LIVE BLOG: Perlmutter’s telephone town hall on financial crisis, bailout
Democratic Rep. Ed Perlmutter is holding a telephone town hall with constituents about the economy, financial crisis and plans for economic relief.
Before the town hall — basically a gargantuan conference call — Perlmutter’s office sent post cards and e-mails to 50,000 constituents in the 7th Congressional District letting them know they’d be getting a call Wednesday night and could participate in the town hall by pressing some digits on their phone.
7:03 p.m. – Perlmutter welcomes callers, says his telephone town halls have had as many as 2,900 callers on the conference call and roughly 500 are on the call now.
7:05 p.m. – Perlmutter describes a stimulus bill passed by the House to add jobs. It’s sitting in the Senate and probably won’t be passed until the next Congress. Also passed TARP to stabilize the markets, make loans to troubled financial institutions, also businesses and individuals. There was a two-week period in September during which AIG needed help, Lehman Brothers failed and the secretary of the Treasury and Federal Reserve head came to Congress asking for emergency powers. Congress added taxpayer protections — the House didn’t pass, Senate did, then House finally did. Now we’re dealing with the automakers, Perlmutter says. There’s a hearing Friday to determine whether to provide assistance to Chrysler, GM and Ford. The automakers “did not present a very good case” previously asking for emergency assistance. They have come back with detailed business plans how to make their companies profitable. The downturn in the economy has exacerbated their problems, asking fro loans, guarantees for $34 billion, warning that failure could reverberate through the economy. Perlmutter’s Financial Services committee will consider it Friday. There’s also a proposal to provide credit to businesses and individuals with a hearing scheduled next Wednesday.
7:09 p.m. – Leslie Oliver, Perlmutter’s communications director, says there are more than 1,500 people on the call and provides instructions on how to ask questions. Perlmutter makes a few more points: When considering bailout proposals, he has these questions — does it stabilize the market, does it provide taxpayer protection, and does it revitalize the economy? What do we do to impose or reinstate regulations, and were there people who gamed the system who should be held to account? “That’s gotta be a consideration in anything we do,” he says, but first we have to fix things. There are now 1,800 people on the line.
7:12 p.m. – Zachary from Aurora wants to know about tax cuts, whether attempts to roll back the Bush tax cuts pit rich against the poor too much.
Perlmutter says he believes in the “trickle up theory.” The 7th Congressional District is people in the middle, and when the middle does well the country does well. Wants tax cuts for people making $50,000 to $200,000 — that will stimulate economy more than anything. Tax cuts that benefited the wealthiest in our economy while prosecuting wars in Afghanistan and Iraq put country in “an upside down position.” Those tax cuts to highest income brackets should be eliminated, taken back to where they were in 2000, 2001, but he’s not prepared to do that right now. “Ultimately, we’ve all got to pay our share, but tax cuts for the middle would have a stimulating effect on the economy.”
7:15 p.m. – Leslie Oliver describes a poll, which listeners can take by pressing numbers on their phone. This concerns with how to deal with the auto industry’s travails.
Perlmutter describes auto company’s proposals. GM wants $6 billion loan, $12 billion line of credit. CEO and board would cut salaries, top management also cut salaries and take no golden parachutes. They would premise loan on restructuring. Chrysler is asking for $7 billion, said they were doing well until sales came to a halt in August and September, want $7 billion bridge loan to get through first quarter. Ford feels it’s done the necessary restructuring, don’t need immediate cash infusion but want $9 billion line of credit in event market stays weak or if one of the others gets into trouble because they have common suppliers. Chapter 11 reorganization bankruptcy could help companies come to grips with things burdening companies, but these companies feel that would make it hard to sell cars. Another proposal is for government to buy energy efficient vehicles so companies have to retool. Another proposal is a bankruptcy specific to the auto industry so they can maintain business and restructure quickly, avoid layoffs.
The poll questions again: Which would you support?
1. Let Big 3 file for Chapter 11
2. Feds should guarantee purchase of energy efficient fleet
3. Fund based on specific loan terms
4. Feds should create new kind of bankruptcy
5. Feds should do nothing
6. Other options — email suggestions through Perlmutter’s Web site.
7:22 p.m. – Margaret wants to know about unions. Her IRA has lost a significant chunk, so is it fair tax money goes to autoworkers whose generous retirements and pensions are protected.
Perlmutter says the UAW submitted information — comparing new hires vs. people who worked 20-30 years ago. The range for new hires is $14 an hour for entry-level to $28 an hour for assemblers to $33 an hour for skilled workers on new contracts. Pensions — called legacy benefits — have been a heavy burden. GM has tried to move those obligations into a new entity, having spent $123 billion over the last three years. Part of all of this has got to be restructuring of the benefits. Companies have done a good job dealing with new hires, concessions by labor, but these other benefits still exist and that’s got to be part of the whole discussion.
