Everyone is focused on the current economic crisis and it's where my attention has been for some time.  I'd like to share a few key points and some ideas for stabilizing our current economic situation.I want to focus on two things:

1.  What’s the source of this economic trouble?   My profession is business management.  When I go into a company to fix a problem, my first step is to look for the source or cause of the problem - before I plow into fixing the wrong thing.  So, what is the source of the economic spiral down in America?

2.  How do we fix it?  Only after identifying the source of the problem. 

The Source
Don’t worry – I’m not going to blame the Republicans!  There is plenty of blame to go around on both sides, believe me. This is about voting into office multiple Congresses that should have known, could have known, and some that may have known what was happening. 

This is about now voting into Congress people who are smart enough, careful enough, and wise enough to stop what is happening and stabilize our economy. To understand the cause of this problem, we have to go back to the years leading up to the Great Depression of 1929, when: 

• There were no walls between banks and the stock market. 
• Credit was cheap and people were allowed to borrow money from the banks and then risk it in the stock market – and they did. Everyday people were playing the stock market and even banks were doing it with depositors’ money. It was the roaring 20’s and people were getting rich right and left.
• Stocks began to fall in October ‘29, banks began to call in loans because the value of the stocks dropped and no longer covered the loan amount. People couldn’t make payments so they defaulted on the loans. Because banks had been borrowing money to invest as well, their portfolio plummeted. When people came to get their money out of the banks (i.e., when there was a run on the banks), they didn’t have the cash and closed.

Does any of this sound familiar?

In 1933, when Franklin Roosevelt was elected President, he said that in order to protect ourselves “against money lenders and unchecked and unregulated Wall Street gamblers” – and to prevent the possibility of another depression, we needed: To supervise and separate 1) Banks, 2) Securities Companies and 3) Insurance Companies. The Glass Stegall Act was the response and there was a clear separation of:

• BANKS, which were to be the guardians of public money. Low risk. Low reward. Safe. Federally insured with taxpayers dollars. And banks could not risk other people’s money in the stock market.
• SECURITIES for those who wanted to speculate in the market, but could not do so with other people’s money. Glass Stegall said they needed transparency, anti-trust laws, and accounting standards so that a Depression would never happen again.
• INSURANCE companies were the third arm that Glass Stegall separated to make sure a bank failure, or stock drop, would never risk the publics’ health and property.   

Through Democrat and Republican administrations, these protections endured (despite chipping away which started in the 80’s), until 1999 when the walls, boundaries, and safeguards came down with the Gramm, Leech, Blilly or Banking Modernization Act.

Soon these institutions became self-regulating. 

Citibank bought Travelers Insurance and Smith Barney and became Citigroup. J.P. Morgan bought Chase Manhattan. BOA bought Merrill Lynch just recently and, because they were deregulated and self-regulated, there was no supervision of what they were doing.  What they were doing was making wild loans to people who had no business getting credit - with depositors’ money.  Subprime loans. All the time shielding from view the transaction trail by bundling loans and selling them off in pieces and parts to speculators.

When the first round of subprime loans and mortgages – the high risk mortgages – adjusted, the trouble began. Defaults began. Some people didn’t understand the loan agreements they signed in the first place. Some people were borrowing cheap money and flipping houses as they watched the housing bubble grow bigger and bigger. Credit card companies were hiding extraordinary charges from view that made predatory lenders look like pikers.

But the bubble burst, as bubbles always do, and the banks didn’t get paid on their loans, their investments have gone south, and they are filing for bankruptcy.This is obviously very serious. Just as in 1929, there is nothing really to stop the spiral downward except the response time and creative problem-solving of the government now.

WHAT DO WE DO NOW? The same things Congress should have been doing since 1999 if they hadn’t been asleep at the wheel.

1. Immediately restore the separation between banks, securities companies, and insurance companies and immediately restore accountability and oversight over the three sectors.

2. Immediately repeal the Commodities Modernization Act and restore the safeguards to the commodities markets.  The removal of those safeguards has led to extraordinary gas and food prices.

3. Re-establish a Homeowners Loan Corporation (HOLC) like in the 30’s where the government buys up low and middle income Americans’ home mortgages that are in default and issues new 30 year loans. In the Depression, by the time they closed HOLC, government made a small profit. FHA could handle this without creating a new agency.

4. The SEC should immediately put a stop to selling short. It is criminal that so many people have gotten rich from this country’s downward economic spiral.

5. Institute accountability and transparency rules and sound accounting principles so corporations can’t hide behind fuzzy math.

