I have composed a letter which I am faxing to the leadership of Congress. If you would like to join my efforts, copy and paste this letter and fax it to your Congressperson:
Sen. Harry Reid (D) 202-224-7327
Sen. Jim DeMint (R) 202-228-5143
Sen. John Ensign (R) 202-228-2193
Sen. Jim Bunning (R) 202-228-1373
Sen. Chuck Grassley (R) 202-224-6020
Sen John McCain (R) 202-228-2862
Sen. John D. Rockefeller 202-224-7665
Sen. Dianne Feinstein 202-228-3954
Sen. Ron Wyden 202-228-2717
Sen. Evan Bayh 202-228-1377
Sen. Barbara Mikulski 202-224-8858
Sen. Bill Nelson 202-228-2183
Sen. John Kerry 202-224-8525
Sen. Daniel Inouye 202-224-6747
Sen. Hillary Clinton 202-228-0282
Here is a link to a website which lists the websites of every member of the House of Representative. You should be able to find your Congressperson’s fax number on their website.
Here is a link to the website for the House Financial Services Committee:
This is a link to a member’s directory where you can find your representative:
Here’s the letter:
I oppose the Paulson plan and believe you should consider an alternative plan detailed below. This plan addresses not just the banking crisis but the economic slowdown as well.
The problem the US faces is a shortage of capital. The Paulson plan attempts to address that by having the US taxpayer provide that capital through the Treasury Department. This plan will benefit poorly run institutions that are at the root of the housing problem. These poorly run institutions should not be bailed out of their bad decisions.
A recession is likely if not already underway and for any plan to work, it must address this basic issue. Since the issue is really a shortage of capital, there are a number of steps we can take that reduces the percentage of that capital that must be provided by the taxpayer.
- Fannie Mae and Freddie Mac should be nationalized and used to coordinate any use of taxpayer funds. These institutions are a big part of the problem but we will not solve that problem by creating another parallel bureaucracy. Hiring outside asset managers to run a new system doesn’t make sense when we already have the infrastructure in place at Fannie/Freddie.
- To support the recapitalization of the banking industry, all ownership restrictions on US banks should be lifted immediately. If Wal Mart wants to buy a bank, we should allow it. If private equity funds or Sovereign Wealth funds want to buy a stake, we should allow it.
- To address the recession, take the following actions:
- Pass Rep. Ted Poe’s H.R. 6690 defining the dollar as 1/500th of an ounce of gold. This would have an immediate and electrifying effect on global capital markets. Overnight you would see long term interest rates come down, commodity prices (including oil) drop dramatically, and a rush to dollar-denominated assets. U.S. funding costs would come down, and equity markets would rally. Banks would find it easier to recapitalize.
- Corporate and capital gains tax cuts could be instituted, and the Bush tax cuts made permanent. This would again rally our equity and bond markets, draw more capital into the U.S., and hasten recovery.
- As much as possible, domestic discretionary spending should be cut, helping to lower interest rates, increase productivity, and lower inflation.
These three items would attract capital to the US. That is the key problem we have right now – a shortage of capital and these three items will address that.
- Take other actions to reduce the stress in the banking system. The goal should be to attract capital to these institutions and shore up their remaining capital. Here are several additional steps that can be taken:
- Repeal Sarbanes-Oxley – this law has driven capital away from the US by making the cost of doing business here versus other locales prohibitive.
- Allow banks forbearance in complying with FASB 157 and mark to market accounting rules.
- Banks should be required to eliminate their dividends. The top 20 banks pay over $400 billion in dividends annually. If Paulson is correct and the need is $700 billion, taking this step will provide a majority of the funds required.
- Banks which cannot raise private capital can be recapitalized by the government buying preferred stock in the companies. Any company that takes this option should be required to cut the pay of its executives or fire them if necessary. Goldman Sachs was able to raise capital by selling preferred stock to Warren Buffet. The US taxpayer should get similar terms if we are to provide capital to failing banks.
If it is still believed necessary, the Treasury can still have a bad asset purchase program, but this should be run through Fannie/Freddie and they should only pay current market prices for these assets. The size of this asset purchase program should be much less than the currently requested $700 billion.
Whatever is done, please remember that the need is for more capital. That capital does not have to be provided by taxpayers. If you use free market principles, private actors will step up and provide the needed capital.
Do the right thing. Protect the US taxpayer and help our economy recover.
Joseph Y. Calhoun, III