haven’t felt a drop. I would 

settle for a heavy dew. I haven’t even 

seen that. 

We know what works. We know that 

when you put money in at the bottom, 

it does percolate up. Our whole economy is strengthened because of it. 

When we come back, that is what we 

have to do in January and February, 

change this thing around. 

I might mention one other thing. 

When we come back, we have to do 

something about credit card debt. I 

keep hearing everyone talking about a 

credit crunch. When I talk to my constituents about a credit crunch, they 

think I am talking about credit cards. 

I was told there is something floating 

around this country, nine credit cards 

for every individual. I don’t know if 

that is true, but that is what they say. 

I read that. We know there are too 

many credit cards. We know credit 

cards are too easy to get. One of the 

reasons they are so easy to get is because the interest rates are out of 

sight, and people don’t know what they 

are being charged for interest on their 

credit cards. These young people get 

credit cards sent to them as soon as 

they graduate. They get one after another. Credit cards are easy to use. 

Then you get the bill, but you can roll 

it over and pay it next month. OK, 

maybe I can do that. But they don’t realize that 12 percent or 15 percent this 

month can rise up to 28 percent; and 

not just for the next month, it can impact purchases made before that point. 

Now you are paying 28 percent on 

items you buy. So many people have 

been hooked on this, using their credit 

cards. So we have to do something 

about the credit card debt. 

There is a bill called the Credit Card 

Accountability, Responsibility and Disclosure Act, the CARD Act, of which I 

am a cosponsor. As we come back in 

January and February, that is something else we are going to have to incorporate into this so-called bailout. 

There is one other thing we will have 

to do. I was sorry to see it lost in the 

Senate earlier this week. That is the 

stimulus package. We had a package to 

put money in at the bottom, let it percolate up, by helping people with extending their unemployment benefits 

which has the biggest bang for the 

buck in terms of economic stimulus. 

People on food stamps, investing in rebuilding our schools, our roads, 

bridges, our sewer and water systems, 

that goes directly to people, and it 

helps stimulate the economy and puts 

people to work. That bill had a 

pricetag of about $56 billion. That is 

not chump change. That is lot of 

money: $56 billion. But do you know, in 

what we just voted on last night with 

$700 billion, $54 billion is, what, not 

quite 8 percent of what we voted on 

last night, which we turned down earlier this week to stimulate the economy by putting people to work. Well, I 

think we have to come back and do 

that again next year. That is to stimulate our economy. 

But there are some other provisions 

in the rescue bill that are extremely 

important and valuable. The bill includes a number of tax provisions important to Iowans in particular, including energy production tax credits for 

producers of wind energy and biomass 

energy. That will create a lot of new 

jobs in Iowa and continue the jobs we 

have. 

They are important tax provisions, 

added by my colleague, Senator GRASSLEY, on the Finance Committee that I 

have been a strong supporter of, to help 

the victims of the floods we had in 

Iowa, to help them get back on their 

feet, to help the small businesses get 

back on their feet. It is vitally important to get our economy going back in 

the State of Iowa. That was in the bill 

last night. 

There is also a provision in there to 

improve the prospects for the construction of ethanol pipelines—something 

vitally important to the fledgling 

biofuels industry that I have led on. It 

is important to get ethanol back to the 

east coast, where a lot of people live, 

from the Midwest where we produce it. 

That was also in the bill last night. 

In addition, there was another thing 

in that bill last night that we have 

been trying to do for many years 

around here, and that is to get mental 

health parity. In other words, if you 

have health insurance, they would 

treat mental health, an addiction, just 

the same as they would any other 


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health problem. We have been trying to 

get that for years, and we finally got it 

in the bill last night. That will make 

sure families struggling with mental 

illness do not have that challenge compounded by having to pay for it out of 

their pockets. It will be covered by 

their insurance. It is named after Senator Paul Wellstone and Senator PETE

DOMENICI, both of whom worked very 

hard to get it passed. 

Well, Mr. President, it was an overwhelming, bipartisan vote last night. 

There are a lot of reasons we need to 

come back, as I said, next year and 

make some changes, and we will do 

that. Hopefully, as I said, this will 

calm the markets. 

Now, Mr. President, I want to ask 

consent for a number of articles to be 

printed in the RECORD at the conclusion of my remarks. 

One is an article by Jonathan 

Koppell and William Goetzmann entitled ‘‘The Trickle-Up Bailout.’’ I will 

quote from one part of it. It says: 

The financial crisis is a liquidity crisis, 

yes, but it is ultimately a product of homeowner failures to pay. Unless this fundamental problem is fixed, we will continue to 

see—and need to treat—the symptoms. The 

proposed bailout ignores this. Yet the sum 

being demanded from taxpayers is almost 

certainly more than sufficient to pay off all 

currently delinquent mortgages. 

They call this the ‘‘trickle down,’’ 

what we passed, rather than the 

‘‘trickle up’’ bailout. 

Mr. President, I ask unanimous consent that article be printed in the 

RECORD at the conclusion of my remarks. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

(See exhibit 1.) 