6. Prohibit any company we bail out from paying obscene buy-out agreements to the CEOs who got us into this mess. (AIG’s CEO of 3 months was to get 7 million; the previous CEO who led during the failure got $47 million).

7. Rather than offering another tax rebate, which disappears in months and ends up in the pockets of foreign companies selling products in America, let’s use the rebate money for jobs to shore up our failing infrastructures (i.e. roads, bridges, drainage, etc.) in the states. 

8. Call for and support a balanced budget until we are out of this crisis. No more borrowing until we pay down our debt.

9. Get serious about government waste.  Yearly waste of $375 BILLION dollars is obscene.

10. Give middle income people a tax cut. Middle income people have absorbed the largest tax burden of any group in the last 8 years.

11. Burn most of those 10,000 pages that Bush added to the tax code.  Get the tax code down to 100 pages.  If we can write a $700 Billion Dollar Bailout in 100 pages, we can write a tax code in 100.

12. Don’t let American companies overseas avoid taxes by leaving profits overseas.

13.  Raise the amount before the Alternative Minimum Tax takes effect.

14.  Reduce the corporate tax from 35% to 28% and eliminate ALL loopholes.  

15. Cap the estate tax exclusion where it is now with $7 million dollars exempt from taxation.  

16. Come up with a real energy plan that will support alternative energy sources and solutions, including a 0% capital gains on technologies and production for fuel sources of 3 carbons or less.

17. Allow small businesses to get health insurance through their Associations and immediately reduce the waste in the healthcare system.

18.Create truth in lending laws with teeth so that consumers know everything – no hidden costs, no unexplained points, etc. - with special emphasis on deceptive credit card practices.

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America has almost always been a country where hard working people could expect to provide decent housing, education and health care for their families. But shrinking salaries, increased taxes, and the rising cost of housing, gas, food and health care are making that more and more difficult.

I have been a management consultant to business, government and nonprofits for over 30 years. I know when things are out of balance within a system or an organization and our economy is dramatically out of balance. This is about working together to find solutions to complex problems. 

We are in tough times economically: the sub-prime mortgage crisis, soft home sales, rising unemployment, an unstable stock market, high oil prices (and the associated rise in prices for everything from food to utilities because of that), the cost of the war in Iraq, a turndown in retail sales, too much inventory, a weak dollar, tighter credit, rising health care costs, and a national debt approaching $10 trillion dollars. South Carolina families feel the results in what it takes to fill up our gas tanks and our grocery carts; what it takes to sell our homes; and, what it takes to keep our homes warm or cool and ourselves and our children in good health. 

If we take the same old path, with the same old people, we can expect the same old difficulties we are experiencing today. We need Congressional representation with sounder, more fiscally responsible thinking and longer term solutions. 

What do we do now?

Fair Taxation, Invest in Education and Retraining, Accelerate the Minimum Wage

• Cut income taxes by $1,000 for working families making $50,000 or less to offset increasing payroll taxes.
• Eliminate last minute "pork barrel" spending with no review process and make earmarks completely transparent and accessible.  
• Maintain the current rate for capital gains to encourage economic investment and jobs. 
• Return Pell Grants to their former level of funding because to compete in this economy, we must have more education.
• Fund retraining for workers in growth industry skill sets.
• Accelerate minimum wage to reach $7.25 by November 2008.

Increase Policy and Oversight For Consumer Financial Products

• Establish a Financial Products Review Commission to protect against misleading or imprudent consumer financial products.
• Make financial products more transparent by requiring annual payment figures for the life of a loan, clear information about points, fees and penalties during the application process.
• Make credit card charges transparent and curb excessive and extraordinary charges.
• Regulate predatory lenders and set interest caps on that industry.
• South Carolina is second in the nation for mortgage fraud. Implement penalties for perpetrators of mortgage fraud.

Government Accountability

• Attack the over $375 billion a year waste of our tax dollars by the federal governmnet.  Boomers are currently paying taxes which are three times as much of our income in real dollars as our parents did in 1950.  Poor fiscal management, redundancy and inefficincy are costing us all.  Restoring budgetary discipline and being a steward of taxpayer money is a non-partisan issue and should be a prioirty for every Congressional representative. 

  Invest in 21^st Century Economies and Jobs

• Require American made cars to meet a standard of 40 mpg by 2015. This will save families money, help American automakers be competitive, secure jobs and cut down on CO₂ emissions.
• Increase the speed of the Renewable Energy Sector with tax incentives to create more jobs of the future.
• Offer incentives for energy independent technologies that are safe, have no negative impact on the environment and don't impact the price of food.
• Our congressional office will have two experienced staff who are fully dedicated to promoting commerce in our district.