"The result of the government policies was to create a tremendous economic bubble that, when it popped, and the trillions of dollars of bailouts began, now threatens the entire world with a sovereign debt crisis." —Bill Wilson, President of ALG.
April 29th, 2010, Fairfax, VA—Americans for Limited Government (ALG) President Bill Wilson today urged Senate Republicans to "take the opportunity to amend the Dodd financial takeover bill to directly address the root, government causes of the financial crisis once and for all."
"At the end of the day, the American people know that government caused this crisis by deliberately weakening credit standards, pumping easy money into the system, and advancing home 'ownership' as a social policy. It's their fault. Government did this to the American people, and if the Senate legislation fails to address these root causes, it must be rejected," Wilson said.
"The result of the government policies was to create a tremendous economic bubble that, when it popped, and the trillions of dollars of bailouts began, now threatens the entire world with a sovereign debt crisis," Wilson explained, noting that excessive deficit-spending by European nations like Greece and Portugal has resulted in their credit ratings being downgraded, and interest rates rising on their government borrowing costs.
"Greece and Portugal are a coming attraction of what's in store for the U.S. should Congress fail to remove the unlimited, implicit backing of taxpayers to Wall Street," Wilson added. "The implied backing of taxpayers created the crisis with Fannie Mae and Freddie Mac, who sold the mortgage-backed securities all over the world on the basis that they were as good as U.S. treasuries. This was the genesis of the 'too big to fail' system of bailouts and takeovers."
Yesterday, Wilson blasted provisions that he said would protect firms with assets greater than $50 billion, saying, "This bill would create about sixty new Fannie Mae's all with the implied backing of taxpayers. Taxpayers cannot even afford to back Fannie and Freddie, and Senate Democrats want to multiply that by a factor of thirty. This is madness."
According to the Congressional Budget Office, there are about 60 bank holding and insurance companies with $50 billion or more in assets that would contribute to an unlimited fund with the power to bail out those firms. The legislation would also allow the FDIC put into receivership companies whether they are financial or not.
Wilson said the bailouts were the direct cause of the sovereign debt crisis spreading throughout the world. "This government-created crisis is now engulfing Europe, a direct result of losses associated with the government-financed housing, securities, and derivatives bubbles all popping at once, and the added weight of deficit-spending brought on by the bailouts."
"The bailouts and government takeovers are unaffordable to taxpayers, are misallocating resources from productive sectors of the economy, and as a result are bankrupting the nations that participated in them. Now, Senate Democrats want to institutionalize and codify that system," Wilson said.
Wilson yesterday noted that the nation's largest financial institutions want a permanent bailout fund for themselves. "The facts are clear. The head of Goldman Sachs has said he embraces the legislation and that the biggest beneficiary of the bill is Wall Street. This is evidence that the Dodd-Goldman bill continues the system of 'too big to fail,' and does not reject it," Wilson said.
Senate Republicans yesterday reportedly won concessions for the bailout fund to be removed, but Wilson said that would "not be enough to win the support of the American people if 'too big to fail' stays in there by perpetuating the current bailouts of Fannie, Freddie, and the entire mortgage market."
Wilson concluded, "Senate Republicans must not support a bill that fails to rein in Fannie, Freddie, the FHA, the Federal Reserve, and HUD that caused the crisis by weakening credit and inflating the housing bubble to begin with. The American people are counting on them, and they must not let their constituents down, who want an end to the bailouts, an end to 'too big to fail' and an end to the centralization of credit and finance in government that is bankrupting this nation."
Letter to the U.S. Senate, ALG President Bill Wilson, April 26th, 2010.
"'Down a Rabbit Hole:' The Threat Posed by the Dodd Bill to the Private Sector," April 22nd, 2010, Americans for Limited Government.