Mr. HARKIN. Mr. President, I will 

also ask consent that an article by 

Harold Meyerson entitled ‘‘Slow Rise 

for a New Era’’ be included in the 

RECORD. Again, I will quote from that 

article. Mr. Meyerson talked about this 

bill being passed. He said: 

If that happens— 

If we pass this bill— 

the next move would be for Democrats to 

craft a solution more in the spirit of FDR: 

Franklin Roosevelt. 

Save American capitalism by fundamentally reshaping it. They could direct the government to raise the amount of depositors’ 

money it insures— 

We did in the bill last night a little 

bit— 

to compel the banks to write down their 

losses, to recapitalize the banks by taking a 

significant equity interest in them, and to 

refinance beleaguered homeowners directly. 

Mr. President, I also ask unanimous 

consent that article be printed in the 

RECORD at the conclusion of my remarks. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

(See exhibit 2.) 

Mr. HARKIN. Mr. President, I will 

also ask consent that a list of economists who signed a letter saying there 

are better ways to approach the problems we have in our financial institutions rather than what we did last 

night be printed in the RECORD. It is a 

letter that was sent to the Speaker and 

the President. They said: 

As economists, we want to express to Congress our great concern for the plan proposed 

by Treasury Secretary Paulson to deal with 

the financial crisis. . . .We see three fatal 

pitfalls in the currently proposed plan: 

(1) Its fairness. . . . 

(2) Its ambiguity. . . . 

(3) Its long-term effects. . . . 

So, Mr. President, I ask consent that 

this list also be printed in the RECORD

to show that—again, the one thing that 

bothered me in the hearings we had on 

this plan is, we only heard from the administration. We only heard from people who were for the plan. Why didn’t 

we hear from other people, 200 other 

economists, Nobel prize-winning economists, who say there is a better way of 

doing this, folks? 

I think when we come back in January, and perhaps even between now and 

January, we ought to be hearing from 

these people to see what changes we 

ought to make in this proposal when 

we come back in January. 

I ask unanimous consent to have 

that letter and list printed in the 

RECORD at the end of my remarks. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

(See exhibit 3.) 

Mr. HARKIN. Lastly, Mr. President, I 

have an article by William Isaac, 

former head of the Federal Deposit Insurance Corporation. It is a Washington Post article dated September 27, 

entitled ‘‘A Better Way to Aid Banks.’’ 

I also ask unanimous consent that article be printed in the RECORD. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

(See exhibit 4.) 

Mr. HARKIN. Mr. President, to sum 

it up, as I said when I started, I reluctantly supported this bill. I hope it will 

calm the markets. But I am under no 

illusions that what we did last night 

solves the problem of why we got here 

in the first place. To that end, we have 

to come back. We have to have hearings. We have to bring in other people. 

We have to get a better handle on what 

was going on, and next year, with a 

new administration and a new Congress, I think one of the first things we 

have to do is to fix this, make it more 

equitable, make it more fair to the taxpayers of this country, and to get at 

the underlying fundamentals of why we 

are here and not just to be satisfied 

with stopping the bleeding, which is 

what we did last night. 

So, Mr. President, with that, I yield 

the floor. 

EXHIBIT 1 

THE TRICKLE-UP BAILOUT

(By Jonathan G.S. Koppell and William N. 

Goetzmann) 

The theory underlying the bailout plan 

stalled in Congress is that rescuing the finance industry will restore market stability 

and that the benefits will eventually trickle 

down to average Americans. Thus, solving 

the sub-prime mortgage crisis has morphed 

into a much larger challenge: reassembling 

the architecture of the financial markets, 

which seemingly requires giving the Treasury secretary nearly a trillion dollars and 

extraordinary latitude to pick winners and 

losers. 

There is an easier and more politically palatable fix: Pay off all the delinquent mortgages. 

The financial crisis is a liquidity crisis, 

yes, but it is ultimately a product of homeowner failures to pay. Unless this fundamental problem is fixed, we will continue to 

see—and need to treat—the symptoms. The 

proposed bailout ignores this. Yet the sum 

being demanded from taxpayers is almost 

certainly more than sufficient to pay off all 

currently delinquent mortgages. 

If the government did this, all the complex 

derivatives based on these mortgages would 

be as good as U.S. Treasuries. Their fair 

value would jump to 100 cents on the dollar, 

rescuing teetering financial institutions. The 

credit markets would be resuscitated overnight. Foreclosures would stop. 

Some will argue that it is grossly unfair to 

pay off the mortgages of borrowers who took 

risks and lost. In other words, why should 

my profligate neighbor be rewarded for overleveraging himself? 

Because such unfairness is a small price to 

pay to avoid a rapid transition to a socialist 

economy, the collapse of our financial system (and its related global implications) and 

a frightening shift of economic power toward 

the executive branch. Why shell out $700 billion to Wall Street dealmakers and the companies they managed into this mess? 

Wouldn’t it be preferable for individual 

homeowners to benefit directly? 

