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An update from the office of
U.S. Representative Michael E. Capuano
8th Congressional District of Massachusetts

Congressman Capuano's
E-UPDATE

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March 27, 2009

Treasury's Plan for "Legacy Assets"

This week Treasury Secretary Tim Geithner released details of the Administration's plan to relieve financial institutions from the "legacy assets" weighing down their balance sheets. I certainly understand that additional action is required to untangle the economic crisis we continue to face and as regular readers know, I have, up till now, supported imperfect measures to cope with the crisis. I judged the stimulus bills, though flawed, preferable to inaction.

However, I have serious reservations about the Administration's plan to purchase toxic assets (recently renamed "legacy assets") with taxpayer funds and transferring the risk associated with those assets from the people who made these risky purchases to the taxpayers. Under the current proposal, private investors would contribute 7% of the cost of purchasing one of these bad assets, the government would contribute 7% and the rest would be guaranteed by the Federal Deposit Insurance Corporation (FDIC). The potential risk of default is too high and the potential payout is too uncertain to put taxpayers' money on the line.

I strongly believe that private investors should be required to contribute much more than the amount proposed. They risk almost nothing and stand to gain a great deal. I am also convinced that there are other ways to address this particular problem. One of them is adjusting mark-to-market rules. These rules currently requires financial institutions to value their assets according to what they would be worth today, without taking into consideration what they were worth at the time of acquisition. Many of us have found our home values and our retirement accounts diminish in value considerably. Nonetheless, I think most of us remain hopeful that these assets will eventually increase in value. They may not get back to their heights, but they will be worth more in ten years than they are worth today. By modifying or temporarily suspending mark-to-market rules, financial institutions could hold onto these toxic assets and assess their value in a few years instead. This would ease some of the immediate pressure on banks' balance sheets and more accurately reflect the long-term value of these assets. Are some of these investments virtually worthless? Absolutely. However, many of them will regain some of their value over time. I have written Secretary Geithner to encourage him to modify mark-to-market rules and not to move forward on the "legacy asset" purchase plan.

FLAME Act

On Thursday the House considered H.R. 1404: the Federal Land Assistance, Management and Enhancement Act (FLAME), which establishes a federal fund that can be used for emergency wildfire fighting when federal land management agencies exhaust their appropriated funds. This bipartisan legislation passed in the House last year but the Senate did not act on it. 48% of the Forest Service budget is currently used for fighting fires and agencies are regularly forced to borrow from future budgets. I voted YES. H.R. 1404 passed and the entire vote is recorded below:

  YEA NAY PRESENT NOT VOTING
DEMOCRAT

243

0

0

10

REPUBLICAN

169

3

0

6

TOTAL

412

3

0

16

MASSACHUSETTS
DELEGATION

10

0

0

0

Help For Homeowners

The Treasury Department has established a website so homeowners may find out if they are eligible to participate in the Administration's Homeowner Affordability and Stability Plan. Through this program, homeowners may be able to refinance their loans for a better rate if they are held by Fannie Mae or Freddie Mac. If they do not have a loan with Fannie Mae or Freddie Mac, they may be eligible for a loan modification through the help of private lenders and the federal government. The Administration estimates the program will refinance 4 to 5 million mortgages and modify 3 to 4 million mortgages. The website can be found at http://www.makinghomeaffordable.gov/

Telephone Community Meeting

If you did not get a chance to call into my telephone community meeting last week, I am hosting another one on Tuesday March 31st from 6:40-7:40 PM. Anyone interested in participating may dial 1-877-229-8493 and use pin 13034 at the scheduled time to listen in. We will post audio files of both meetings on our website as soon as they are available.

What's Up Next

Next week the House is expected to consider the Budget for Fiscal Year 2010.


Congressman Mike Capuano
8th District, Massachusetts
Committee on Transportation and Infrastructure
Committee on Financial Services
Committee on House Administration

District Offices:

110 First Street, Cambridge, MA 02141
and
Roxbury Community College, Campus Library, Room 211

District Office Phone:

(617) 621-6208

DC Office:

1414 Longworth Building, Washington, DC 20515

DC Office Phone:

(202) 225-5111

Website and e-mail:

www.house.gov/capuano


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