Bob Casey and the Bail Out

Dear Mr. Williams:

Thank you for taking the time to contact me regarding the stabilization of the economy and our financial infrastructure. I appreciate hearing from all Pennsylvanians about the issues that matter most to them.

After passage by the United States Senate and the House of Representatives, the Emergency Economic Stabilization Act (EESA) of 2008 was signed into law by the President on October 3, 2008. The Act helps to stabilize our credit markets, protect retirement and pension savings, modify troubled loans and protect taxpayers from paying for Wall Street's mistakes.

This is a time of great economic uncertainty in our Nation's history. For many families in Pennsylvania and throughout the country, the recession has been part of their lives for many months now. In August, the unemployment rate in Pennsylvania went from 5.4% to 5.8%, and for some parts of the state, it went up far more than half a percentage point. We also learned that in the month of August the foreclosure rate in Pennsylvania went up by more than 60% from the previous year. The job loss and foreclosure rates are indicators of the economic trauma that many families have felt in Pennsylvania and across America.

Like you, I am not happy with the current crisis, and I'm angry about the climate of deregulation and deference to Wall Street over the last eight years that got us into this mess. However, failing to act would not only have punished those who brought us to this situation, it would punish everyone.

The EESA provides up to $700 billion to the Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses and other companies to access credit. After purchasing these assets, the Department of Treasury will hold them until markets for them recover. Treasury would then plan to sell these assets for a profit, recouping most or all of the $700 billion for the benefit of taxpayers.

You should know that Congress significantly improved the original proposal presented by the Bush administration. In the enacted version, executives will be held accountable for their past decisions through limitations on compensation, prohibitions against golden parachutes or excessive retirement packages, and requirements that unearned bonuses be returned. The improved legislation also requires participating companies to provide warrants and other forms of equity so that taxpayers will share in the profits if the stock of these companies goes up as a result of Treasury Department intervention.

The EESA contains several provisions directed at stemming the tide of mortgage foreclosures thereby keeping families in their homes and addressing the root cause which has led to a loss of investor confidence and the freezing of credit markets. It would require the Treasury Department, where possible, to modify troubled loans to help American families keep their homes. It would also expand the HOPE for Homeowners program and require other federal agencies to modify loans that they own or control. To ensure that Treasury did not receive a blank check, the legislation made $250 billion available immediately and requires the President to certify that additional funds are needed. The Treasury must report on the use of the funds and on progress in addressing the crisis. The bill establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner and establishes a special inspector general to protect against waste, fraud and abuse.

The United States is in a financial crisis that could become worse than anything in a generation. In addition, our Nation's problems are already spreading into the global economy. Without continued federal government intervention, there is a real threat to small businesses and jobs, as well as mortgages, pensions and savings.

Enactment of this legislation was just the first in a series of steps we must take to bring about economic recovery. We need to institute rigorous and aggressive regulation of players in the market place in order to prevent the abuses which caused our economic problems.

Again, thank you for sharing your thoughts with me. Please do not hesitate to contact me in the future about this or any other matter of importance to you.

If you have access to the Internet, I encourage you to visit my web site, http://casey.senate.gov/. I invite you to use this online office as a comprehensive resource to stay up-to-date on my work in Washington, request assistance from my office or share with me your thoughts on the issues that matter most to you and to Pennsylvania.

Sincerely,

Bob Casey
United States Senator