“Yesterday, the House of Representatives voted on a financial rescue plan that had been negotiated by Congressional leaders of both parties and my administration,” Bush reminded the audience. “Unfortunately, the measure was defeated by a narrow margin. I’m disappointed by the outcome, but I assure our citizens and citizens around the world that this is not the end of the legislative process.”

“Producing legislation is complicated, and it can be contentious. It matters little what a path a bill takes to become law,” he continued. “We’re at a critical moment for our economy, and we need legislation that decisively address the troubled assets now clogging the financial system, helps lenders resume the flow of credit to consumers and businesses, and allows the American economy to get moving again.”

“I recognize this is a difficult vote for members of Congress. Many of them don’t like the fact that our economy has reached this point, and I understand that. But the reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act. The dramatic drop in the stock market that we saw yesterday will have a direct impact on the retirement accounts, pension funds, and personal savings of millions of our citizens. And if our nation continues on this course, the economic damage will be painful and lasting.” World and US markets today are up after severe declines yesterday. Most have recovered 30% of their previous losses, meaning that the potential government expenditure was similar to the market losses.

Bush then said that he knows “many Americans are especially worried about the cost of the legislation.” He then attempted to justify the cost. “The bill the House considered yesterday commits up to 700 billion taxpayer dollars to purchase troubled assets from banks and other financial institutions. That, no question, is a large amount of money. We’re also dealing with a large problem. But to put that in perspective, the drop in the stock market yesterday represented more than a trillion dollars in losses.”

If passed, the bailout plan would have allowed for the United States government to purchase devalued mortgage backed securities, resulting from the subprime mortgage crisis, from troubled financial institutions. The US Treasury Secretary Henry Paulson said the plan could cost up to $700 billion.

PRIMARY SOURCE:
Office of the Press Secretary
September 30, 2008

President Bush Discusses Economic Rescue Plan

THE PRESIDENT: Good morning. Yesterday, the House of Representatives voted on a financial rescue plan that had been negotiated by Congressional leaders of both parties and my administration. Unfortunately, the measure was defeated by a narrow margin. I’m disappointed by the outcome, but I assure our citizens and citizens around the world that this is not the end of the legislative process.

Producing legislation is complicated, and it can be contentious. It matters little what a path a bill takes to become law. What matters is that we get a law. We’re at a critical moment for our economy, and we need legislation that decisively address the troubled assets now clogging the financial system, helps lenders resume the flow of credit to consumers and businesses, and allows the American economy to get moving again.

I recognize this is a difficult vote for members of Congress. Many of them don’t like the fact that our economy has reached this point, and I understand that. But the reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act. The dramatic drop in the stock market that we saw yesterday will have a direct impact on the retirement accounts, pension funds, and personal savings of millions of our citizens. And if our nation continues on this course, the economic damage will be painful and lasting.

And I know many Americans are especially worried about the cost of the legislation. The bill the House considered yesterday commits up to 700 billion taxpayer dollars to purchase troubled assets from banks and other financial institutions. That, no question, is a large amount of money. We’re also dealing with a large problem. But to put that in perspective, the drop in the stock market yesterday represented more than a trillion dollars in losses.

Furthermore, both the nonpartisan Congressional Budget Office and the Office of Management and Budget expect that the legislation considered would ultimately cost the taxpayer far less than the $700 billion. Because the government would be purchasing troubled assets and selling them once the market recovers, it is likely that many of the assets would go up in value over time. Ultimately, we expect that much — if not all — of the tax dollars we invest will be paid back.

As much as we might wish the situation were different, our country is not facing a choice between government action and the smooth functioning of the free market. We’re facing a choice between action and the real prospect of economic hardship for millions of Americans. And for the financial security of every American, Congress must act.

My administration will continue to work closely with leaders of both parties on Capitol Hill. I appreciate their determined efforts. While Congress is out today for the Jewish holiday, my administration will be talking to Congressional leaders today about how we can move legislation forward when members begin returning to the Capitol tomorrow. Our economy is depending on decisive action from the government. The sooner we address the problem, the sooner we can get back on the path of growth and job creation. This is what elected leaders owe the American people, and I am confident that we’ll deliver. Thank you.

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Over the past eight years while Bush has been in office, Republicans have gradually became disgruntled with him as government spending increased at alarming levels – the biggest increases in history. This final slap in the face dramatically increasing spending and government regulation in the free market is the last straw for many Republicans, who wonder what happened to the conservative principles Bush ran for office on.

