Tuesday, November 3, 2009

Kirk and Roskam: Federal Government Must Set a Timetable for Withdrawal from Private Business



From Congressmen Mark Kirk and Peter Roskam:





Federal Government Must Set a Timetable for Withdrawal from Private Business

Treasury provided $217 billion for ownership and loans to 8 major corporations;

GM, AIG and Citigroup alone cost taxpayers more than $70 billion in common stock losses;

CIT Group bankrupt on Sunday: Taxpayers lost $2.3 billion

Kirk and Roskam: “The Federal government should not be in the business of running private companies.”

CHICAGO – Citing massive financial losses at companies bailed out by the Treasury, U.S. Reps. Mark Kirk and Peter Roskam today unveiled legislation establishing a timeline for the U.S. Government to withdraw from its ownership of several private companies. The Taxpayer Investment Protection Act requires the federal government to divest its common and preferred stock interests of private companies purchased under the Emergency Economic Stabilization Act of 2008 (P.L. 110-343) by Dec. 31, 2010.

“Last year, the Congress followed the recommendation of the Fed and Treasury to avert a financial crisis with the Emergency Economic Stabilization Act,” said Congressman Kirk, a member of the House Appropriations Financial Services Subcommittee. “Once approved, Treasury officials expanded funding beyond anything Congress intended, taking control of companies whose losses accelerated under government management. Last night, CIT Group went bankrupt after its taxpayer bailout, costing $2.3 billion. These government investments lost taxpayers more than $70 billion. Congress should set a timetable for a withdrawal from private company ownership before even more money is lost. The government is a very poor manager of private companies.”

"My constituents have had enough of the government spending billions of taxpayer dollars to control more private business, which only hurts our ability to create jobs and continues to plunge America even further into debt,” Congressman Roskam said. “Under TARP, the federal government effectively became CEO of a range of major private U.S. employers. With unemployment nearly 10% nationally after being promised no higher than 8%, we can see just how inefficient the government is at fostering real job growth.”

Congress authorized the Troubled Assets Relief Program (TARP) to purchase "troubled assets," focused on buying mortgage-backed securities. After enactment, Treasury officials then dramatically expanded bailout funds to go beyond loan purchases, actually buying stock in big failing businesses, including automakers who were asked to become “banks” to be eligible.

The U.S. Treasury committed taxpayer funding for the following companies:

· Bank of America: $35 billion in preferred stock
· Chrysler: $12.5 billion in common stock and notes
· General Motors: $49.5 billion in common stock, warrants and notes
· Citigroup: $45 billion in common stock
· AIG: $40 billion in common stock, plus amounts outstanding on a $30 billion U.S. Treasury line of credit
· Hartford Financial Services: $3.4 billion in preferred stock
· Lincoln National Corporation: $950 million in preferred stock
· GMAC: $884 million in common stock

In many situations, the taxpayer is a majority or part owner of a company that continues to lose money.

· In the case of General Motors, President Obama's former "Car Czar" estimated that the taxpayers’ $49.5 billion interest in GM is now worth only $25 billion. While sales for private-owned Ford Motors fell only 6 percent in September, government-owned GM saw a 45 percent decline.
· AIG has lost even more taxpayer money. With a market value of only $3.5 billion, taxpayers lost $36.5 billion of their original $40 billion common stock investment.
· With a market value of $33 billion, Citigroup lost $12 billion of taxpayers’ original investment of $45 billion.

A copy of the Taxpayer Investment Protection Act is below, and a graphic depicting U.S. Treasury investment in private companies is attached.

111th CONGRESS

1st Session

To prohibit the Federal Government from holding security interests, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES
DATE