7:25 p.m.: Poll results are in
1. Let Big 3 file for Chapter 11 – 26 percent
2. Feds should guarantee purchase of energy efficient fleet – 9 percent
3. Fund based on specific loan terms – 22 percent
4. Feds should create new kind of bankruptcy – 24 percent
5. Feds should do nothing – 11 percent
6. Other options — 8 percent
7:26 p.m. – Perlmutter says there are more than 3,000 people on the call.
Ricky with The Orion Project asks what kind of mandates will be put in place to require new technologies that have been put on the shelf “or suppressed” to get us off carbon-based fuels? Ice caps are melting, the problem with infrastructure is a technological and energy problem. He says his project is trying to get fuel cells, for instance, developed but it’s difficult. What kind of legislation will guarantee the technology makes it to the market?
Perlmutter says Congress passed the first increase to fuel mileage requirements in the last 28 years. Have to be concerned with climate — new technology means jobs. National security, environment, jobs — all reasons to focus on new ways to fuel vehicles. Tremendous pressure on Big 3 to come up with more efficient autos. GM says 22 of 24 new cars to be introduced are energy-efficient, including the Chevy Volt. Ford and Chrysler have done a lot to move toward that. They all “went kicking and screaming” into energy-efficient future and developed their own headaches, but they know Americans won’t continue to buy gas guzzlers. Consumers shouldn’t think oil will continue to go way up and drop way down. Has to be part of any loan package or restructuring. All the manufacturers have electric, hybrids, fuel-cell cars coming on line. Battery storage advances are there. Question is if tech steps are too little, too late?
7:30 p.m. – Margie in Arvada wants to know why would anyone open a bank anymore since so many have gotten in trouble.
Perlmutter says there are challenges ahead but Colorado is better off than most of the nation. State has all these energy companies, just today there was an announcement about a new solar film that can be placed on many things — like the tinting of car windows, that can generate electricity. Colorado went into the downturn before anyone else, we’ll come out before others because of diverse economy.
Are there too many banks? It’s easier to create a bank because of national banking system. In the old days, each bank had to have its own capital and stand on its own. Over time, moved from that to branch and then national banking. Erosion of regulations and precautions that came out of the Depression. Last barriers that kept stock brokerages, insurance companies and banks apart have fallen and that’s part of the problem. Some of the regulations provided for a stronger banking system.
7:34 p.m. – New poll about stimulus package. Which moves would callers support:
1. Rebuilding transportation, energy grid
2. Aid to homeowners to prevent foreclosures
3. Aid to small businesses and individuals
4. All of the above
5. No more economic stimulus
7:36 p.m. – Brian from Lakewood wants to hear views on stimulus for consumers vs. those for businesses.
Perlmutter wants to focus on infrastructure. “We’ve deferred maintenance on highway system,” transit system, energy grid is “antiquated,” doesn’t allow easy use of solar, wind, geothermal. “We have deferred investment in our country for too long.” Investment helps leave a legacy to our grandkids. Should spend money to develop new types of energy — solar, wind, biomass. Colorado is lucky, has big wind investment, NREL which spawns all sorts of businesses. U.S. should invest in new ways to come up with energy. Also money for unemployment insurance, healthcare — help folks tread water.
7:38 p.m. – Results of poll
1. Rebuilding transportation, energy grid — 38 percent
2. Aid to homeowners to prevent foreclosures – 8 percent
3. Aid to small businesses and individuals – 6 percent
4. All of the above – 27 percent
5. No more economic stimulus – 20 percent
7:39 p.m. – Bob from Arvada wants to know consequences to the nation if we let Big 3 automakers lapse into bankruptcy?
Perlmutter says economists, from left, right and middle, say in a normal year allowing one or two to file for Chapter 11 wouldn’t rock the economy, but the economy is fragile enough, layoffs of hundreds of thousands would create its own spiraling downward effect. Going to ask questions about that at hearings. Before he was in Congress, Perlmutter represented debtors in bankruptcy procedings. Chapter 11 allows companies to come out leaner and stronger, but the fear here is even that kind of bankruptcy would affect purchase of autos and cause layoffs in companies, suppliers and dealers. Economists say we can’t take the chance what it would do the economy overall.
7:42 p.m. – Sophia from Aurora wants to know about retraining. She was in mortgage business and has been laid off for over a year. Will there be retraining for the new energy jobs?
