Accountability From Wall Street Needed To Earn Back Trust from Main Street

John Cornyn
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Posted: Oct 01, 2008 11:17 AM
Accountability From Wall Street Needed To Earn Back Trust from Main Street

In recent weeks, as the American people have continued to grapple with a slowing economy and instability on Wall Street, the response to calls for a sweeping economic stabilization plan has understandably been one of anger and frustration. I share that anger.

I’ve personally heard from thousands of Texans, and the complaints have come from all walks of life – retirees on a fixed income, middle-aged men and women working two jobs, small business owners, and thousands of others who have much to lose if the economy continues to slide. I’ve even heard similar frustrations from those who have much to gain if the economic stabilization proposal is passed and credit remains available for economic necessities such as home loans and small business growth.

But who can blame them? The vast majority of Americans play by the rules – they pay their bills on time, file their taxes every April, and budget-and-save for their families accordingly. So they are understandably outraged with the idea that their hard-earned tax dollars, even if ultimately recouped, should go to aid those who engaged in irresponsible, risky, and perhaps even illegal conduct.

And let’s also not overlook the fact that this proposal is being put forward at a time when Congress’ approval rating is already at an all-time low.

So it should serve as a wake up call to every Member of Congress when nearly every major political and economic leader in the country -- the President, the Vice President, the Treasury Secretary, the Chairman of the Federal Reserve, the Chairman of the Securities and Exchange Commission, the Democratic and Republican leadership of the House and Senate, and the Democratic and Republican nominees for President – supports this economic stabilization plan and yet, the majority of the American people continue to have deep concerns.

Clearly, the American public’s confidence in their government and financial institutions is broken. They watch as the political parties put partisan brinksmanship and political infighting above the many important issues facing our country. And they watch as Wall Street insiders put their bank accounts over the savings and retirements of their clients, with few consequences.

Many have not forgotten that just two years ago, in 2006, Fannie Mae was found to have intentionally overstated its earnings by $10.6 billion to meet their projected targets. Yet, top executives simply received civil fines, and no criminal charges were ever pursued.

Clearly, the federal government, on a number of levels, needs to start earning back the faith and confidence of the American people. I for one believe the current economic stabilization debate before the Congress is a good place to start.

That is why I recently sent a letter to U.S. Attorney General Mukasey asking for a full investigation into what happened – to find out how Fannie Mae and Freddie Mac, which were so central to the issuances of mortgages in the United States, could have been so poorly managed that they had to be bailed out by the federal government. I’m pleased to see that the FBI is investigating and Grand Jury subpoenas have been issued to both companies this week. But more than just investigating, we must hold accountable all those responsible for any malfeasance.

If corrupt or fraudulent practices have led to this crisis, it is our responsibility to pursue anyone involved with the full force of the law. Reckless Wall Street gamblers and crooked CEO’s should pay the price for their actions, and legal repercussions should follow any criminal activity.

More than that, CEO’s and Wall Street insiders who put their bank accounts over the savings and retirements of their clients don’t deserve more money from taxpayers. I am pleased to see that both parties agree that the final proposal must include reasonable limits on executive pay for any company requesting taxpayer assistance. CEO’s who failed their companies and its investors to the point where the federal government needs to step in do not deserve golden parachutes. This is one of the many improvements that were made to the Administration’s initial stabilization proposal.

The bipartisan proposal that the Senate will vote on, though not perfect, includes a number of substantial improvements in the areas of oversight, transparency, and protecting taxpayers across my home state of Texas and America as well. Republicans were also successful in batting down proposals that would have resulted in more spending on special pet projects and higher taxes.

However, more must be done to bring those accountable to justice. I believe the federal government must immediately devote substantial new resources such as additional FBI investigators and federal prosecutors to focus on unearthing criminal behavior in every aspect of this mess -- from the mortgage application to the securitization of toxic mortgages. Congress should also pass legislation that requires bailout participants to fully cooperate – by turning over certain documents and making certain witnesses available -- in securities and mortgage fraud investigations related to the assets they are selling to the government.

I believe Congress and the federal government must send a clear and unmistakable message that those responsible for this mess will be held accountable. In doing so, we will be taking much-needed steps toward rebuilding the American people’s confidence in their government and restoring accountability in this great country of ours.