Mr. Kirk of Illinois introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To prohibit the Federal Government from holding security interests, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Taxpayer Investment Protection Act of 2009'.
SEC. 2. DEFINITION.
In this Act--
(1) the term `ownership interest' means an interest in a troubled asset described in section 3(9)(B) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5202(a)(1)), as in effect on the day before the date of enactment of this Act, that was purchased by the Secretary under section 101(a)(1) of such Act (12 U.S.C. 5211(a)(1)); and
(2) the term `Secretary' means the Secretary of the Treasury.
SEC. 3. SALE OF FEDERAL CORPORATE PROPERTY.
(a) DIVESTITURE- Except as provided in subsection (b), the Secretary shall divest the Federal Government of any ownership interest not later than December 31, 2010.
(b) Conforming Amendment- Section 3(9) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5202(9)) is amended--
(1) in subparagraph (A), by striking `; and' at the end and inserting a period;
(2) by striking `means--' and all that follows through `residential' in subparagraph (A) and inserting `means residential'; and
(3) by striking subparagraph (B).
(c) Deposit of Funds-
(1) IN GENERAL- Section 115(a)(3) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5225(a)(3)) is amended by striking `outstanding at any one time'.
(2) DEPOSIT OF FUNDS INTO TREASURY-
(A) IN GENERAL- On and after the date of enactment of this Act, all repayments of obligations arising under the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5201 et seq.), and all proceeds from the sale of assets acquired by the Federal Government under that Act, shall be paid into the general fund of the Treasury for reduction of the public debt, in accordance with section 106(d) of that Act (12 U.S.C. 5216(d)), as amended by this subsection.
(B) CONFORMING AMENDMENT- Section 106(d) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5216(d)) is amended by inserting `, and repayments of obligations arising under this Act,' after `section 113'.
(d) Federal Deposit Insurance Corporation- Nothing in this Act may be construed to impede the ability of the Federal Deposit Insurance Corporation to maintain the stability of the banking system.
SEC. 4. OVERSIGHT BY FINANCIAL STABILITY OVERSIGHT BOARD.
Section 104(a) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5214(a)) is amended--
(1) in paragraph (2), by striking `and' at the end;
(2) in paragraph (3), by striking the semicolon at the end and inserting `; and'; and
(3) by adding at the end the following:
`(4) reviewing the implementation of section 3 of the Taxpayer Investment Protection Act of 2009.'.
SEC. 5. REPORTS REQUIRED.
(a) Reports on Winding Down or Divestment-
(1) REPORTS REQUIRED- The Secretary shall submit to Congress periodic reports on the plans of the Secretary for compliance with this Act, providing detail on equity divestiture plans and return of capital for the following corporate investments:
Bank of America: $35 billion in notes and preferred stock
Chrysler: $12.5 billion in common equity and notes
General Motors: $49.5 billion in common and preferred equity, notes
Citigroup: $45 billion in common stock and notes
AIG: $40 billion, applied to acquire 79.9% of equity, plus amounts outstanding on a $30 billion line of credit
Hartford Financial Services: $3.4 billion in preferred stock
Lincoln National Corporation: $950 million in preferred stock
GMAC: $884 million in common equity
(2) TIMING OF REPORTS- The Secretary shall submit the reports under paragraph (1)--
(A) not later than Jan. 1, 2010; and
(B) each month thereafter until all ownership interests are divested under section 3(a).
###

3 comments:

Whispers said...

Nice work by Kirk and Roskam. I wish both of them were running Illinois.

Crazy4glf said...

Of course, last year when Bush initiated government involvement in private organizations because otherwise said organizations would fail (possibly due to McCain and others arguing to relax regulations then vowing to reform the system he weakened), no one said a word. Also, when there were no strings attached to gobs of US money being given out as if these organizations were ENTITLED to it, no one said a word.

When some companies were saved (where Bush appointees formerly hailed from?) and other companies were allowed to fail in what I would suggest was an unequal manner that is contrary to major tenets of our nation's founding, no one said a word.

If these organizations were rationally run in the first place, with decent compensation, without excessive perks, and with a concern for the greater good (long-term growth?), the mention of government involvement would be moot!

This seems to be lost on Kirk and Roskam. Sometimes, saying nothing (in China, DC, or Illinois is more diplomatic for a 'statesman,' who is 'thoughtfully independent') is better than the weekly, rhetorical press conference.

That said, shouldn't a significant shareholder or stakeholder have a say in the way in which it's organization is run? Or does this only count for majority shareholders like Carl Icahn?

The people that claim to fight for states' rights and an individual's ability to shape their future, have some influence on their investments, life's course, and opportunity are arguing against having some discretion and influence over how the government's funds are being spent?


If Kirk ran Illinois, we'd all be blamed for voting for him in the first place or that his decisions are the fault of the electorate. He'd read all legislation, vote one way, and then call it into question.

If Roskam were running Illinois, I think we'd have no safety net, decisions would be made based on perspective and theory instead of real-time needs, priorities, and best-practices.

No thanks.

(For example, without Dem's there'd be no healthcare reform legislation.
Patchwork quilt or collage-like legislation such as the belated GOP version is.)

Anonymous said...

Pup's old press secretary, the woman that orchestrated the infamous stunt at the gas station is about to lose her 4th straight race when Jon Corzine gets fired tonight in new jersey.

Even pups former people have the loser disease.

FOKLAES