No Bailout Without Adequate Protections For Working Families

FOR IMMEDIATE RELEASE
Tuesday, September 23, 2008

CONTACT: Greg Denier
Noreen Nielsen
202-721-0660

WASHINGTON, D.C. – The following is a statement of principle from the Change to Win Leadership Council on the Treasury Department’s bailout plan.

“For most working families, the economy has been in a meltdown for quite some time: they have seen their jobs outsourced, their wages decline, their benefits disappear, their homes foreclosed and the American Dream becoming more remote.

“Now, the Bush Administration wants us to pick up the tab to bail out Wall Street, with no strings attached. Congress should not give the Administration a blank check. It needs to structure a bailout plan that will actually work to stabilize the financial sector without leaving taxpayers holding the bag. And it needs to provide relief to the real victims of this crisis – the working families whose homes are now at risk of foreclosure.

“Accordingly, Change to Win believes that the following principles must govern any bailout plan, and that Senator Dodd’s proposal provides a good starting point.”

  • Taxpayer money; taxpayer accountability. No plan should give the Treasury Secretary unfettered discretion or unduly insulate Treasury’s implementation from accountability to the courts and Congress. Lawmakers should create an independent oversight board that includes nongovernmental representatives, with the authority to review and approve the Treasury Secretary’s decisions and to create rules that will prohibit gaming of the bailout. Some details should be written into the law; for example, the mechanism by which troubled assets purchased by Treasury will be priced should be specified, and regulations should be required to be issued by a date certain, with fast track rules for consideration by the Congress.
  • Taxpayers share in the upside. If a firm wants the benefit of being able to unload bad debt onto the federal treasury, then taxpayers should gain a proportional equity interest in that firm. This will ensure that if the bailout works and the firms become profitable, taxpayers, not simply bankers, benefit from the upside, and the treasury can recoup some of its losses.
  • Prevent this from happening again. No bailout should go forward without a comprehensive, regulatory overhaul of the entire financial system, including revised capital requirements, leverage limits, increased transparency, and limits on compensation schemes. Hedge funds and private equity firms should not be eligible to participate in the bailout and should be subject to meaningful regulation.
  • Curb excessive CEO pay. Wall Street executives − especially those who brought us this mess − shouldn't be pocketing millions while asking taxpayers to bail them out. Any firm that applies for relief must agree to limit the total compensation of all executives.
  • Aid the victims, not just the predators. No bail out of the banks can take place without a freeze on foreclosures and changes to allow bankruptcy courts to require banks to renegotiate the terms of bad mortgages so that people can stay in their homes.
  • Protect pension plans. Pension plans have significant assets invested in the financial sector, and may have incurred large losses as a result of the meltdown. Funding rules should be modified to give plans adequate time to make up funding shortfalls tied to the mortgage meltdown. In addition, Congress should ensure the Pension Benefit Guaranty Corporation (PBGC) has sufficient funds to meet any increased obligations.
  • Invest in the real economy. This bailout should not be used as yet another excuse not to make critical investments in our future. A major public investment − in developing new energy and conservation, rebuilding schools and infrastructure, extending unemployment and food stamps, and helping states avoid crippling cuts in police and health services − is vital to get the real economy moving and put people back to work. There should be no bailout without an agreement to pass a stimulus package before adjournment.

** Note: Media representatives interested in scheduling an interview to discuss Change to Win’s position on the bailout plan should contact Noreen Nielsen at Noreen.nielsen@changetowin.org. **

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