Rep. John Campbell
Rep. John Campbell urged his fellow Republicans and Democrats to support the economic rescue plan in a speech on the house floor today.
“I desperately hope and pray that we as a body, Democrats and Republicans alike, have the courage to pass this bill,” Campbell said.
Because it would invest up to $700 billion in troubled financial companies, the bailout bill could potentially earn taxpayers 30 cents on every dollar government invests, the Irvine Republican said.
If congress does not pass the bill, “financial crisis will extend to every American with a job,” Campbell said. “We cannot allow that to happen.”
Campbell said the plan isn’t a perfect solution to the financial crisis, but is a good start. The bill is also a symbol of compromise between Republicans and Democrats and is better than the alternative: doing nothing.
“To do nothing would be uncontainable,” Campbell said.
I, for one,will remember that vote, and recommendation.
Keel -
Second that. I plan on calling Mr. Campbell and letting him know that I will urge everyone i know to show him how they feel about this yes vote.
He will reap what he sows. Campbell thinks he has an understanding of the crisis better than us non-sophisticated individuals, as he put it, but from everything he says he seems as clueless as most…….
The immediate reason the government decided not to wait any longer to bail out Freddie and Fannie was very simple: All over the world, investors were beginning to reject their bonds, refusing to lend them any more money. So the price of Fannie and Freddie bonds plunged, and the yields on those bonds went through the roof.
As a result, to borrow money, Fannie-Freddie had to pay higher and higher interest rates, far above the rates paid by the U.S. Treasury Department. And they had to pass those higher rates on to any homeowner taking out a new home loan, driving 30-year fixed-rate mortgages sharply higher as well.
Now, with the U.S. Treasury itself stepping in to directly guarantee Fannie-Freddie debts, Washington and Wall Street are hoping this rapidly deteriorating scenario will be reversed.
They hope investors will flock back to Fannie and Freddie bonds.
They hope investors will resume lending them money at a rate that’s much closer to the Treasury rates.
And they hope Fannie and Freddie will again be able to feed that low-cost money into the mortgage market just like they used to.
In other words, they hope the U.S. Treasury will lift up the credit of Fannie and Freddie.
There’s just one not-so-small hitch in this rosy scenario: Fannie’s and Freddie’s mortgage obligations are just as big as the total amount of Treasury debt outstanding.So rather than the Treasury lifting up Fannie and Freddie, what about a scenario in which Fannie and Freddie drag down the U.S. Treasury?
To understand the magnitude of this dilemma, just look at the numbers …
* Mortgages owned or guaranteed by Fannie and Freddie: $5.3 trillion.
* Treasury securities outstanding as of March 31, according to the Fed’s Flow of Funds (report page 87, pdf page 95): Also $5.3 trillion.
If Fannie’s and Freddie’s obligations were equivalent to 10% or even 20% of the U.S. Treasury debts, the idea that they could fit under the Treasury’s “full faith and credit” umbrella might make sense. But that’s not the situation we have here — Fannie’s and Freddie’s obligations are the equivalent of 100% of the Treasury’s debts.
And it’s actually worse than that:
* Foreign investors, the most likely to dump their holdings if they lose confidence in the United States, hold an estimated 20% of the Fannie- and Freddie-backed mortgages outstanding. But …
* Foreign investors own 52.7% of the Treasury securities outstanding (excluding those held by the Fed).
So based on the above stats, Treasury securities are actually more vulnerable to foreign selling than Fannie and Freddie bonds.
What happens if the international mistrust and fear afflicting Fannie and Freddie bonds infects U.S. Treasury bonds? Foreign investors would start dumping Treasury securities en masse. They’d drive Treasury rates sharply higher. And they’d wind up forcing Fannie and Freddie to pay much higher rates for their borrowings after all.
How will you know? Just watch the all-critical spread (difference) between the yield on Fannie-Freddie bonds, considered lower quality, and the yield on equivalent government bonds, considered high quality. Then consider these two possibilities:
* If that spread narrows mostly because Fannie and Freddie interest rates are coming down toward the level of the Treasury rates, fine. That means the immediate goal of the bailout is being achieved. BUT …
* If the spread narrows mostly because Treasury rates are going up toward the level of Fannie’s and Freddie’s rates, that’s not so fine. It not only means a failure to achieve the immediate goals, but it will also imply that the entire Fannie-Freddie bailout is backfiring on the Treasury.
I give Congressman John Campbell a lot of credit for this vote. It took courage to do what he believes is right for the American people despite the mob mentality (as evidenced by some of the other comments here) crying for a no vote. I often disagree with John Campbell on specific issues, but this time at least you have to admit that he acted in a principled way.
I applaud John Campbell for his vote.
I will remember Campbell at election time and vote for his rival.
I have called Campbell’s office and told him (as I threatened prior to the vote) that I will vote for his closest opponent. His courage comes from his two main constituents, the Irvine Co. and Bill Gross (PIMCO). Not the rest of us. If he was courageous, he would have loudly opposed the run-up in housing prices that led to this disaster. He happily stood by while this fake housing economy while the balloon expanded to the breaking point.
Remember Mr. Campbell’s Background anyone!
The Automotive Industry…. Gee, Didn’t they ask for a bailout as well!
This is what happens, Americans, when you elect people to office who do not understand economics and finance.
Mr. Campbell has it all bass ackward.
Mr. Campbell, the banks are responsible for their lending practices. Government (funded the entire time by taxpayers) did not regulate these banks, their balance sheets or their reserves. These banks must face the consequences and fail so that smaller and medium sized banks can pick up where they left off, grow and offer more services and increased competition and lower costs to consumers over the long run.
You are destroying the concept of moral hazard.
If a taxpayer makes a poor financial decision, hell will freeze over before Uncle Sam, let alone a profit-driven bank, would step in and lend a hand free of charge.
I too will remember this vote especially, Mr. Campbell.
You’re seat is up for grabs in November right? Duly noted.
Campbell will be back working as a car salesman after his next election. Hope Saturn makes a hybrid. We will note forget his vote to spend taxpayer money on behalf of Wall Street.
It seems to me that the vast majority of Americans do not want a bailout. These are normal average everyday hardworking people who do not have vast amounts of money in stock markets if any at all. They did not max out on their home equity line of credit or default on their mortgages. They are also not in the market to borrow money for a new car or any other major purchase. So who is this bailout for?
I called Campbell’s office too. He let everybody down. We, his constituents do NOT want a bail out for wall street. He is wrong about everything he says in this article and, like Paulson and Bush, can’t explain how Investment Banks going under can somehow ‘extend’ to every american…because it won’t. Empty threats yet again.
Not only will there not be a financial crisis without a bail out, it will be the first step towards financial sanity. Put down the kool-aid, Campbell, and grow a backbone!
Bye bye John Campbell. You better get your resume updated and ask your lobbyists if they’re hiring, because when your term is up, say good bye to DC.
Not only does John Campbell support the bailout bill, he supported Hank Paulson’s original, 3 page plan that even the most clueless of politicians couldn’t support.
How is it that despite a majority of Americans in outrage over this bill, Mr. Campbell sees fit to support it — and in opposition to the majority of his constituents…those who elected him and he represents?
I, for one, will remember this when Mr. Campbell comes up for re-election. I hope for his sake that Bill Gross and Don Bren can bring him a lot more votes than all outraged constituents.
I am a registered Republican and voted for Congressman John Campbell the first time. I WILL NOT BE VOTING FOR HIM AGAIN. Time to elect his opponent Steve Young and tell all politicians that if you disregard your constituents’ wishes you are out.