Economic Rescue Plan Must Protect Taxpayers

It was bitter medicine, but taxpayers were asked to swallow hard and accept the bipartisan, 700-billion-dollar, financial rescue package as an emergency action by the federal government to save our financial market.

It was a grim setting. Stock prices on Wall Street were plummeting. Home foreclosure signs were springing up everywhere. Senior citizens were terrified by their lost savings and memories of the Great Depression. Credit markets were frozen.

Something had to be done immediately, we were told. The causes of the meltdown and the long-term corrections to the mysterious ways of Wall Street would have to be dealt with later.

Well, it didn’t take long at all for the masters of Wall Street to abuse the trust of taxpayers and reveal themselves as dwellers in a world of greed.

After receiving a $120 billion loan from the Federal Reserve to keep it from going under, the financial services giant American International Group spent hundreds of thousands of dollars at a lavish, high-end spa to celebrate the successes of its top executives.

AIG further demonstrated a reprehensible misuse of its taxpayer funds by dipping into its federal loan to pay millions of dollars for lobbying efforts to fight government oversight of their very same, free-wheeling, profit-generating behavior that precipitated the financial crisis.

Fortunately, U.S. Sen. Dianne Feinstein, D-Ca., announced she was crafting legislation to close the loophole in the federal rescue package and ban its use by all participating companies for lobbying efforts. I strongly urge our New Jersey congressional delegation to support Senator Feinstein’s legislation.

We have all witnessed the financial and economic bedlam that lax regulation and virtually no oversight can cause. An economic crisis of this magnitude requires a comprehensive, multi-faceted approach.

Provisions of a new federal law, the Housing and Economic Recovery Act of 2008, combined with a measure I am developing in the Senate, S-470, are designed to establish strict oversight of mortgage originators and to hold accountable those who engage in the kind of improper or fraudulent lending practices that helped cause untold thousands to default on their mortgages and, ultimately, the market going into free fall.

My proposal will implement the requirement of the new federal law that all mortgage originators be licensed by individual states.

In New Jersey, the Department of Banking and Insurance will be developing a set of state standards that must be achieved over time by mortgage originators who will be subject to written examinations.

The needed regulatory constraints are being built after the impact of unfettered, unrestrained greed has threatened the very fabric of our lives, our futures and our sense of stability.

At a hearing this week, members of the Senate Budget & Appropriations Committee were told by economic experts that – before financial conditions improve – New Jersey faces a loss of up to 250,000 jobs and a multi-billion dollar deficit in the next State budget.

We are tough in New Jersey when it comes to coping with hard times, but we react with outrage to evidence of greed especially from those who would try to kick us as taxpayers when we’re down. We are resilient and we will meet this fiscal challenge, but we also are resolved to eliminate conditions which led to the excesses enabled by a lack of regulatory oversight.

The mindset of those who have carried this drive for greed over the top might best be expressed in the slogan, “It’s Not Illegal Unless You Get Caught.”

Our efforts now, on both the state and federal levels, have to be focused on ensuring that the bad actors in this financial travesty, indeed, get caught. And, moving forward, we should ensure that new restrictions and standards prevent their misdeeds from recurring.

Senator Buono, the Chair of the Senate Budget & Appropriations Committee, represents the 18th Legislative District in Middlesex County. She is a resident of Metuchen.