Letter to Congress on U.S. Financial Markets
September 24, 2008
TO THE MEMBERS OF THE UNITED STATES CONGRESS:
The U.S. Chamber of Commerce, the world's largest business federation representing more than three million members and organizations of every size, sector, and region, urges Congress to come to a bipartisan agreement and quickly pass legislation to provide liquidity and stability to U.S. financial markets.
Both the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System have each testified to the significant negative developments in financial markets over the past months and to the culmination of market fears last week that locked up financial markets and blocked the flow of credit to even the most creditworthy borrower. Failure to address such systemic fears could result in a complete lockup of the financial system with dire consequences for the economy as a whole.
The solution proposed by Treasury is to allow the Treasury to remove $700 billion in illiquid and impaired assets from the system. While this proposal has been described as a bailout with a $700 billion price tag to the American taxpayer, it is not. The Treasury would purchase up to $700 billion of impaired and illiquid assets from the financial markets, but these assets would be purchased at a price that is significantly below par value. As a result, the Treasury would place up to $700 billion of taxpayer money at risk, but the ultimate cost of the package will not be determined until the Treasury ultimately disposes of the assets and will almost certainly be significantly less. Congressional oversight will help to insure that the immediate pricing and ultimate sale of these assets will keep taxpayer cost to a minimum.
Whatever the cost of action, the cost of inaction will be significantly higher. "Main Street" and Wall Street are inextricably connected. The funds that flow through Wall Street drive the activity on Main Street that creates jobs and generates income. Americans have witnessed what has happened to equity markets over the past week, and failure to act will only contribute to even greater declines in the markets, which will erode taxpayers' retirement savings and pension fund assets. However, that may very well be only the tip of the iceberg because a lockup in credit markets will cripple Main Street's ability to operate and threaten taxpayer jobs and income.
The U.S. economic system depends on credit, and credit depends on confidence. We have seen the capital markets and credit markets freeze already. Extraordinary government intervention is essential to restoring confidence and ensuring credit availability. Stabilizing the financial system and preventing a systemic collapse of our capital markets must be the federal government's top priority. Speed is of the essence.
We call upon our elected leaders to join together and unite behind a bipartisan proposal and pass it quickly without attempting to add extraneous provisions.
Make no mistake: Americans will not be tolerant of inaction that leads to calamity. If, on the other hand, you support the plan to successfully restore the financial system and preserve the flow of credit to our economy, the American people will recognize that act of courage.
R. Bruce Josten