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Bailout measure a mistake

The first time I voted no on the bailout bill, I said that the $700 billion bailout for Wall Street was a huge amount of taxpayer money to spend on a plan that took the wrong approach and was unlikely to solve the actual problem.

The first time I voted no on the bailout bill, I said that the $700 billion bailout for Wall Street was a huge amount of taxpayer money to spend on a plan that took the wrong approach and was unlikely to solve the actual problem.

On Monday it was called the Wall Street bailout, and on Friday they called it the Emergency Economic Stabilization Act, but no matter what it was called, the bill was still not the right solution for the problems I see on Wall Street, and so I voted no for a second time.

However, this second time the bill, H.R. 1424, passed the House by a vote of 263-171.

As I reflect on this, I don't see how anyone could think that taking a bill that already was weak in a lot of places and will expose taxpayers to $700 billion more in debt can be improved by adding on another

$150 billion. And all of this spending is "unpaid for" - it will be added directly to the national debt. In effect, we're mortgaging the future (something that should belong to our children and grandchildren) and turning to China and other foreign nations to finance it. We could be putting ourselves and our children in a position where we no longer have effective control over our own country's financial system. They could be in a position to buy our country's best assets, and we won't have a lot of options for preventing it.

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Now that the president has signed this massive new spending bill into law, the secretary of the Treasury will be able to begin buying any kind of "bad debt" he thinks should be removed from the books of a variety of private sector firms. His power to make these decisions is virtually unrestrained, and there's no doubt in my mind that one of the things he's going to buy on behalf of you and me is something called a credit default swaps contract.

We have a roughly $60 trillion exposure in the market where they trade these credit default swaps, which most people don't know anything about. I can tell you this bill does absolutely nothing to protect any of the $700 billion in taxpayer money this bill will allow to be spent from that kind of bad debt.

If the government is going to be spending taxpayer dollars to buy assets, those assets should be things with real value. Like Warren Buffett has advised, we should buy only those assets that can help assure that the taxpayers will recoup something from their collective investment once those currently underperforming assets are resold at some point in the future when they have regained actual value in the market. We should also gain actual equity in all firms that participate in this bailout so that the taxpayer - as an actual shareholder - will profit on their investment when the company itself profits.

There were a few good ideas in the bill, including raising the limit of FDIC deposit insurance, but at the end of the day you can't get around the fact that the bill hands $700 billion in nearly unrestrained spending authority to the secretary of the Treasury, and if you count the extra pork and tax breaks the Senate added on it spends more than $850 billion all together.

The most encouraging thing I heard during the debate was that many in Congress, regardless of how they voted, recognize that we have a lot of work ahead of us if we're going to truly get at the underlying problems we have in our financial system's credit markets.

At the end of the day it's hard not to think that Wall Street will get to keep their profits and hand all of their bad debts to the taxpayers. The bailout bill has certainly opened the door to that possibility, but I want people to know that I will be doing all I can to see that does not happen. When Congress reconvenes I will get to work immediately on sorting out the underlying problems that were not addressed in the bailout bill and working with both Republicans and Democrats to overhaul our system in ways that will be effective, that will protect taxpayers and investors, and will insure against a repeat of this fiasco.

Peterson, D-Minn., has represented Congressional District 7 in the U.S. House since 1990.

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