October 20: Kaptur Urges Bernanke to Alter Response to Economic Emergency
October 20, 2008
“The purchase by the government of bad loans from bad lenders is a bad idea,” said Kaptur, a leading critic of the Wall Street bailout bill that passed Congress in early October.
She characterized the Bush Administration’s response to the crisis as “uneven and incomplete” and urged greater focus on the foreclosure crisis, which underlies the economic meltdown. “I view the bursting of the housing bubble as the key element of the meltdown, but nothing is being done to address the rising foreclosure rate in Ohio ,” she said. “If we do nothing about workouts, we will see the problem explode in the last quarter and next year.”
The author of the NO-BAILOUT bill in Congress, Kaptur told Bernanke the government should rely on “market discipline” to correct the situation, along with greater involvement by the Federal Deposit Insurance Corporation. “The FDIC should use its full emergency powers to protect the credit of those banks, with no exception," she said. "That’s not being done. The most important thing is to inject confidence into the system."
Kaptur proposed three additional steps to deal with the crisis: (1) use of net worth certificates rather the purchase of troubled assets by the government; (2) elimination of mark-to-market accounting requirements; and, (3) aggressive actions against wrongdoers who were involved in shoddy underwriting practices and other possibly illegal activity.
Kaptur also warned against a growing concentration of power in the nation’s largest banks at the expense of local and community banks. “We are rewarding the irresponsibility of the big banks and imposing new conditions on the community banks that were very much not a part of those making the bad loans," she said.