PA Senator Arlen Specter Requests Final Bailout Proposal Be Put on the Internet for Review By the People Before Any Voting - 9/27

I Respect his viewpoints. We need transparency.

September 27, 2008
Secretary of the Treasury Henry Paulson
Chairman of the Federal Reserve Ben Bernanke
Speaker of the House Nancy Pelosi
House Republican Leader John Boehner
Senate Majority Leader Harry Reid
Senate Republican Leader Mitch McConnell
Chairman Christopher Dodd
Ranking Member Richard Shelby
Chairman Kent Conrad
Ranking Member Judd Gregg
Chairman Barney Frank
Ranking Member Spencer Bachus
Senator Bob Bennett

Gentlemen and Speaker Pelosi:

I write with some suggestions on the prospective legislation to deal with the economic crisis and to urge you to take the time necessary to give appropriate consideration to it without rushing to judgment. In the past week, I, like many members, have been reaching out to economists and other experts and have had suggestions coming in from economists and other experts, as well as listening to the suggestions made by other members of Congress.

I urge you to consider lending federal funds with senior security as opposed to having the federal government buy toxic securities. The AIG model could be used. The obvious difficulty for the federal government to go into the market to buy toxic securities is the difficulty in assessing realistic value in the absence of a market. With a lending approach, the government is likely to be able to have lesser expenditures with a better chance of repayment. I further urge a real consideration to the proposals made by House Republicans for an industry-financed insurance program for mortgages which are in default.

As to the overall figure of $700 billion, Congress should have a detailed explanation as to how at which that figure was arrived and the necessity for such a large sum. I favor the proposal to have the federal funds advanced in installments. Consideration should be given to having the first installment less than the $250 billion as currently proposed. On additional installments, it is a good idea to require a presidential certification with the legislation specifying standards which the President should use.

On the stipulation to give Congress to the option to object to the final $350 billion, care must be exercised not run afoul of the Supreme Court decision in INS v. Chadha which requires following regular legislative process with passage by both houses and presidential approval to overrule presidential action and perhaps inferentially legislative conditions.

In a letter dated September 21, 2008 I wrote to Majority Leader Reid and Minority Leader McConnell urging that we not rush to judgment. Many have argued that the situation is so dire that there must be immediate Congressional action in order to avoid a cataclysmic result in the market. My view, as expressed in my letter to Secretary Paulson and Chairman Bernanke on September 23, 2008, is that dire consequences are not likely to result if it is seen that the Congress is moving as fast as practicable to enact a serious, substantial program since there is a solid consensus that some major government aid must be and will be forthcoming.

On September 19, 2008, there were predictions of dire consequences if legislation was not passed by September 26th. The Dow declined by 2.15% from September 19th from 11,388.44 to September 26th to 11,143.13. During this time, there was no major deviation from September 19th: 9/22 – down 3.27%; 9/23 – down 1.47%; 9/24 – down .27%; 9/25 – up 1.82%; 9/26 – up 1.1%. It is noteworthy that the market ended on a positive note at the end of the week, even though Congress had not passed legislation.

I urge time for due deliberation because of the risks when we do not follow regular order. For those who are not acquainted with the details of the legislative process, there should be a focus on the institutions of Congress which have served this nation so well for more than 200 years. The legislative process begins, as we all know, with the introduction of a bill. As yet, we do not have in writing the traditional starting point, a bill which we can study and analyze. Next there are hearings on the bill with testimony from its proponents. Then the committee of jurisdiction listens to opponents or those with other ideas and all the witnesses are subject to questioning, really cross examination, by members of the committee.

Then the committee sits in what is called a markup going over the proposed legislation line by line with votes on suggested changes. A committee report is then filed and the measure is called for floor action in each house with debate and opportunity for amendments. The bills passed by each house are then subjected to a conference where further refinement is made before the legislation is presented to the president.

When we depart from regular order, we are on very risky ground. I am not suggesting that this full time-consuming legislative process be followed; but we should take great care in the consideration of this legislation to compensate as much as possible for the departure from regular order.

I pass on, for your consideration, an idea proposed by former Speaker of the House Newt Gingrich who suggests that the final proposal be put on the internet for 24 hours. Speaker Gingrich suggests, and I concur, that such a proposal would be read by thousands if not millions of people who could then inform the Congress of provisions which are so often slipped into legislation unbeknownst to the members and further give us appraisals of unintended consequences.

As already noted, I wrote to Secretary Paulson and Chairman Bernanke by letter dated September 23, 2008 (copies enclosed for the additional addressees), not yet answered, which raises questions which I would like to have responded to before I am called upon to vote.

We have a duty to the American people to act responsibly to address the problem, protect the taxpayers, and take every measure to ensure that this does not happen again.

Thank you for your consideration of these suggestions.

Sincerely,

Arlen Specter