Representatives Marcy
Kaptur (D-OH), Peter DeFazio (D-OR), Rush Holt (D-NJ) proposed an alternative
measure, the No BAILOUTS Act, to address the financial situation without bailing out Wall Street and
corporate executives.
"We want a good bill, not a fast bill. We want a bill that will really work," said
Kaptur, the senior-most woman in the House.
Bringing
Accounting, Increased Liquidity, Oversight and Upholding Taxpayer Security
1)
Require the Securities and Exchange Commission (SEC) to require an economic
value standard to measure the capital of financial institutions.
This bill will require SEC to implement a rule to suspend the
application of fair value accounting standards to financial institutions, which
marks assets to the market value, no matter the conditions of the market. When
no meaningful market exists, as is the current market for mortgage backed
securities, this standard requires institutions to value assets at fire-sale
prices. This creates a capital shortfall on paper. Using the economic value
standard as bank examines have traditionally done will immediately correct the
capital shortfalls experienced by many institutions.
2)
Require the Securities and Exchange Commission to restricting naked short sells
permanently
This bill will require SEC to implement a rule that blocks naked
selling, selling a stock short without first borrowing the shares or ensuring
the shares can be borrowed. Such practices many times harm the companies
represented in the sales and hurt their efforts to raise capital. There is no
economic value produced by naked short sales, but significant negative effects.
3)
Require the Securities and Exchange Commission to restore the up-tick rule permanently.
This bill will require SEC to implement a rule that blocks short
sales without an up-tick in the market. On September 19, 2008, the SEC
approved a temporary pause of short selling in financial companies "to protect
the integrity and quality of the securities market and strengthen investor
confidence." This rule prevents market crashes brought on by irrational short
term market behavior.
4)
"Net Worth Certificate Program"
This bill will require FDIC to implement a net worth certificate
program. The FDIC would determine banks with short-term capital needs and the
ability to financially recover in the foreseeable future. For those
entities that qualify, the FDIC should purchase net worth certificates in these
institutions. In exchange, these institutions issue promissory notes to
repay the FDIC, counting the amount "borrowed" as capital on their balance
sheets. This exchange provides short term capital, with not cash
outlay. Interest rates on the certificates and the FDIC notes should be
identical so no subsidy is necessary.
Participating banks must be subject to strict oversight by the FDIC
including oversight of top executive compensation and if necessary the removal
of poor management. Financial records and business plans should be
subject to scrutiny while participating in the program.
In 1982, Congress approved a program, known as the Net Worth
Certificate Program, that allowed banks and thrifts to apply for immediate
capital assistance. From 1982 to 1993, banks with total assets of $40
billion participated in the program. The majority of these banks, 75%, required
no further assistance beyond the certificate program.
5)
Increase the FDIC Insurance limit from $100,000 to $250,000.
The bill will require the FDIC raise its limit to provide depositors
confidence that their money is safe and help eliminate runs on banks which are
destabilizing to the industry.
