Ensign
Urges Paulson to Focus More On
Recapitalizing Banks
Plan would be Less Costly,
More Efficient and Strengthen Economy
In a letter to the Department
of Treasury, Senator John Ensign urged Secretary Henry Paulson to focus the
funding available through the recently-passed Financial Rescue legislation on
recapitalizing banks. As opposed to purchasing toxic assets with little value,
this plan would be less costly, more efficient and would better stabilize our
struggling economy.
“I’m encouraged by Treasury’s
recent decision to put a portion of the funds toward this plan, but we should
put more resources into recapitalizing our banks if necessary,” said Ensign.
“We need to go further because we risk a deep economic downturn, and we need to
ensure that the taxpayer is protected. The purchase of senior preferred stock
could do both.”
The Financial Rescue
legislation, formally known as the Emergency Economic Stabilization Act,
provides the Secretary of Treasury with this authority.
Included
below is a copy of the letter Ensign sent to Secretary Paulson today.
October 14, 2008
The
Honorable Henry M. Paulson, Jr.
Secretary of the Treasury
Department of the Treasury
1500
Pennsylvania Avenue
Washington, DC 20220
Dear
Secretary Paulson:
As you know, our nation is currently dealing with
extraordinarily challenging economic circumstances. The stock markets have
experienced some of the most dramatic swings in American history. The credit
markets have seized up, making it difficult for even those with good credit to
borrow money for important things like buying a car, making payroll, getting
student loans, or purchasing a home. Individual retirement accounts, pension
funds, and 401k plans have lost tremendous value, delaying the retirement plans
for millions of Americans. The financial conditions in this country are dire,
and we could be facing a deep downturn in our economy.
Recently, Congress passed the Emergency Economic
Stabilization Act to help stabilize the financial industry and the economy as a
whole. Now that this legislation is law, we must make sure that the $700
billion authority provided to you to craft appropriate financial relief is
executed in the most effective manner possible.
I am encouraged by your recent announcement that $250
billion will be dedicated to recapitalizing the banking system in return for
senior preferred stock positions. I would like any taxpayer money used in the
program to go toward recapitalizing the banking system rather than buying toxic
assets from financial companies. The government’s
investment will enable banks to lend multiple dollars for every dollar of
capital injected, providing better policy leverage and potential taxpayer return
through direct investment.
During a systemic banking crisis, history has shown that
the financial system must be recapitalized to avoid a dangerous credit
contraction. With more capital in the system, banks should be more willing to
lend to each other, to companies, and to individuals. Capital instruments
purchased by the government should be non-voting and priced at market rates.
There should also be covenants attached to the capital investments that prevent
participating banks from exploiting these public investments.
This could then encourage new investors to enter the
market. Existing shareholders should not object since it would stabilize share
prices and increase them over time. By placing the taxpayers in this
senior equity position, they will share in any profits that a company may
realize after receiving federal assistance.
I am pleased that the executives of participating companies
will have limits placed on their compensation packages because these corporate
officers should not receive huge bonuses or “golden parachutes” after receiving
millions or billions of taxpayer dollars. Executive compensation at
participating companies should be based on future performance. Such limits
combined with the equity stake make it more likely that companies will act
responsibly to restore themselves to financial health so that they may quickly
relieve themselves of government involvement.
By injecting capital directly into firms, we can also avoid
the potential problem of having the government buy and hold toxic assets at
above market value, which would provide the greatest benefit to the worst
offenders. A capital injection plan is more transparent and will distort the
marketplace less than purchasing bad assets. If this is handled correctly, the
government can ultimately spend far less than the bill’s $700 billion price tag
while still bringing stability to our economy.
I am encouraged by your
recent decision to recapitalize banks. I hope that the Treasury
concentrates its resources on this more effective strategy for stabilizing the
banking sector.
Sincerely,
Senator
John Ensign
Ensign Urges Use Of Id To Comply With
Federal Election Law
Senator John Ensign released the following statement
regarding the importance of maintaining the highest level of integrity in
Nevada’s election:
“A cherished right in our country is the fundamental right
to vote. Americans deserve the right to vote, and every vote should be
counted.
“Early voting begins this week. We face a crisis of
confidence in the integrity of this election due to a top level investigation
into ACORN voter registration fraud. Last week, the Social Security
Administration asked Nevada’s and five other Secretaries of State to review
their voter registration verification procedures to comply with the federal Help
America Vote Act.
“I urge all Nevada officials responsible for conducting
this election, whether they are Republicans or Democrats, to make sure the
public and all poll workers understand the Help America Vote Act. This Act
requires new voters to present identification when registering to vote or
casting their ballots for the first time. Every Nevadan should know that an
acceptable form of identification will ensure a smooth process when voting and
to come prepared. Doing so ahead of time will reassure everyone that their
votes will count on November 4.
“Nevada officials should implement the highest standard to
ensure that Nevada’s election maintains maximum credibility. I believe that
requiring photo identification is the best way to do that. Given the current
irregularities relating to fraudulent voter registration, this would go a long
way in maintaining confidence in our election process. We are the symbol of
Democracy to the world, and our voting and election standards need to strive for
perfection.”
Background Information from the DOJ on the Help America Vote
Act of 2002