Implementation could follow the example 

of the Home Owners’ Loan Corp., which in 

the 1930s issued new mortgages to a quarter 

of American homeowners. The government 

could offer to refinance all mortgages issued 

in the past five years with a fixed-rate, 30- 

year mortgage at 6 percent. No credit scores, 

no questions asked; just pay off the principal 

of the existing mortgage with a government 

check. If monthly payments are still too 

high, homeowners could reduce their indebtedness in exchange for a share of the future 

price appreciation of the house. That is, the 

government would take an ownership interest in the house just as it would take an 

ownership interest in the financial institutions that would be bailed out under the 

Treasury’s plan. 

All this could be done through the Federal 

Housing Administration, with the help of 

Fannie Mae and Freddie Mac, which have the 

infrastructure to implement this plan rapidly. An equity participation structure 

would prevent thousands of foreclosed homes 

from being dumped on a strained housing 

market and would allow prices to reach a 

new equilibrium that is based on realistic demand for houses rather than on easy money 

or impending foreclosures. 

Like the administration’s proposal, this 

plan would result in the government owning 

assets. But these assets would be real estate, 

not complex derivatives whose true value 

would take weeks to discern. Homeowners 

would become partners with the government 

in resolving the crisis. 

When Congress returns, lawmakers are 

likely to modify and then pass the administration’s bailout proposal. They should consider ways to implement this bottom-up solution. Combining this approach with the 

government’s proposal could greatly benefit 

taxpayers. Yes, the government’s swift purchase of illiquid securities would stabilize 

compromised financial institutions and the 

credit markets. But the notion that taxpayers would benefit in the long run is pure 

speculation, particularly if the government 


rfrederick on PROD1PC67 with SENATE
October 2, 2008 CONGRESSIONAL RECORD — SENATE S10411 

overpaid for the securities. On the other 

hand, once a government-sponsored refinancing wave kicked in, the full value of the 

securities in the government’s portfolio 

would be restored, and they could be sold off 

in an orderly manner, with Uncle Sam taking profits that would cover the cost of the 

bailout. 

The public is rightly concerned that the 

administration’s bailout would benefit only 

powerful financial institutions. No matter 

how it’s done, rescuing the financial system 

is a large, complex gamble. 

This solution would start by helping ordinary Americans and would quickly spill over 

to revive the financial markets. Directly addressing the underlying cause of the crisis 

would help ensure that we would not be facing the same crisis again down the road. 

While Wall Street has only recently felt the 

bite of foreclosures delinquencies, communities across the nation will face greater financial and social fallout if the foreclosure 

crisis continues. 

EXHIBIT 2 

SLOW RISE FOR A NEW ERA

(By Harold Meyerson) 

We are, just now, stuck between eras. The 

old order—the Reagan-age institutions built 

on the premise that the market can do no 

wrong and the government no right—is 

dying. A new order, in which Wall Street 

plays a diminished role and Washington a 

larger one, is aborning, but the process is 

painful and protracted. 

It shuddered to a halt on Monday, when 

House Republicans, by 2 to 1, declined to support the administration’s bailout plan. To 

lay the blame on Speaker Nancy Pelosi’s 

speech (in which she even noted the work of 

House GOP leaders in crafting the compromise) is to miss the larger picture: The 

proposal asked Republicans to acknowledge 

the failure of the market and the capacity of 

government to set things right. It asked 

them to repudiate their worldview, to go 

against the beliefs that impelled many of 

them to enter politics in the first place. 

So as America experienced a financial crisis, House Republicans experienced a crisis 

of faith. And on Monday, most of them opted 

to stick to their faith, whatever the financial consequences for the nation. 

Many of the Republicans’ counterproposals 

to the bailout bill were so wide of the mark 

that they can be understood only as faithbased solutions to empirical problems. 

Banks and investment houses are toppling 

like so many dominos, and, to solve this crisis of capital evaporation, House Republicans 

suggested reducing capital gains tax. Are we 

to believe that more investors didn’t rush to 

rescue LehmanBearAIG-WaMuWachoviaEtc 

because they calculated that the tax on the 

capital gains they’d realize was too high? 

Then again, the bill that the Republicans 

opposed was itself a transitional document— 

to some extent ushering in a new order, 

though designed chiefly to prop up the old. 

The bailout plan’s political travails can be 

traced to its conception—a three-page proposal for the Treasury secretary, who is the 

immediate past CEO of Wall Street’s most 

successful investment bank, to buy up financial institutions’ bad loans at prices he 

would set, with no oversight and no aid to 

anybody else. End of story. The bill that 

went to the House floor Monday had been 

significantly improved: It created the possibility that the public would gain a limited 

equity interest in some banks in return for 

the public’s largess; it restricted Wall Street 

CEO pay; it allowed for a stock-transaction 

tax to cover any public losses if such still existed after five years. But it had been 

stamped at birth as a bailout for Wall Street, 

by a Treasury Department that didn’t see 

the glaringly obvious political problems that 

created. 