Let’s take a look at how we got to this crisis. Lenders like Fannie Mae and Freddie Mac chose to give loans to high-risk consumers; borrowers they knew were likely to default. 15% of their total mortgages went to “Alt-A” and subprime loans. They calculated that the government would bail them out if the homeowners defaulted. In 2004, Freddie Mac’s Chief Risk Officer wrote a memo warning the company that its problematic loans were endangering the company, but it was ignored. Like other financial institutions suffering collapse currently, Fannie Mae and Freddie Mac are now under investigation for misleading investors about their assets and pushing agencies to inflate their ratings. Last year, Freddie Mac was charged with securities fraud, resulting in its executives paying hundreds of thousands of dollars in fines and restitution.

There is talk of a “growing credit crisis” requiring this bailout. Do you see your friends losing their homes and going bankrupt? There is a relatively small number of people across the country going into foreclosure as a result of taking on mortgages they could not afford. Many of the homes going into foreclosure are owned by investors who made unwise decisions.

There is a prevailing liberal mentality that everyone in America is entitled to own a home. This entitlement attitude is what helped lead to this collapse. The vast majority of people around the world cannot afford to own their own home, and in third world countries are lucky if they even have a place to live with the amenities we expect in the western world. It’s unrealistic to expect every American to own their own home when there are millions of people elsewhere who would be grateful just for an apartment with working facilities.

As for the financial institutions, let them fail – another financial institution will buy them out, as always happens when a company goes under. Bank of America is currently making plans to buy out Countywide Financial, another lender which gambled in risky subprime loans. What is so wrong with allowing the wealthy banks and their shareholders to suffer the consequences of their poor investments? Isn’t the whole point of the stock market the risk of losing money in a gamble? According to Rep. Kay Granger, R-Texas, she is receiving hundreds of calls from constituents saying things like, “We pay our bills. Why can’t Wall Street pay theirs?” An overwhelming majority of Americans oppose the bailout. Sen. Bob Corker, R-Tenn., said that of 3,500 calls his office has received on the bailout, only 95 said they support it.

Why did the government decide to bail out AIG, an insurance company, but not Lehman Brothers, a bank that has been in business for over one hundred years? AIG is currently being investigated by the FBI for fraud, for overvaluing its Alt-A and subprime mortgage-backed securities. Milton Friedman once wrote, and current Federal Reserve Chairman Ben Bernanke agrees, that the Great Depression was caused by the Federal Reserve’s manipulation of money – choosing to aid certain banks over others. This is strikingly similar to what we’re seeing proposed today – having the government bail out certain mammoth financial institutions but not others.

Democrats are scrambling to get Republicans to vote with them for the bailout, hoping for cover when the voters realize down the road that it was a bad idea. Democrats know the bailout isn’t going to do any good, but when the economy inevitably rebounds, they can point to the bailout as the reason why and take credit.

President Bush said in a speech to the American public this week that the bailout wasn’t just about helping big business, but was necessary to help out families affected by the big firms’ losses. This is a false dichotomy, since it assumes there aren’t other resources available to help out homeowners in danger of foreclosure. In reality, today there are plenty of consumer credit programs, churches, charities, and solid lending institutions willing to step in on a micro or macro level to ameliorate the losses.

Now we’re finding out that the bill includes a clause that directs 20% of any profits from the bailout into a Democrat slush fund – the “Housing Trust Fund” which funds such groups as the anti-American National Council of La Raza and ACORN, considered by many to be the most corrupt voting registration organization in the country.

Rep. Mike Pence from Indiana and Sen. Richard Shelby from Alabama are two of the House Republicans leading the opposition to the bailout. Former Speaker of the House Newt Gingrich is also speaking out, suggesting that a loan instead of a flat giveaway would be better. Gingrich has called for Paulson’s resignation. Rep. Ron Paul is all over the airwaves saying “I told you so.” According to WorldNetDaily, at least 165 economists have signed a letter addressed to Congress warning of pitfalls in the bailout plan, regarding its fairness, ambiguity, and long-term effects. We can only hope that cooler heads in the Republican Party, perhaps McCain, prevail and Congress backs off from this foolish plan. The economy always rebounds in a free market society – it was government that caused the Great Depression.

Rachel Alexander and her brother Andrew are co-Editors of Intellectual Conservative. Rachel practices law in Phoenix, Arizona and blogs for GOPUSA.com.

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