Welch explains vote against bailout plan

October 1, 2008
By John Briggs, Free Press Staff Writer

A day after Monday’s stock market plunge, Rep. Peter Welch defended his vote against the administration’s $700 billion bailout plan, saying that although urgent action is necessary to loosen credit essential to ordinary Americans, it is important that the plan also protect taxpayers.

The House of Representatives rejected the bailout in a 228-205 vote. Welch was one of 95 Democrats who voted no. Those Democrats, 40 percent of the House Democratic majority, were joined by 133 Republicans — 67 percent of the Republican members — to sink the emergency legislation.

In a statement released after his vote, Welch said he had “heard from thousands of Vermonters concerned about their hard-earned tax dollars rewarding Wall Street’s reckless behavior.” He said he voted against the negotiated plan “because it isn’t paid for and because I don’t believe it will work.”

Tuesday, he said this opposition was not a capitulation to that public rage. “Frankly, it’s the hardest vote. There’s a lot of anxiety here.”

The injunctions from the president and from congressional leaders to act quickly had created a feeling that action of any sort was preferable to inaction, he said. The pressure “was to suspend judgment and fiscal responsibility,” Welch said. “Whenever you have a huge pressure to act, it diminishes the focus on acting wisely.”

Until a couple of weeks ago, Treasury Secretary Henry Paulson had told Congress the dangers from the mortgage-investment financial losses were being controlled.

“Everything was being managed,” Welch said. Suddenly, that changed, and Paulson announced a crisis and asked for $700 billion.

“To suggest it’s impolite for Congress, on behalf of the taxpayers, to ask a few questions is in effect asking for a blank check,” Welch said.

Welch said that although he accepts the assessments of Paulson and Federal Reserve Chairman Ben Bernanke that the current situation is potentially ruinous, Congress has been buffeted by conflicting advice on how best to respond.

He said a parade of economists and financial experts have made themselves available but offered “many different prescriptions” for congressional action.

Welch said he favors, with other Democrats, the creation of an escrow account on securities trades to provide “a backstop to protect the taxpayers down the line.” The account would act for securities as the Federal Deposit Insurance Corp.’s bank deposit insurance protects bank depositors against bank failures and would be paid for with a small transaction fee on each trade.

He said other taxpayer-protection proposals are also circulating. “The big question is how to restore credit in the banks without imposing a huge burden on the taxpayer’s credit card,” he said.

Welch said that while the need for legislation is urgent, “taking a deep breath and getting it right” is vital. “We want to have something in a month or two months, after the market has sorted it out, that is sustainable,” he said. “In these negotiations, you have to be flexible in the way you reach your goal.”

Welch made a point of absolving Vermonters for responsibility in what he called “a decade of reckless borrowing and lending.”

“I want to defend Vermonters,” he said. “We have the second-lowest foreclosure rate in the country. Vermonters, by and large, did not get caught up in the weird world of no money down and no job, no income.”

Welch said he was under little pressure from Democratic leaders in the House to vote for the plan.

“The leadership left it up to the members,” he said, recognizing that for individual representatives it was “a very important judgment call. I let the leadership know I was going to vote no, and I didn’t experience pressure.”

Contact John Briggs at 660-1863 or jbriggs@bfp.burlingtonfreepress.com