U.S. Representative Rick Larsen shared the following information with his constituents:

Our nation faces an economic crisis that has the potential to impact every family in the country. I believe that the federal government must respond to this crisis.  My colleagues in Congress and I are working to find the best way forward. 

I want to help explain the stakes we face and update you on our work in Congress, but first, I want to invite you to contact me with any thoughts you have. Please don’t hesitate to call my office in Washington, D.C. at (202) 225-2605 or email me at rick.larsen@mail.house.gov.

This is a critical time for our country, and I appreciate hearing from you.

What would the Financial Rescue Package do?

To get our economy back on track, the Administration asked Congress to provide as much as $700 billion to purchase bad debt from financial institutions.  But I am not willing to write Wall Street a blank check to get them out of this mess. 

Congress has already rejected the Administration’s “blank check” proposal. We are now drafting a new plan that includes help for homeowners and protections for taxpayers.

Buying bad debt from troubled banks could unclog our financial system, allowing banks to once again provide the capital our economy needs to function, so families and businesses across the country are able to get the loans they need. 

Taxpayers would be investors in any financial institution we help, and we should expect to get a fair return on our investment when the economy rebounds.

Here are some of our changes to the Administration’s proposal:
 

• No golden parachutes or exorbitant bonuses for Wall Street executives at taxpayer expense

• Help for families who have been hit hard by the foreclosure crisis

• A fair return on our investment and a stake in any future profit 

• Strong oversight and no conflicts of interest

Why do we need a Financial Rescue Package?

The economic rescue package we are considering in Congress is not about helping banks or Wall Street. It’s about all of us -- American families across the country who want our economy to recover and grow.  Our economy can’t grow to create jobs without the availability of credit.  If you own a small business and need a loan, you could be impacted.  If you are planning to buy a home, you could be impacted.  If your son or daughter wants to go to college, you could be impacted.

Due to the credit crunch we face, banks in Washington state and around the country have already tightened lending, and families and business are finding it more difficult to get the loans they need in their everyday lives.

Who could be hurt if we don’t intervene?

• A family who needs a home loan

• A student who needs private loan to attend college

• A small business owner who needs a loan to get started or expand

• Your neighbor who could lose their job if their employer is forced to cut back

• Your aunt planning to retire next year

The Seattle PI editorial board put it well: “…unless the federal government uses every resource at its disposal, the very economic foundation of this nation could crumble. In an instant there would be no credit for car loans, condos or companies. We, not Wall Street, would be left in the rubble. Without action, we could lose our jobs, our homes and more at a greater cost than a $700 billion intervention. This is that big a deal.” 

How did we get here?

For over a decade, recklessness on Wall Street and a lack of aggressive regulation and enforcement made it very easy for Americans to get credit.  Easy credit and a strong housing market led mortgage lenders to make loans that some borrowers couldn’t afford.  Eventually the housing bubble burst, and many borrowers with adjustable rate mortgages were stuck with homes worth less than they expected and mortgage payments they could not afford.  As a result, many homeowners began to default on their mortgages. 

At the same time, these mortgages were packaged together as “mortgage-backed securities” and sold to investors around the world.  When the housing market began to decline and borrowers could no longer pay their mortgage payments, the market value of these financial assets plummeted, and investors stopped buying them.  This dealt a fatal blow to some of our country’s oldest financial institutions, which risked running out of money and collapsed.  Other investment banks found themselves in serious trouble and unable to lend money to smaller banks. These smaller, community banks depend on funds from larger institutions to loan money to your cousin who wants to buy a home, or your neighbor looking to expand his business. 

The Small Business Administration reports that small business loans made by commercial banks have already declined by 25 percent from last year.  I have heard stories in Skagit County, for example, of construction, manufacturing, childcare and restaurant businesses that may be forced to shut down because they have been turned down for needed loans.   If credit dries up entirely, our economy could grind to a halt.

As I write this, Congress is working to respond to the economic crisis.  Please be assured that I am fighting to make sure that we get the best plan for taxpayers and the best plan for our economy.  Please contact my office with any thoughts you have.