“Good morning.  This is Congressman Barney Frank of Massachusetts, Chairman of the House Financial Services Committee.

“The large jump in the unemployment rate in December is the latest sign that the economy is slowing down and most observers believe that this downturn will intensify. 

“A crisis that spread rapidly from the subprime mortgage market to the broader financial markets, now threatens the entire economy and the well-being of American workers and their families.

“This week, the Federal Reserve reported that, in addition to major weakness in housing markets, manufacturing activity was down in most areas, and consumer spending during the holiday season was disappointing.  According to the Conference Board, a leading business research organization that tracks consumer spending, consumers’ views toward the economy quote, ‘continue to paint a dismal picture,’ unquote, as Americans grow increasingly worried about their economic situation. 

“Worse, this economic downturn comes after a period of growth that failed to benefit the majority of Americans.  In fact, wages for workers are actually down in real terms since 2001, and income inequality has reached levels not seen since the 1920s.

“In early December, Speaker Pelosi convened a meeting with a broad range of economic experts and they urged us to begin preparing a stimulus package.  We have been hard at work.  As the President acknowledged yesterday, the need for action is now undisputed so we should act together and we should act quickly.

“In terms of immediate stimulus, Democrats stand ready to work with the President and Congressional Republicans to put together a bipartisan package including tax rebates for most Americans, and one-time increases in programs directed at those who are bearing the heaviest burdens in this economy.  Economists agree that middle and working class people are most likely to spend that money in a way that will effectively stimulate the economy and create jobs. 

“As we work on the details of a proposal, we are also guided by the need for increased assistance to those who are unemployed, to those hit hardest by the increases in food and energy costs, and, importantly, to those who have lost their homes or are struggling to avoid foreclosure.  We should also address the problems faced by state and local governments who may be forced to reduce vital services as their tax receipts decline.

“Of course, acting on an immediate stimulus to stem the downturn is not all that is required.  We must also work to address the underlying economic problems that have come to light in recent months.  Democrats believe that an active government role is needed to maintain confidence in the integrity and fairness of markets for consumers, homeowners, workers, and investors. 

“The free market system is the foundation of our prosperity, but as we confront the damaging consequences of irresponsible mortgage lending, all but a few zealots now understand that enforcement of standards of honesty, openness, and responsibility is necessary to prevent the sort of abuses that have brought us to the present crisis.

“It appears that this anti-regulatory tide may, at long last, be turning.  In 1994, a Democratic Congress passed the Homeowners Equity Protection Act, giving the Federal Reserve the power to regulate all home mortgage loans.  Alan Greenspan, a staunch advocate of deregulation and then Chairman of the Federal Reserve, flatly refused to use any of that authority.  In contrast, today’s Federal Reserve will soon issue the rules called for in that legislation.  While they are not as strong as many of us would like, this still represents an important repudiation of the hands off view that has dominated in recent years.

“While some continue to argue that government efforts to address problems in the marketplace will damage the economy, the evidence is quite clear that growth in the private sector is consistent with a great variation in many aspects of public policy, such as taxation and regulation.  In fact, appropriate intervention not only promotes economic growth, its absence – as we have learned – can slow it.

“Today our nation faces a test.  We must cooperate to enact immediately aggressive measures that respond to the economic downturn, while we simultaneously continue a healthy debate about the role of government in a modern economy.  I am confident we will succeed.

 “This is Congressman Barney Frank.  Thank you for listening.”

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