It’s possible that with a few cosmetic 

changes, the bill can be passed by the House 

tomorrow. Or it may be that the prospect of 

bailing out Wall Street with public funds offends so many House members at both ends 

of the political spectrum that it goes down 

to defeat again. 

If that happens, the next move would be 

for Democrats to craft a solution more in the 

spirit of FDR: Save American capitalism by 

fundamentally reshaping it. They could direct the government to raise the amount of 

depositors’ money it insures, to compel the 

banks to write down their losses, to recapitalize the banks by taking a significant equity interest in them, and to refinance beleaguered homeowners directly. 

Already, it’s clear that we will emerge 

from this crisis with fewer but bigger banks. 

As a result of the recent government-arranged consolidations and fire sales, three 

banks—JP Morgan Chase, Bank of America 

and Citigroup—will control roughly onethird of all deposits. They will be too big to 

fail. They will also be so big that they’ll be 

able to set the price for money when Americans come borrowing. 

As such, they will require tighter regulation than we’ve imposed on banks before. 

And that’s hardly the only arena in which 

government will have to do more. With financial institutions de-leveraging and lending less, it will fall upon the government to 

invest more in the American economy—to 

diminish the effects of the recession that is 

coming down the tracks and to build the 

kind of infrastructure that will enhance 

American competitiveness in a global economy. 

It’s not just investment banks that have 

fallen by the wayside in the recent carnage; 

it’s the ideology of unregulated capitalism— 

of Reaganism. And if Republicans cannot 

find a way to disenthrall themselves from 

their faith in their old gods, they may ensure 

that the GOP itself becomes one more casualty in the collapse of laissez faire. 

(This letter was sent to Congress on Wed., 

Sept. 24, 2008, regarding the Treasury plan as 

outlined on that date. It does not reflect all 

signatories’ views on subsequent plans or 

modifications of the bill.) 

To the Speaker of the House of Representatives and the President pro tempore of the 

Senate: As economists, we want to express to 

Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal 

with the financial crisis. We are well aware 

of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls 

in the currently proposed plan: 

(1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who 

took risks to earn profits must also bear the 

losses. Not every business failure carries systemic risk. The government can ensure a 

well-functioning financial industry, able to 

make new loans to creditworthy borrowers, 

without bailing out particular investors and 

institutions whose choices proved unwise. 

(2) Its ambiguity. Neither the mission of 

the new agency nor its oversight are clear. If 

taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must 

be crystal clear ahead of time and carefully 

monitored afterwards. 

(3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America’s 

dynamic and innovative private capital markets have brought the nation unparalleled 

prosperity. Fundamentally weakening those 

markets in order to calm short-run disruptions is desperately short-sighted. 

For these reasons we ask Congress not to 

rush, to hold appropriate hearings, and to 

carefully consider the right course of action, 

and to wisely determine the future of the financial industry and the U.S. economy for 

years to come. 

Signed 

Acemoglu Daron (Massachusetts Institute 

of Technology); Ackerberg Daniel (UCLA); 

Adler Michael (Columbia University); 

Admati Anat R. (Stanford University); Ales 

Laurence (Carnegie Mellon University); 

Alexis Marcus (Northwestern University); 

Alvarez Fernando (University of Chicago); 

Andersen Torben (Northwestern University); 

Baliga Sandeep (Northwestern University); 

Banerjee Abhijit V. (Massachusetts Institute 

of Technology); Barankay Iwan (University 

of Pennsylvania); Barry Brian (University of 

Chicago); Bartkus James R. (Xavier University of Louisiana); Becker Charles M. (Duke 

University); Becker Robert A. (Indiana University); Beim David (Columbia University); 

Berk Jonathan (Stanford University); Bisin 

Alberto (New York University); 

Bittlingmayer George (University of Kansas); Blank Emily (Howard University); 

Boldrin Michele (Washington University); 

Bollinger, Christopher R. (University of Kentucky); Bossi, Luca (University of Miami); 

Brooks Taggert J. (University of Wisconsin); 

Brynjolfsson Erik (Massachusetts Institute 

of Technology); Buera Francisco J.(UCLA); 

Cabral Luis (New York University); Camp 

Mary Elizabeth (Indiana University); Carmel 

Jonathan (University of Michigan); Carroll 

Christopher (Johns Hopkins University). 

Cassar Gavin (University of Pennsylvania); 

Chaney Thomas (University of Chicago); 

Chari Varadarajan V. (University of Minnesota); Chauvin Keith W. (University of 

Kansas); Chintagunta Pradeep K. (University 

of Chicago); Christiano Lawrence J. (Northwestern University); Clementi, Gian Luca 

(New York University); Cochrane John (University of Chicago); Coleman John (Duke 

University); Constantinides George M. (University of Chicago); Cooley, Thomas (New 

York University); Crain Robert (UC Berkeley); Culp Christopher (University of Chicago); Da Zhi (University of Notre Dame); 

Darity, William (Duke University); Davis 

Morris (University of Wisconsin); De Marzo 

Peter (Stanford University); Dube ́ JeanPierre H. (University of Chicago); Edlin 

Aaron (UC Berkeley); Eichenbaum Martin 

(Northwestern University); Ely Jeffrey 

(Northwestern University); Eraslan Hu ̈lya K. 

