We’ve treated symptoms, this is cancer
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Scott Jagow: I wish I could tell you exactly what would happen if the government didn’t bail out the financial industry. Paulson and Bernanke and the president are filling our heads with some very dire predictions of recession, more foreclosure, businesses collapsing. And that’s what Congress has to go on to make its decision.
We’re joined now by Republican Sen. Sam Brownback of Kansas as Marketplace continues its coverage of the financial crisis. Senator, are you buying this idea the government has to step in to prevent an economic catastrophe?
Sam Brownback: Well, I think we’ve got to do something. We’ve seen the credit markets freeze up like we have not witnessed before. And unfortunately any more money moves with the click of a mouse. And so if confidence moves, people pull money out at such a rapid pace, and then people won’t lend bank to bank to the point that businesses can’t do their business. They can’t get the credit, the liquidity that they need to operate. And this just freezes up. And that’s what we’ve seen taking place. So it looks to me that we have to do something to unfreeze these credit markets.
Jagow: But why do we have to do this? Why do we have to buy up these bad mortgage debts? Why can’t we do something else, like pay off the defaulted loans.
Brownback: Well we’ve treating the symptoms of this, really since Bear Stearns in March we’ve been trying to treat symptoms. This goes at the actual cancer itself. And the cancer is this toxic paper in the system: these subprime mortgages that nobody is exactly sure who all has what and they’re not exactly sure what it’s worth. And that’s what’s making the credit flee. And the thought is that if we can get the actual cancer itself, the liquidity will free up, the system will rectify itself and it can move forward. The problem of it is in economics you are dependent upon millions of people’s individual decisions and you’re not exactly sure how anybody responds to it. But this does seem to be the most likely medicine to work.
Jagow: What are you hearing from your constituents about this?
Brownback: Oh, they are mad. They are hopping mad about this. They don’t like it. But then again, they are starting to feel what happens when our credit system locks up, and they’re getting a bit fearful of that.
Jagow: What do you want to see in this bailout plan?
Brownback: I want to see that the taxpayer is taken care of, and then I want to see the liquidity free up. So, I don’t think we should do the whole $700 billion all at once. Maybe we can say that there’s a target, but we’re gonna do this is trunches, maybe $100 billion, $150 billion at a time. And then let’s see how it’s going. I want to make sure that the executive pay is not exorbitant for people who got us into this mess. I think their golden parachutes ought to be lead balloons. And then I think we ought to look at getting ownership in some institutions if they unload a bunch of this, so that the taxpayer can be made whole at the end of the day. We really have to take care of the economy and the American taxpayer.
Jagow: All right, Republican Sen. Sam Brownback, thank you.
Brownback: Thank you.
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