It’s late September 2008. Storied Wall Street investment bank Lehman Brothers Holdings has gone bust, the U.S. government has bailed out the world’s largest insurance company, some of the country’s biggest banks are merging just to stay alive, and the world’s credit markets are frozen solid. Meanwhile, Congress is bitterly debating Treasury Secretary Henry Paulson’s $700 billion plan to buy toxic assets from ailing banks — a plan that will become the largest industry bailout in U.S. history.
These are unprecedented times. Democratic House Speaker Nancy Pelosi, 68, the first woman to serve in that position, is thrust into the spotlight as Congress scrambles to rescue the American economy from the worst financial debacle since the Great Depression — and in the process, becomes the country’s lender of last resort. In recent months, Pelosi has been at the center of high-level talks on everything from the future of American capitalism to the demise of the automobile industry.
In late December, as the historic year came to a close, Pelosi spoke to Institutional Investor staff writer Julie Segal.
1 Institutional Investor: A Detroit rescue would put tight shackles on executive pay and set ground rules for the auto industry. Why did the finance sector get off so easy?
Pelosi: Secretary Paulson came to the Congressional leaders and told us he needed this money right away to avoid the collapse of our financial system. He offered a three-page legislative proposal to provide the Treasury with billions of dollars and no oversight. Congress worked hard to improve the legislation by providing protections for taxpayer dollars, limits on CEO pay and independent oversight.
2 How will Congress deal with Americans’ anger over the bailouts, particularly when they haven’t staved off a recession?
The American people’s anger about the economic policies that have led to high unemployment and economic insecurity is understandable. Years of President Bush’s failed economic policies have left our nation in a recession with middle-class families struggling to make ends meet.
3 Problems in the housing market are at the root of the financial crisis. Should the government rethink its role in encouraging homeownership?
The problem was not the government’s encouragement of broad-based homeownership. The problem was that for years the Bush Administration and Republicans in Congress have weakened regulation of our nation’s financial system and failed to regulate risky, and often predatory lending practices.
4 Once the financial crisis passes, how will the government exit the private sector in an orderly way?
The government has invested this money in return for shares of these companies. Once things clear and these companies’ financial health is restored, the government can sell the shares in order to recoup taxpayers’ money and exit the private sector.
5 What was the biggest mistake made by government last year?
The failure to pass an economic and jobs package was the biggest mistake. The House passed legislation in September that would have begun to get our economy back on track by investing in new energy technologies and infrastructure, helping working families afford health care and offering Americans job training to gain new skills and earn higher wages. Regrettably, President Bush and Senate Republicans stood in the way and forced Americans to wait until we had a new Congress and a new Administration. At a time when joblessness was on the rise and our nation in need of critical investments, an economic recovery package had to wait.