K. (Johns Hopkins University); Fair Ray 

(Yale University); Faulhaber Gerald (University of Pennsylvania); Feldmann Sven (University of Melbourne); Fernandez, Raquel 

(New York University); FernandezVillaverde Jesus (University of Pennsylvania); Fohlin Caroline (Johns Hopkins University); Fox Jeremy T. (University of Chicago); Frank Murray Z. (University of Minnesota). 

Frenzen Jonathan (University of Chicago); 

Fuchs William (University of Chicago); 

Fudenberg Drew (Harvard University); 

Gabaix Xavier (New York University); Gao 

Paul (Notre Dame University); Garicano 

Luis (University of Chicago); Gerakos Joseph 

J. (University of Chicago); Gibbs Michael 

(University of Chicago); Glomm Gerhard (Indiana University); Goettler Ron (University 

of Chicago); Goldin Claudia (Harvard University); Gordon Robert J. (Northwestern University); Greenstone Michael (Massachusetts 

Institute of Technology); Gregory, Karl D. 

(Oakland University); Guadalupe Maria (Columbia University); Guerrieri Veronica (University of Chicago); Hagerty Kathleen 

(Northwestern University); Hamada Robert 


rfrederick on PROD1PC67 with SENATE
S10412 CONGRESSIONAL RECORD — SENATE October 2, 2008 

S. (University of Chicago); Hansen Lars (University of Chicago); Harris Milton (University of Chicago); Hart Oliver (Harvard University); Hazlett Thomas W. (George Mason 

University); Heaton John (University of Chicago); Heckman James (University of Chicago—Nobel Laureate); Henderson David R. 

(Hoover Institution); Henisz, Witold (University of Pennsylvania); Hertzberg Andrew (Columbia University); Hite Gailen (Columbia 

University); Hitsch Gu ̈ nter J. (University of 

Chicago); Hodrick Robert J. (Columbia University). 

Hollifield Burton (Carnegie Mellon University); Hopenhayn Hugo (UCLA); Hurst Erik 

(University of Chicago); Imrohoroglu Ayse 

(University of Southern California); Isakson 

Hans (University of Northern Iowa); Israel 

Ronen (London Business School); Jaffee 

Dwight M. (UC Berkeley); Jagannathan Ravi 

(Northwestern University); Jenter Dirk 

(Stanford University); Jones Charles M. (Columbia Business School); Jovanovic Boyan 

(New York University); Kaboski Joseph P. 

(Ohio State University); Kahn Matthew 

(UCLA); Kaplan Ethan (Stockholm University); Karaivanov Alexander (Simon Fraser 

University); Karolyi, Andrew (Ohio State 

University); Kashyap Anil (University of 

Chicago); Keim Donald B (University of 

Pennsylvania); Ketkar Suhas L (Vanderbilt 

University); Kiesling Lynne (Northwestern 

University); Klenow Pete (Stanford University); Koch Paul (University of Kansas); 

Kocherlakota Narayana (University of Minnesota); Koijen Ralph S.J. (University of 

Chicago); Kondo Jiro (Northwestern University); Korteweg Arthur (Stanford University); Kortum Samuel (University of Chicago); Krueger Dirk (University of Pennsylvania); Ledesma Patricia (Northwestern University); Lee Lung-fei (Ohio State University). 

Leeper Eric M. (Indiana University); 

Letson David (University of Miami); Leuz 

Christian (University of Chicago); Levine 

David I. (UC Berkeley); Levine David K. 

(Washington University); Levy David M. 

(George Mason University); Linnainmaa 

Juhani (University of Chicago); Lott John R. 

Jr. (University of Maryland); Lucas Robert 

(University of Chicago—Nobel Laureate); 

Ludvigson, Sydney C. (New York University); Luttmer Erzo G.J. (University of Minnesota); Manski Charles F. (Northwestern 

University); Martin Ian (Stanford University); Mayer Christopher (Columbia University); Mazzeo Michael (Northwestern University); McDonald Robert (Northwestern University); Meadow Scott F. (University of Chicago); Meeropol, Michael (Western New England College); Mehra Rajnish (UC Santa Barbara); Mian Atif (University of Chicago); 

Middlebrook Art (University of Chicago); 

Miguel Edward (UC Berkeley); Miravete 

Eugenio J. (University of Texas at Austin); 

Miron Jeffrey (Harvard University); Moeller, 

Thomas (Texas Christian University); 

Moretti Enrico (UC Berkeley); Moriguchi 

Chiaki (Northwestern University); Moro Andrea (Vanderbilt University); Morse Adair 

(University of Chicago); Mortensen Dale T. 

(Northwestern University). 