Perlmutter plugs the recent passage of a bill he sponsored, the GREEN Act — Green Resources for Energy Efficient Neighborhoods. It set standards for housing, commercial and retail properties — incentives for energy-efficient homes would lower credit risk because they’re less vulnerable to energy costs. Within mortgage business, many homes in default and foreclosure — effort to modify so can pay some part of mortgage and stay in homes, but servicing companies need people to be part of servicing loans. Without people servicing loans, we can’t do modifications to loans May be real chance in next few months for those kinds of jobs. Education for folks to learn about energy-efficient homes will also be promoted.
7:45 p.m. – Elizabeth from Golden wants idea where all the bailout money is coming from, if the system is accountable so we know it’s going for legit uses, whether companies will repay it.
Perlmutter says under TARP, $700 billion was appropriated to loan money into banking system so they’d work with one another again. They’d stopped loaning to other banks because they feared those banks would fail. TARP would be repaid these ways: the government purchases portfolios containing troubled mortgages that are in default, get cash flow from performing mortgages and eventually sell portfolio back after they improve. Bailout recapitalizes banks so they didn’t fail and could continue to make loans to public — we (taxpayers) receive stock in bank and banks will have to repay as they return to profitability. Also loans through federal agencies to small businesses, farms. There are also programs where the Fed has loans to banking system. For automakers, the government would get stock and warrants. Remember when Chrysler came to Congress in 1978, 1979, they took out a loan and paid it back seven years early and have been doing well since until very recently. If we keep the economy going, taxes would be coming in from the stronger economy. Mostly it’s loans, also investments in infrastructure paid over a very long time.
7:49 p.m. – New poll – have you postponed a major purchase such as new home or car within the last six months because of concern over the economy?
7:50 p.m. – Juan from Lakewood is an entrepreneur who had to lay off employees for the first time recently. Big companies are going overseas — how to bring economy back to our shores?
Perlmutter points to key Obama plank to not provide incentives to companies to ship jobs overseas. Part of automaker conditions is to try to have jobs here in U.S., not all around the globe, even though all three are global manufacturers. Goal is to make sure we don’t give incentives to companies to offshore labor, but make sure they look first to America to build business and employ people. Renewable energy, making homes energy efficient (GREEN Act) provides jobs here in America, infrastructure jobs are here in America. We’re in a global economy but we shouldn’t provide benefits to send jobs overseas. The space industry and engineering companies need workers — example of homegrown jobs.
7:53 p.m. – There are bout 3,000 people on the call.
Results of poll:
Have you postponed a major purchase such as new home or car within the last six months because of concern over the economy?
Yes – 31 percent
No – 69 percent
New poll – if you have postponed a major purchase, why?
1. Fear of or actual unemployment
2. Loss of credit
3. Wait and see attitude
4. Some other reason
7:55 p.m. – Lucille from Arvada wants to make a comment on auto industry. She can remember World War II – we cannot consider losing the automobile industry in the United States for national defense reasons because they retooled quickly to build the tanks and airplanes that helped win the war. They’ve made mistakes but we cannot let them go.
Perlmutter reviews Detroit’s history providing equipment for national security in WWII and since then. Has to be taken into consideration. Whatever Congress does, there are going to be a lot of conditions attached to any kind of bridge loan or line of credit. National security aspect, jobs, fuel and energy efficiency, concessions from management, dealers and labor are all necessary to keep companies lean and competitive to go forward. How to make sure taxpayer is protected — great question.
7:57 p.m. – Results of last poll: if you have postponed a major purchase, why?
1. Fear of or actual unemployment – 29 percent
2. Loss of credit – 4 percent
3. Wait and see attitude – 53 percent
4. Some other reason – 14 percent
7:58 p.m. – Mike from Aurora wants to know what guarantees we have the same people won’t fall into trouble again if we bail out foreclosures?
Perlmutter says vast majority are paying mortgages as promised, but a number suffer from teaser rates and housing values that have dropped. Borrower has fault, lender has fault for not adequately screening borrowers. Goal is we don’t want a lot of vacant homes because that has a domino effect, bringing down properties in neighborhoods. To allow loan modification, borrowers have to demonstrate they can pay. If real estate market comes back and improves, the taxpayers would share for five or six years in any increase up to original loan amounts. So if a loan is modified from $200K to $150K and if the house reappreciates to $200K, taxpayers would share in some of that growth. Don’t want to reward incompetence, greed — but have to deal with this in the short run, protect taxpayers, get economy back on its feet. Where people have taken advantage of the system, we hold them accountable. Lot of work to do.
8:02 p.m. – Perlmutter closes with invitation to an open house Dec. 13 at his Lakewood congressional office on Colfax between Simms and Youngfield, from 10 a.m. to 11:30 p.m. He thanks everyone for participating.
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