A Bitter But Necessary Pill

A great many free market conservatives are disillusioned with the Senate’s vote last night on the financial recovery plan. Their reaction is understandable. The choice last night was between doing something and doing nothing. Many of you may believe we made the wrong decision, but you should understand the factors we considered before the vote.

First of all, the mortgage mess is especially infuriating because some of us saw it coming. Two years ago, I joined with 19 of my colleagues demanding that we crack down on mortgage abuse, particularly by Fannie Mae and Freddie Mac. A bill doing exactly that, The Federal Housing Enterprise Regulatory Reform Act, was approved by the Senate Banking Committee. But it was killed on the Senate floor by Democrats who favored pushing out mortgages to people with dubious prospects for paying them back. They claimed we were concocting a problem that didn’t exist. We were not, and that makes the resulting mess all the more disgusting.

The decision we faced this week was not on whether to bail out Wall Street. If this was merely about assisting those who had gambled and lost in the financial markets, I would have opposed this bill without question. But the inward spiral of restricting credit now underway across our country threatens the jobs and savings of millions of ordinary Americans. I voted for the 65-year-old worker who suddenly has seen his retirement nest egg evaporating, and a lifetime of hard work thrown into jeopardy. I voted for the small business owner who is days away from failing to make his payroll because his line of credit has been frozen. I did it for the thousands of innocent employees who were soon to be facing layoffs due to excesses that were no fault of their own.

I believe that my colleagues and I have done a poor job explaining to the American people exactly what is included in the final plan, as well as the probable consequences of inaction. Some conservative leaders have begun filling the void. Newt Gingrich said the plan “is a temporary measure to stop a hemorrhaging of credit and the potential collapse of the American and world economy.” My highly respected Senate colleague, Dr. Tom Coburn, was eloquent in explaining the stakes involved here:

““Taxpayers deserve to know that there is no guarantee this plan will work, but there is a guarantee that we will face a financial catastrophe if we do nothing. If banks continue to fail and stop lending the average American could lose their job, be unable to secure a loan for a car, home or college education, and find their life savings and retirement in jeopardy. Our economy depends on having liquid assets available for credit and lending just as an automobile engine needs oil. If those liquid assets stop flowing, our economy will be seriously damaged and will require far more costly and lengthy repairs.”“This bill does not represent a new and sudden departure from free market principles as much as it represents an emergency response to congressional actions that have ignored free market principles, and our Constitution, for decades. If anyone in Washington should offer their resignation it should be the members of Congress who peddled the fantasy of free home ownership without risk.”

The proposal we approved is significantly improved over the blank check sought by the Treasury only ten days ago. We managed to excise many special interest provisions, such as the ACORN subsidy, that Democrats tried to slip in. If the plan works as expected, and the economy regains its footing, most or even all of the upfront costs involved will be recouped. Of the choices facing us, I believe this one will involve the least amount of overall cost to taxpayers, and give us the best chance of avoiding permanent damage to our system.

This exceptional government intervention is a bitter pill for those of us who believe that free market capitalism, with our civil liberties, are the foundation of American exceptionalism. I’m convinced it was necessary. I understand that many of my longtime supporters will disagree, but I hope they know that I took their arguments seriously, and made the best call I could. My goal now will be reforming the conditions that got us into this mess so we will not ever face this type of choice again.