Mortimer Julie Holland (Harvard University); Moskowitz, Tobias J. (University of 

Chicago); Munger Michael C. (Duke University); Muralidharan Karthik (UC San Diego); 

Nair Harikesh (Stanford University); Nanda 

Dhananjay (University of Miami); Nevo Aviv 

(Northwestern University); Ohanian Lee 

(UCLA); Pagliari Joseph (University of Chicago); Papanikolaou Dimitris (Northwestern 

University); Parker Jonathan (Northwestern 

University); Paul Evans (Ohio State University); Pearce David (New York University); 

Pejovich Svetozar (Steve) (Texas A&M University); Peltzman Sam (University of Chicago); Perri Fabrizio (University of Minnesota); Phelan Christopher (University of 

Minnesota); Piazzesi Monika (Stanford University); Pippenger, Michael K. (University 

of Alaska); Piskorski Tomasz (Columbia University); Platt Brennan C. (Brigham Young 

University); Rampini Adriano (Duke University); Ray, Debraj (New York University); 

Reagan Patricia (Ohio State University); 

Reich Michael (UC Berkeley); Reuben 

Ernesto (Northwestern University); Rizzo, 

Mario (New York University); Roberts Michael (University of Pennsylvania); Robinson 

David (Duke University); Rogers Michele 

(Northwestern University). 

Rotella Elyce (Indiana University); 

Roussanov Nikolai (University of Pennsylvania); Routledge Bryan R. (Carnegie Mellon 

University); Ruud Paul (Vassar College); 

Safford Sean (University of Chicago); 

Samaniego Roberto (George Washington 

University); Sandbu Martin E. (University of 

Pennsylvania); Sapienza Paola (Northwestern University); Savor Pavel (University 

of Pennsylvania); Schaniel William C. (University of West Georgia); Scharfstein David 

(Harvard University); Seim Katja (University of Pennsylvania); Seru Amit (University 

of Chicago); Shang-Jin Wei (Columbia University); Shimer Robert (University of Chicago); Shore Stephen H. (Johns Hopkins University); Siegel Ron (Northwestern University); Smith David C. (University of Virginia); Smith Vernon L. (Chapman University-Nobel Laureate); Sorensen Morten (Columbia University); Spatt Chester (Carnegie 

Mellon University); Spear Stephen (Carnegie 

Mellon University); Stevenson Betsey (University of Pennsylvania); Stokey Nancy 

(University of Chicago); Strahan Philip (Boston College); Strebulaev Ilya (Stanford University); Sufi Amir (University of Chicago); 

Tabarrok Alex (George Mason University); 

Taylor Alan M. (UC Davis); Thompson Tim 

(Northwestern University). 

Troske Kenneth (University of Kentucky); 

Tschoegl Adrian E. (University of Pennsylvania); Uhlig Harald (University of Chicago); 

Ulrich, Maxim (Columbia University); Van 

Buskirk Andrew (University of Chicago); 

Vargas Hernan (University of Phoenix); 

Veronesi Pietro (University of Chicago); 

Vissing-Jorgensen Annette (Northwestern 

University); Wacziarg Romain (UCLA); 

Walker Douglas O. (Regent University); 

Walker, Todd (Indiana University); Weill 

Pierre-Olivier (UCLA); Williamson Samuel 

H. (Miami University); Witte Mark (Northwestern University); Wolfenzon, Daniel (Columbia University); Wolfers Justin (University of Pennsylvania); Woutersen Tiemen 

(Johns Hopkins University); Wu Yangru 

(Rutgers University); Yue Vivian Z. (New 

York University); Zingales Luigi (University 

of Chicago); Zitzewitz Eric (Dartmouth College). 

EXHIBIT 4 

[From the Washington Post, Sept. 27, 2008] 

A BETTER WAY TO AID BANKS

(By William M. Isaac) 

Congressional leaders are badly divided on 

the Treasury plan to purchase $700 billion in 

troubled loans. Their angst is understandable: It is far from clear that the plan is necessary or will accomplish its objectives. 

It’s worth recalling that our country dealt 

with far more credit problems in the 1980s in 

a far harsher economic environment than it 

faces today. About 3,000 bank and thrift failures were handled without producing depositor panics and massive instability in the financial system. 

The Federal Deposit Insurance Corp. has 

just handled Washington Mutual, now the 

largest bank failure in history, in an orderly 

manner, with no cost to the FDIC fund or 

taxpayers. This is proof that our time-tested 

system for resolving banking problems 

works. 

One argument for the urgency of the 

Treasury proposal is that money market 

funds were under a great deal of pressure last 

week as investors lost confidence and began 

withdrawing their money. But putting the 

government’s guarantee behind money market funds—as Treasury did last week—should 

have resolved this concern. 

Another rationale for acting immediately 

on the bailout is that bank depositors are 

getting panicky—mostly in reaction to the 

July failure of IndyMac, in which uninsured 

depositors were exposed to loss. 

Does this mean that we need to enact an 

emergency program to purchase $700 billion 

worth of real estate loans? If the problem is 

depositor confidence, perhaps we need to be 

clearer about the fact that the FDIC fund is 

backed by the full faith and credit of the 

government. 

