NH GOP - Chairman Fergus Cullen Responds to Obama’s Lack of Leadership on Reforming our Financial Markets

CONCORD – New Hampshire Republican Party Chairman Fergus Cullen released the following statement on Barack Obama’s lack of leadership and hesitancy about reforming our financial markets:

“While John McCain outlined a comprehensive plan today to reform our financial markets through the formation of a Mortgage and Financial Institutions Trust, Barack Obama has called upon his economic team to ‘refrain’ from putting together any sort of plan that will overhaul our financial system. This is not the first time that Granite Staters have seen Barack Obama hesitate in a time of crisis and it is part of a disturbing trend that shows he is simply not ready to lead.”

BACKGROUND

Obama pauses on economic plan

By Scott Helman, Boston Globe blog

http://www.boston.com/news/politics/politicalintelligence/2008/09/obama_pauses_on.html

MIAMI -- As Wall Street and Main Street await details of the US government's massive mortgage bailout plan, Barack Obama announced this morning that he would wait on laying out his own proposed economic fix.

Obama, who is holding a confab shortly with his top economic advisers, reaffirmed broad principles he says any proposed solution must promote -- protections for homeowners and taxpayers, stricter government oversight for financial institutions, and cooperation with other leading industrialized nations. But despite hints yesterday that he would outline a sweeping economic plan this morning, Obama said that, after consulting with Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke, he would hold off.

"I have asked my economic team to refrain from presenting a more detailed blue-print of how an immediate plan might be structured until the Treasury and the Federal Reserve have had an opportunity to present their proposal," Obama said in a statement. "It is critical at this point that the markets and the public have confidence that their work will be unimpeded by partisan wrangling, and that leaders in both parties work in concert to solve the problem at hand."

So far this morning, we know that the Securities and Exchange Commission halted short-selling of some financial stocks and that the Federal Reserve will put up $50 billion to guarantee money market investments.

Obama did issue a statement laying out his broad principles and general support for the Fed-Treasury plan.

“The events of the last few days have made it clear that we must take further bold and decisive action to shore up confidence in our financial markets and avoid a deepening economic crisis that could jeopardize the life savings and well-being of millions of Americans. I support the effort of Secretary Paulson and Federal Reserve Chairman Bernanke to work in a bipartisan spirit with the Congressional leadership to find a systemic solution to our deepening crisis, and I will closely examine the specifics of their effort and the opportunities for swift action. As I review the emerging details of Fed-Treasury proposal with my top economic advisors this morning I will be guided by four basic principles:

“First, we cannot lose sight that we are in the midst of a broad economic crisis that also requires immediate action to create jobs and help support distressed homeowners and communities. For too long, this Administration has been willing to hit the fast forward button in helping distressed Wall Street firms while pressing pause when it comes to saving jobs or keeping families in their homes. Swift and unprecedented action to shore up Wall Street must come alongside equally swift and serious efforts to help struggling families on Main Street , create new jobs, and grow our middle-class once more.

“Second, any taxpayer-funded support must have as its focus protecting our nation's long-term interest in a stable financial market and a growing economy rather than rewarding particular companies or the imprudent decisions of borrowers or lenders. These extraordinary steps must be designed with only the public good in mind, not to enhance the personal gain of CEOs and management at taxpayers’ expense.

“Third, this plan must be temporary and coupled with tough new oversight and regulations of our financial institutions. There must be a clear process to wind down this plan and restore private sector assets into private sector hands after restoring stability to the system. Taxpayers must share in any upside benefit that such stability brings.

“Finally, this plan should be part of a globally coordinated effort with our partners in the G-20. We are facing a global financial crisis and the United States can take a leadership role in coordinating a global response to the present crisis, as well as greater regulatory cooperation and alignment to prevent future crises.

“As we move beyond immediate actions to stabilize financial markets, it is important that we build upon the ideas I have laid out over the last several years about how to modernize our financial regulation. Eliminating consumer protections and lax oversight contributed to the crisis we are in today, and establishing commonsense rules of the road for our financial system can help restore confidence in our financial system.

“Given the gravity of this situation, and based on conversations I have had with both Secretary Paulson and Chairman Bernanke, I have asked my economic team to refrain from presenting a more detailed blue-print of how an immediate plan might be structured until the Treasury and the Federal Reserve have had an opportunity to present their proposal. It is critical at this point that the markets and the public have confidence that their work will be unimpeded by partisan wrangling, and that leaders in both parties work in concert to solve the problem at hand.”

REFORMING OUR FINANCIAL MARKETS -- THE MORTGAGE AND FINANCIAL INSTITUTIONS TRUST

Today, In Wisconsin, John McCain Outlined His Plan To Reform Our Financial Markets. To ensure that people are able to stay in their homes and safeguard the life savings of Americans by protecting our financial system and capital markets, John McCain is calling for the formation of a Mortgage and Financial Institutions Trust (MFI). The MFI will be a vital element in managing the current financial crisis.

The Purpose Of The Mortgage And Financial Institutions Trust (MFI):

The MFI Is An Early Intervention Mechanism That Will Help Financial Institutions Avoid Bankruptcy And Expensive Bailouts While Protecting Their Customers. The MFI will minimize the use of taxpayer money by having an orderly process to address the market crisis. Working with the private sector and regulators, the MFI will help identify troubled institutions and take action to strengthen them before they become insolvent.

The MFI Will Provide Troubled Institutions With An Orderly Process To Identify Bad Loans, Provide Funding And Eventually Sell Them At A Profit. This will get the Treasury and other financial regulators in a proactive position instead of reacting to one troubled institution after another.

The Structure Of The Mortgage And Financial Institutions Trust (MFI):

The MFI Will Be Part Of The U.S. Department Of The Treasury. The MFI will be managed by a board of directors consisting of at least the Secretary of the Treasury, Federal Reserve Chairman, Chairman of the FDIC and two public members. The Secretary of the Treasury will be Chairman of the Board. Under the MFI process:

· Troubled institutions will voluntarily come to the MFI.

· The MFI will provide liquidity loans at reasonable interest rates. The MFI will receive warrants for controlling interest in troubled institutions.

· Troubled financial institutions that enter the MFI will keep operating as private companies with the help of the MFI.

· The MFI will supervise the sale of loan assets at market prices and purchase them as necessary.

· The MFI will eventually, and at its discretion, sell the loans to the private sector.

· The MFI will have a predetermined tenure during which to dispose of the loans.

· The MFI will return all profits to the U.S. Department of the Treasury and taxpayers.