Joe Pitts, September 26, 2008

It has been an unfortunately historic week in Washington as Congress and the President work toward a plan to help the ailing financial system. One thing is clear: something must be done. Our capitalist system relies on the availability of credit to continue functioning. The fallout from the subprime credit crisis has spread through the credit markets like a disease and is putting the health of the overall economy in jeopardy.

I am extremely frustrated that Wall Street that got too fast and loose trying to chase profits and now we find ourselves in a situation where we are discussing a bail out. Banks were willing to lend to just about anyone, and people were taking out mortgages that they could not afford, either because they did not understand the terms, or because they did not care to act responsibly. Many of our financial institutions threw out the policies that have long kept banks solvent, policies like limited and off-set risk. Unfortunately, the fate of Wall Street is inextricably tied to the fate of Main Street.

There is bipartisan consensus in Washington that something must be done, but as of now, there is not yet consensus on what is the best course of action. I have heard from many, many constituents who are deeply opposed to writing a $700 billion taxpayer check to the Secretary of the Treasury who is able to spend that with little to no oversight.

As we continue negotiations to determine what action will be taken, I want to explain the principles behind which House Republicans -- myself included -- are approaching the negotiations.

We believe Wall Street, not the taxpayers, should fund the recovery. Rather than providing taxpayer funded purchases of frozen mortgage assets to solve this problem, we should adopt a plan to insure mortgage backed securities through payment of insurance premiums. This would keep the government from having to purchase securities comprised of bad mortgages by instead providing a favorable atmosphere in which private capital is encouraged to purchase the securities.

We firmly believe it is in the best interest to encourage the introduction of private capital into the system rather than taxpayer dollars. Instead of injecting taxpayer capital into the market to produce liquidity, private capital can be drawn into the market by removing regulatory and tax barriers that are currently blocking private capital formation. Too much private capital is sitting on the sidelines during this crisis.

We must have immediate transparency, oversight, and fundamental market reform. The current lack of transparency makes it nearly impossible for the credit markets to function. People are not willing to purchase assets of which they do not know the value.

We should immediately mandate that the government sponsored enterprises -- Fannie Mae and Freddie Mac, which are responsible for a huge portion of all mortgages in the U.S. -- no longer deal in subprime, risky mortgages.

We believe the Securities and Exchange Commission (SEC) should audit reports of failed companies to ensure that the financial standing of these troubled companies was accurately portrayed.

We fundamentally believe that Wall Street executives should not benefit from taxpayer funding -- individuals that poorly managed institutions must be held responsible for their decisions, and this does not include compensation packages handed out by the American taxpayer.

Though many, including individuals in the Executive Branch, are demanding swift action, we have a responsibility to the American people to exercise due diligence in evaluating this plan. The dollar amount being suggested represents a massive figure. The only thing worse than doing nothing would be to rush into a plan that does more harm than good.

Congressman Joe Pitts, a Republican, represents Pennsylvania's 16th Congressional District, which includes Lancaster County and parts of Chester County and Berks County.