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Late last week, Treasury Secretary Paulson and Federal Reserve Chairman Bernanke recommended that the federal government allocate $700 billion to provide liquidity in the financial market by purchasing unspecified items from various Wall Street firms.  They justified their recommendation by saying that the financial markets are in a crisis because banks no longer have faith in each other and that it is very difficult to obtain credit. 

This recommendation comes on the heels of two other bail outs which have passed Congress this year.  We have seen no bill in the House of Representatives to this point, although the White House has submitted a 3-page bill that basically gives the Treasury Secretary the authority to use $700 billion with no oversight and no accountability.  The Democrats in the Senate have countered with a 42-page bill that adds bailing out individuals who have defaulted on their mortgages, has the government control executive compensation, will allow judges to change the amount a person owes a bank on a loan if the person declares bankruptcy and many, many other items.

I’m not convinced that the proposal that has been made is the appropriate way to deal with the problem. Rushing to provide a government-based solution may do more long-term damage than good. There’s one common sense idea that I can’t help but agree with: the federal government should not be bailing out people on Wall Street who made bad decisions.  We need to protect American citizens who have played by the rules.

My office has received many calls asking for details on “the bill” Congress is considering.   Please know that I am working very hard on this issue by discussing this with experts in the subject, especially those in North Carolina, reading the latest materials we receive, attending relevant meetings and speaking up on your behalf whenever appropriate.  This is a very fluid situation, with dramatic developments coming throughout every day.