Economic rescue will impact Ohio
Published 10:17 am Wednesday, October 8, 2008
This past week, the eyes of the nation were on Washington, D.C., as members of Congress deliberated the merits of a $700 billion plan backed by the President and U.S. Treasury Secretary Henry Paulson, designed to rescue several big banks on Wall Street from financial turmoil and avert what some believe would be a national economic disaster if no action was taken.
Amid concerns from lawmakers on both sides of the aisle, the House rejected the proposal on Monday, which sent the stock market tumbling. Shortly thereafter, the Senate approved a reformed version of the bill, and the House followed suit on Friday.
My office has received many calls and emails from residents in the 17th District, who are concerned about the proposal and have questions about its potential impact on our state and their family’s financial future. As a state senator, I generally do not comment in my column about what is going on at the federal level, but I felt it was important to address these concerns.
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While I did not vote on the economic rescue plan, the results of the vote will have a direct impact on our national and state economy. I recently participated in a conference call to discuss the proposal with the White House and other state and local officials from across the country.
Uncertainty is the worst thing for the stock market and the overall health of our economy. Interest rates are already going up, which means the cost of buying a car or a house increases. It also means that businesses large and small have a harder time getting credit to maintain operations and meet payroll obligations. In addition, a lack of money in the market could restrict the ability of state and local treasurers to sell bonds to help pay for important projects. Not to mention, higher interest rates on these bonds could cost taxpayers more money.
The federal solution, as I understand it, uses the resources of the U.S. Treasury to purchase struggling assets from banks—particularly investments in troubled mortgage loans—which have caused financial institutions to lose billions of dollars and have greatly restricted their ability to loan money to consumers and businesses. Under the plan, the federal government would recoup the money once these mortgages are sold. This action is designed to free up financial institutions to continue lending, which will help keep the economy going. While there are other ancillary provisions, this is the primary goal of the legislation.
My thoughts on the rescue plan are similar to many who have contacted me—how did we get in this situation? There is much speculation and finger-pointing on this issue, but I am not going to get in to that discussion here.
History tells us that in 1929, when the stock market crashed, there was no federal government intervention and there was no Federal Deposit Insurance Corp. (FDIC) to protect consumers’ checking and savings accounts. Now, there are measures in place that keep us from repeating 1929 and the Great Depression that followed. This history helps make a strong case for the rescue plan.