A.I.G. is a Self-Inflicted Wound

Controversy was Infuriating, yet Predictable and Instructive:
Over the weekend, the American people learned about the millions of dollars in bonuses received by AIG employees (which has received nearly $200 billion in taxpayer money), most of whom were directly involved in packaging AIG’s risky financial derivative instruments which have contributed to the recession we are now in. The American people, whose money has been used to prop up these entities with no strings attached, are entitled to be angry; however, the bill that Congress passed on March 19th to tax the bonuses at 90% was nothing more than an effort to absolve many in Congress who hurriedly passed the stimulus bill (which had the Dodd/Geithner language protecting the bonuses) on February 13th. The President signed his stimulus bill a mere four days later on February 17th in Denver.

The American people clearly remember how the bill was negotiated by the White House and a small group (Pelosi, Reid, Dodd, etc.) behind closed doors and unveiled at 11pm on February 12th. Approximately 15 hours later at 2pm, Congress rammed through the 1,100 page stimulus.

The bill we passed this week, apart from being an unconstitutional violation of Article I, Section 9, Clause 3 of the Constitution (which prohibits bills of attainder and ex post facto laws), was a political cover vote arising from a self-inflicted wound – or manufactured problem, if you will. It should have been called the “Don’t blame us – we didn’t read the stimulus we voted for” Act. The easy vote would have been to vote for this bill, but I have little interest in shredding the Constitution because a few of my colleagues want to feign outrage. This debacle is symptomatic of the backroom deals which have led to outrage after outrage stemming from the massive bailouts, stimulus, and omnibus bills being forced through Congress without hearings, amendments, or votes allowed on alternatives. One newspaper editorial described the episode as “economic populism run amok” and “legislating by rage, fear and panic.”

The more important questions we need answers to are: 1) Did Treasury Secretary Tim Geithner lobby Chairman Chris Dodd about the language in the amendment which led to these bonuses being allowed, and why?; 2) Why did Chairman Dodd allow the language to be changed to protect bonuses after hundreds of billions in taxpayer dollars had been keeping AIG afloat?; and 3) Did the White House know of the AIG bonuses when the language protecting the bonuses was inserted in the stimulus?

Many may be asking themselves, “Ok, Congressman Marchant, but what would you have done about this?” This is a valid question. Because Speaker Pelosi brought this bill up under suspension of the rules (which prohibits amendments or votes on alternative bills), the constitutional bill I cosponsored (H.R. 1577) authored by my colleague, Erik Paulsen of Minnesota, was not able to receive a vote. It would have required the Secretary of the Treasury to pursue every legal means to stay or recoup certain incentive bonus payments and retention payments made by AIG to its executives and employees, and require the Secretary's approval of such payments by any financial institution who receives funds under title I of the Emergency Economic Stabilization Act. It would also have conditioned any future funds to AIG on the repayment of the bonuses by those who received the bonuses. I have also joined as a cosponsor of H. Res. 199 authored by my colleague Todd Tiahrt of Kansas which expresses the sense of Congress that we should stop passing massive government bailouts.

This episode was predictable and instructive. Legislation as large as the bailouts/stimulus/omnibus should only be passed with the requisite number of days for legislators and the public to read the legislation thoroughly. Any future attempts to expedite the legislative process under the guise of an emergency will likely lead to more scandalous episodes.  

Follow me on Twitter

The Possibilities are Endless:
“New media” is the phrase being given to describe the new outlets that are constantly being created for people to connect to each other. This includes a plethora of social networking sites. My goal, as your Congressman, is to maximize my ability to get news to you about my work both in Washington, D.C. and in the 24th District in a timely manner. I am new to twitter, but I think this can be a great tool for you to stay connected with me. Right now, I intend to use it to post pictures, link to articles I have read, and perhaps make short statements about breaking news. You can find me at http://twitter.com/RepKenMarchant. 

This week’s votes on the floor, hearings, and markups

Each week I get the opportunity to represent you in Congress by: 1) voting on legislation that comes to the House floor; and 2) participating in committee hearings and markups for the Committee on Financial Services. 

Key House Floor Votes

AIG Bonus Tax:
Outlined above.

Committee on Financial Services

Regulation of Systemic Risk:
On Tuesday, March 17th, the full Committee held a hearing entitled, “Perspectives on Regulation of Systemic Risk in the Financial Services Industry.” Testifying before the Committee were representatives from: American Bankers Association; AFL-CIO; Consumer Federation of America; Independent Community Bankers Association; American Enterprise Institute; Financial Services Roundtable; and Securities Industry and Financial Markets Association.

Affordable Homes:
On Thursday, March 19th, the Subcommittee on Housing and Community Opportunity held a hearing entitled, “Examining the Making Home Affordable Program.” Testifying before the Subcommittee were representatives from: Federal Housing Finance Agency; HUD; Center for Responsible Lending; Center for Economic and Policy Research; Center for American Progress Action Fund; HOPE Now Alliance; Heritage Foundation; UNC-Chapel Hill; and Yale University.

Consumer Credit:
On Thursday, March 19th, the Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled, “H.R. 627, the Credit Cardholders’ Bill of Rights Act of 2009; and H.R. 1456, the Consumer Overdraft Protection Fair Practices Act of 2009.” Testifying before the Subcommittee were representatives from: Office of Thrift Supervision; National Credit Union Administration; Board of Governor of the Federal Reserve System; American Bankers Association Card Policy Council; Independent Community Bankers Association; Credit Union National Association; National Small Business Association; U.S. PIRG; Consumer Federation of America; and Morrison & Foerster.

Recommended Reading

1) On March 10th, I sent out a special bulletin about the President’s decision to lift the ban on taxpayer funding of embryonic stem cell research. I received hundreds of thoughtful responses both for and against the decision and responses expressing respectful disagreement with my concerns about the lack of framework issued in the executive order. I want to thank everyone who shared their thoughts. The piece I have posted here is a thoughtful article again, coincidentally, by Charles Krauthammer that originally appeared in the Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/12/AR2009031202764.html. More than anything, I found this article provocative, thought-provoking, and respectful of a range of views regarding the debate. And, given that Dr. Krauthammer is a paraplegic, he certainly speaks from experience with both passion and clarity on the issues involved.

2) I just finished a great book called Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed. This book, which I recommend, goes into painstaking detail into the causes and underpinnings of the Great Depression and allows readers to draw lessons that can help us even today as we work through our current recession. The book, which focuses on the central banks and bankers of the U.S., France, England, and Germany, explores post-World War I international finance and the fear that many felt inflation posed to capitalism. For those seeking to understand the interconnectedness of the global economy, this is great read.

Great Quotes in History

“Increased government spending can provide a temporary stimulus to demand and output but in the longer run higher levels of government spending crowd out private investment or require higher taxes that weaken growth by reducing incentives to save, invest, innovate, and work.”
-Dr. Martin Feldstein, Harvard Economist and former Chairman, Council of Economic Advisors

I am honored to represent the 24th District of Texas, and appreciate your interest in my e-newsletter.  Please contact my District or DC office with any further questions you may have or visit my website at www.marchant.house.gov.