If stronger action is needed, the FDIC 

could announce that it will handle all bank 

failures, except those involving significant 

fraudulent activities, as assisted mergers 

that would protect all depositors and other 

general creditors. This is how the FDIC handled Washington Mutual. It would be easy to 

announce this as a temporary program if 

needed to calm depositors. 

An additional benefit of this approach is 

that community banks would be put on a par 

with the largest banks, reassuring depositors 

who are unconvinced that the government 

will protect uninsured depositors in small 

banks. 

I have doubts that the $700 billion bailout, 

if enacted, would work. Would banks really 

be willing to part with the loans, and would 

the government be able to sell them in the 

marketplace on terms that the taxpayers 

would find acceptable? 

To get banks to sell the loans, the government would need to buy them at a price 

greater than what the private sector would 

pay today. Many investors are open to purchasing the loans now, but the financial institutions and investors cannot agree on 

price. Thus private money is sitting on the 

sidelines until there is clear evidence that 

we are at the floor in real estate. 

Having financial institutions sell the loans 

to the government at inflated prices so the 

government can turn around and sell the 

loans to well-heeled investors at lower prices 

strikes me as a very good deal for everyone 

but U.S. taxpayers. Surely we can do better. 

One alternative is a ‘‘net worth certificate’’ program along the lines of what Congress enacted in the 1980s for the savings and 

loan industry. It was a big success and could 

work in the current climate. The FDIC resolved a $100 billion insolvency in the savings banks for a total cost of less than $2 billion. 

The net worth certificate program was designed to shore up the capital of weak banks 

to give them more time to resolve their 

problems. The program involved no subsidy 

and no cash outlay. 

The FDIC purchased net worth certificates 

(subordinated debentures, a commonly used 

form of capital in banks) in troubled banks 

that the agency determined could be viable 

if they were given more time. Banks entering the program had to agree to strict supervision from the FDIC, including oversight of 

compensation of top executives and removal 

of poor management. 

The FDIC paid for the net worth certificates by issuing FDIC senior notes to the 

banks; there was no cash outlay. The interest rate on the net worth certificates and the 

FDIC notes was identical, so there was no 

subsidy. 

If such a program were enacted today, the 

capital position of banks with real estate 


rfrederick on PROD1PC67 with SENATE
October 2, 2008 CONGRESSIONAL RECORD — SENATE S10413 

holdings would be bolstered, giving those 

banks the ability to sell and restructure assets and get on with their rehabilitation. No 

taxpayer money would be spent, and the 

asset sale transactions would remain in the 

private sector where they belong. 

If we were to (1) implement a program to 

ease the fears of depositors and other general 

creditors of banks; (2) keep tight restrictions 

on short sellers of financial stocks; (3) suspend fair-value accounting (which has contributed mightily to our problems by marking assets to unrealistic fire-sale prices); and 

(4) authorize a net worth certificate program, we could settle the financial markets 

without significant expense to taxpayers. 

Say Congress spends $700 billion of taxpayer money on the loan purchase proposal. 

What do we do next? If, however, we implement the program suggested above, we will 

have $700 billion of dry powder we can put to 

work in targeted tax incentives if needed to 

get the economy moving again. 

The banks do not need taxpayers to carry 

their loans. They need proper accounting and 

regulatory policies that will give them time 

to work through their problems. 

Mr. HARKIN. I suggest the absence of 

a quorum. 

The PRESIDING OFFICER. The 

clerk will call the roll. 

The assistant legislative clerk proceeded to call the roll. 

Mr. HARKIN. Mr. President, I ask 

unanimous consent that the order for 

the quorum call be rescinded. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

f 

JUSTICE FOR VICTIMS OF 

TORTURE AND TERRORISM ACT 

Mr. HARKIN. Mr. President, I know 

this is kind of a hectic time in Congress. We are trying to get bills passed. 

People want to get home to campaign 

and for the election. But I want to 

highlight a very important bill I am 

working on with my colleague, Congressman BRUCE BRALEY from the 

State of Iowa. 

I would like to urge my colleagues to 

take the time to look at this important 

measure. It is H.R. 5167, the Justice for 

Victims of Torture and Terrorism Act. 

I am hopeful when we are back in November—and we will be back on the 

17th doing business—we will be able to 

pass this bill and send it to the President for his signature. 

Let me highlight some of the bill’s 

most important aspects. H.R. 5167 will 

finally provide justice for American 

prisoners of war and civilians who were 

taken hostage and tortured by Saddam 

Hussein’s regime. 

These victims include 17 American 

prisoners of war who were tortured 

under Saddam Hussein’s regime and 

who sought compensation through the 

courts. These victims also include CBS 

reporter Bob Simon and his cameraman, Roberto Alvarez, who were captured and tortured along with the 

POWs. 

These brave POWs were beaten and 

starved by Saddam Hussein’s regime, 

and they were awarded compensation 

from a U.S. judge until the Bush administration lawyers intervened in the 

case and said it should be thrown out. 

