USA Today - Opposing View - Stop Using Taxpayers' Money

USA Today: Opposing View: Stop Using Taxpayers' Money

Instead of bailouts or partnerships, create an asset insurance program.

MARCH 24, 2009

By Rep. Jeb Hensarling

I hope Treasury Secretary Timothy Geithner's plan to rescue America's largest financial institutions works. Inaction is not an option when Americans are facing real economic pain. The plan's success should be judged by real economic growth, not by single-day fluctuations in the stock market. Despite Monday's market performance, congressional Democrat leaders might have set up his plan for failure.

Markets need certainty to create economic growth, and Secretary Geithner hopes to deliver it through public-private partnerships that will buy the assets inflicting losses on financial institutions. These partnerships draw funding from two sources: bailout-weary taxpayers and private investors.

Like me, taxpayers were furious to learn that taxpayer-funded bonuses were paid out by failing companies. I proposed requiring American International Group to repay 100% of the bonuses in order to qualify for its next bailout (we all know it's coming), but Democrat leaders introduced and voted to pass unconstitutional legislation that would retroactively punish a targeted group by taxing the bonuses at 90%.
Congress created more uncertainty in our financial markets, signaling to private investors that if Washington doesn't like the way you are playing the game, it will change the rules. Secretary Geithner's plan depends on funding from private investors who are terrified about retribution for investment decisions with which Congress disagrees.

Private investors need certainty that Washington will not change the rules of the game while the game is being played. Had Congress acted rationally, Secretary Geithner's plan might have had a chance to work.

Capital is sitting on the sidelines because investors lack certainty. Instead of more bailouts or public-private partnerships, we should create a temporary and targeted mortgage-backed security insurance program to rejuvenate our credit markets. This will inject voluntary capital from investors and abandon our strategy of using involuntary capital from taxpayers.

Taxes are a levy on capital desperately needed to refinance our homes, preserve our jobs and grow our economy. Congress should temporarily cut the capital gains tax rates to zero. Tax relief works. Every time we've done it, economic growth has followed. We must stop throwing good money after bad and propping up failed institutions of the past. Let's focus instead on creating pathways for the financial institutions of the future.

Rep. Jeb Hensarling of Texas is the senior Republican on the House Subcommittee on Financial Institutions and Consumer Credit and a member of the congressional panel overseeing the Troubled Asset Relief Program.

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