Dear President Bush:
I am deeply concerned that the execution of your economic stabilization plan by Secretary Paulson represents an unprecedented governmental intervention in the economy that threatens our nation's long heritage of limited government and commitment to the free market.
Although I understand the need for a narrow plan to help stabilize our nation's financial sector, I opposed Secretary Paulson's bailout plan because it represented a massive interference in the market, one which hinged on the delegation to a single unelected executive branch official the authority to spend $700 billion in taxpayer money. Unfortunately, recent events have confirmed my fears that this unfocused scheme provides a basis for almost any action, including direct government ownership of private corporations, and sets a dangerous precedent.
Less than a week after pushing for authority to purchase distressed securities, Secretary Paulson altered the focus of the Troubled Asset Relief Program (TARP) to recapitalize banks instead. That move directly contradicted his prior testimony to the Senate: "There are some that said we should just go and stick capital in the banks . . . but we said the right way to do this is not going around and using guarantees or injecting capital." Since that time, Secretary Paulson has abandoned the stated goal of purchasing distressed assets and is now concentrating on purchasing large equity stakes in banking institutions. The financial sector recovery program operating today is entirely different from the one outlined to, and approved by, Congress in October. I can only conclude that the swift reversal from purchasing toxic assets to stock purchases was part of a plan to mislead the Congress because massive stock purchases would have received a much more hostile reception.
Predictably, efforts are now underway to expand the TARP to bail out private companies suffering in a recessionary economic climate, notably the big three auto manufacturers. Allowing this trend to continue sends a clear signal to foreign nations that the United States has turned its back on the free market and is a virtual guarantee that other "vital" industries will request government assistance in the future. As estimates for the Fiscal Year 2009 federal deficit approach the staggering $1 trillion mark, we must ask: where do we draw the line?
With this in mind, I urge you to:
1. Publicly outline a plan for extricating the government from the market as soon as reasonably possible, limiting further interference, and allowing markets to function in the future, as well as emphasizing clearly why this is an important principle.
2. Establish guidelines for making the TARP's basic earnings and loss data - similar to that found on a corporation's quarterly statement - available to the public. The Administration has argued that taxpayers may be made whole by the future sale of equities purchased by the TARP. Accordingly, the American people have the right to know the status of their investment.
3. Oppose the economic stimulus package that includes an additional bailout for troubled auto manufacturers. Your administration should not allow a struggling economy to be used as justification for a huge surge in government spending and control.
It seems to me that Secretary Paulson, whom you obviously admire, has assumed an inappropriate role in our governmental system. He is acting as a Wall Street investment banker, allocating hundreds of billions of dollars in taxpayer money, with no oversight and no stated plan. This undermines our heritage of law and order, and is an affront to the principle of separation of powers. Of course, the Secretary works for you and serves at your pleasure. While you have many challenges in these busy days, I believe you have a clear constitutional duty to personally supervise his actions and to direct this process. I urge you to do so.
In this time of economic turmoil, let your actions clearly reflect a commitment to the sound economic and governmental principles that have made our nation great. It is important that we recognize the magnitude of the precedent these actions have set, and that you intentionally act and speak in ways that limit that precedent for the future.
I have been honored to work with you on many important issues and please know that my affection and appreciation for you and your leadership remains strong.
Very truly yours,
United States Senator