These victims were, again, denied 

justice by the Bush administration 

when President Bush vetoed H.R. 1585, 

the fiscal year 2008 National Defense 

Authorization Act, which would have 

allowed Americans tortured by Saddam 

Hussein’s regime to pursue justice in 

U.S. courts. 

This bill, H.R. 5167, is the result of a 

bipartisan compromise that passed the 

House unanimously—unanimously—on 

September 15. The bill gives the Government of Iraq 90 days to resolve the 

claims of American victims of Iraqi 

torture and terrorism for minimal 

amounts before the waiver that was 

put into last year’s DOD bill would be 

terminated. As a result of the bipartisan compromise made in the House, 

the waiver would remain in place as 

long as the President certifies that 

Iraq has not settled commercial claims 

or that the administration is engaged 

in good-faith negotiations with Iraq to 

settle the claims of the victims. Let 

me point out, the compensation due 

these victims would not be U.S. taxpayer money but coming from the Iraqi 

treasury. It is time these victims are 

compensated. This bill will allow that 

to happen. 

Right now, the Iraqi Government is 

depositing billions—billions—of dollars 

in U.S. banks in the U.S. and billions 

in other places around the world. Surely—surely—they can help compensate 

the 17 American prisoners of war and 

others who were tortured and beaten 

under Saddam Hussein. 

So, again, as I pointed out, it passed 

the House unanimously. I urge my colleagues to take a look at this bill. I am 

hopeful when we come back in November we can take it up and pass it unanimously just like they did in the House. 

With that, Mr. President, I yield the 

floor and suggest the absence of a 

quorum. 

The PRESIDING OFFICER. The 

clerk will call the roll. 

The assistant legislative clerk proceeded to call the roll. 

Mr. SALAZAR. Mr. President, I ask 

unanimous consent that the order for 

the quorum call be rescinded. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

f 

TRIBUTE TO SENATORS 

WAYNE ALLARD

Mr. SALAZAR. Mr. President, I rise 

today to pay tribute to my friend and 

colleague, WAYNE ALLARD, the senior 

Senator from Colorado. As all of us in 

the Senate know, Senator ALLARD will 

retire from the Senate at the end of 

this legislative session. 

Senator ALLARD is a Coloradan 

through and through. Raised on a 

ranch in Walden, CO, a very small town 

in the northwest corner of our State, 

he found his calling in animal medicine. He followed this passion to Colorado State University at Fort Collins, 

where he received his doctorate of veterinary medicine. Even today, he 

proudly wears his tie as a Colorado 

State University Ram. At CSU, WAYNE

met his future wife Joan who was 

studying microbiology at the time. 

After graduating, WAYNE and Joan 

built the Allard Animal Hospital in 

Loveland together. They made their 

home there. They had two wonderful 

daughters, Christi and Cheryl. Living 

and working in Loveland, WAYNE developed a passion for public service. He 

developed a passion for the good that 

could come from serving in politics. 

He began his political career in the 

Colorado State Senate. There, he 

served the people of Weld and Larimer 

Counties in the State legislature for 7 

years. A strong believer in preserving 

the idea of citizen legislators, Senator 

ALLARD championed a Colorado law 

that limits legislative sessions to 120 

days, a law that is still in our Constitution today. It works to ensure that Colorado representatives are able to spend 

the bulk of their time in their communities as opposed to the corridors of the 

State Capitol. 

In 1991, the people of the fourth congressional district elected Senator ALLARD to the U.S. House of Representatives. Five years later, Coloradans 

elected him to serve as Colorado’s 

United States Senator. 

Throughout his career on the Federal 

level, Senator ALLARD has been a 

strong voice for fiscal responsibility 

and ensuring the security of America 

at home and abroad. He has used his 

position on the Senate Appropriations 

Committee to champion priorities important to Colorado. He has played an 

active role on the Senate Budget Committee to restore integrity to the government’s use of taxpayer dollars. 

Yet, even as Senator ALLARD served 

in Washington, he has never forgotten 

where he came from and who he works 

for. He was always traveling throughout Colorado, engaging his constituents, hearing their hopes and concerns. 

It is there, in those communities of 

Colorado, that Senator ALLARD feels 

most at home. 

I have been privileged to work with 

WAYNE ALLARD in the Senate for the 

past 4 years. We fought together for 

clean and safe drinking water for the 

communities in the Lower Arkansas 

Valley and through the construction of 

the Arkansas Valley Conduit which we 

hope will happen in the next several 

years. We worked to ensure the Animas 

La-Plata Water Project in southwest 

Colorado and making sure that project 

is fully funded to implement the historic settlement between Colorado and 

its Indian tribes. Over the past few 

months, we came together to move judicial nominees for the Federal Court 

in Colorado through the often contentious Senate confirmation process. It 

has been a productive and fulfilling 

partnership. 

Now, to be sure, Senator ALLARD and 

I have not always seen eye to eye on a 

number of issues. But in spite of our 

differences, I have always respected 

him. He works hard. He is humble. He 

loves the people of Colorado. 


rfrederick on PROD1PC67 with SENATE