Thursday, September 10, 2009

U.S. Senator Johnny Isakson (R-GA)
Floor Statement on the Economy and Housing Market
Remarks as Delivered on the Senate Floor

Mr. President, last night the President of the United States, in the preface to his address on health care, addressed our economy and the current state of affairs. I think he made a very accurate assessment that we had hit the bottom and we were on the bottom. The question that lies before us is how we move from the bottom in this economic time back to a period of prosperity.

Although unemployment applications for benefits are down, they are still extraordinarily high. In my State of Georgia, unemployment is 10.3 percent. In the United States of America, the average home--47 percent of them--is worth less than is owed upon the house. That is a very bad situation which over a protracted period of time will continue to suppress consumer confidence and keep us at a low point in our economy.

There are many ideas about what should be done, but I want to talk tonight about two things. One is something that has already been done by this Senate and the House and signed by the President and one is something I hope between now and November 30, the Senate, the House, and the President can do.

First, in terms of what we have done. Senator Conrad of North Dakota joined with me in introducing a piece of legislation known as the Financial Markets Crisis Commission. I enjoyed a lot of support for that, including from the distinguished Senator from Rhode Island. The appointees have been made. It is a bipartisan commission, has a budget of $5 million, has subpoena powers--everything the 9/11 Commission had--and has an unbridled charge to investigate every aspect of the financial markets, whether it is the rating agencies, the investment bankers, the regular bankers and traditional bankers, the GSEs such as Freddie Mac and Fannie Mae, every component, and report back to us by the end of next year, which is right after the midterm elections, on what it finds happened that caused the economic collapse that began last September and continued to mushroom until late March of this year.

There are some who are talking of a rush to judgment in terms of financial regulation. But I hope we will take a pause, give this commission time to act, and let's find out what a forensic audit tells us of what happened in America in our financial markets, and let's respond to that after we have all the facts. I think a rush to regulatory judgment under what one might think, for the best of intentions, caused the problem could have the unintended consequence of having a more difficult impact on the economy than it should.

I think this body and the House acted wisely. I appreciate the President having signed it expeditiously, and I commend the majority leader, the minority leader, the Banking Committee chairman, the ranking member, the Speaker of the House, the Republican leader in the House, and the majority leader in the House for making outstanding appointments.

The appointees to this commission could not be elected officials and they could not work for the government. They have to be people knowledgable in the field of finance. They are 10 of the brightest minds in our country. I have my ideas. I am sure the Presiding Officer has his ideas. I think every Member of the Senate has ideas about what did go wrong last year and what we need to do to correct it.

But let's get all the facts on the table. Let's get a forensic audit so when we move we move with due knowledge and in due course. The biggest mistake in Sarbanes-Oxley a number of years ago was a rush to judgment in reaction to Bernie Ebbers and Ken Lay. Sarbanes-Oxley, although needed and appropriate, reached further probably than it should have in a number of cases. The same potential lies again in terms of financial reform if we move too quickly or precipitously or without all of the information. So in the interest of our economy, let's wait for this report to come back before we rush to judgment.

Now, secondly, on the 30th of November, the first-time home buyer tax credit that passed this body last July and was amended in February expires. The first-time home buyer credit is a byproduct of an original bill I introduced along with a number of Members of the Senate to provide a $15,000 credit to anybody buying and occupying a home in America as their principal residence. It got parsed down and finally, in negotiations, became a first-time home buyer credit only, means tested for incomes of $150,000 or less. It has had a positive impact on the market.

But America does not have a first-time home buyer problem. America has a move-up-crisis problem. Right now, no one who is in a house in the middle of the market, from $200,000 to $600,000, can sell their house. Transferees from Georgia to the State of Washington or from Rhode Island to Florida are frozen. They cannot sell in Rhode Island to buy in Florida. They cannot sell in Atlanta to buy in Washington State.

The housing market is literally at gridlock. The majority of sales being made in the last few months are short sales and foreclosures, which is depressing further the value of housing. The few direct arm's-length sales that are taking place are, in fact, spurred on at the lower end of the market by the first-time home buyer credit.

So I ask the Senate to think for a second: What happens on December 1 of this year when that credit goes away to the housing market? Well, I will tell you. I used to be in that market. The worst month of the year is December, to begin with. Housing purchases are seasonal, and in the winter, December, January, and February are always the low months. If you take away the single impetus that exists, what do you have? Nothing more than short sales and foreclosures and a continuing decline in equities and values.

But if before that expiration date takes place the Senate could take a legitimate look at what is in the best interest of moving our economy off the acknowledged bottom where we are today, it is fixing the one thing that led us into our difficulty, and that was the collapse of the housing market.

I would submit if we took the $8,000 housing tax credit for first-time home buyers, extended it to $10,000, made it eligible to anybody who bought and occupied a house as their principal residence, whether it was their first purchase or their tenth purchase, we would move more real estate and move more impetus to the housing market than it has seen in the past 24 months. As we do that, consumer confidence comes back, equities and values come back, the borrowing power of the American public comes back, and our economy comes back. Failure to do so and we remain in a quagmire where we are today, which is no legitimate sales, declining values, a loss of equity, and a continuing high unemployment rate and a continued depressed marketplace.

So as we come back from our August break, as we begin to look forward, as we look at the end of the year, as we look at those things that are terminating, those things that need to be considered, let's pause for a second and realize the good that the tax credit has done so far, as limited as it was, and let's make it better. Let's extend it to July 1. Let's make it $10,000. Let's take the means test off. Let's give an impetus to the move-up market. If we do, values will return, unemployment will go down, our economy will turn, and consumer price confidence will go up. I would submit it is a part of the main solution we need to take an economy that is on the bottom and move it back toward equilibrium and prosperity for America.