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Sunday, September 28, 2008

Domenici on Financial Fallout: 'My Concerns Were Real'

By Michael Coleman
Copyright © 2008 Albuquerque Journal
Journal Washington Bureau
          WASHINGTON — Sen. Pete Domenici saw it coming. The New Mexico Republican watched warily for years as banks offered Americans easy credit to buy anything from houses to Hawaiian vacations. He saw constituents driving shiny new cars and building bigger homes, even as data showed incomes were flat.
        And, last week, he huddled with his top advisers — including a former Wall Street investment banker — and watched the nation's credit system come crashing down.
        Domenici, a former Senate budget committee chairman and 36-year Senate veteran, told the Journal in interviews last week that the current fiscal crisis is worse than any he's seen.
        He voiced regret for not sounding alarms sooner and warned that Americans better get used to living within their means.
        "The days of easy credit are gone," Domenici declared as he sat behind his desk in the Hart Senate Building, surrounded by five solemn aides. "America has learned to live on credit, and what may come out of this is that Americans won't be able to have as much credit as they had before this disaster."
        Domenici will retire from the Senate early next year, and he said he'll walk away wishing he had voiced his concerns about runaway borrowing and spending sooner.
        "I love this country, and I have never had anything as tough as this one. It's just wrenching," said Domenici, the son of Italian immigrants who was born into the Great Depression in Albuquerque in 1932. "I have believed for a long time that we were on the wrong path, and I acknowledge I couldn't do anything about it.
        "Credit was taking over, and we were going crazy," he said. "And I watched these advertisements that were so good at convincing people to borrow money ... and it just bothered me.
        "Now I wake up and see that my concerns were real," Domenici said.
        Domenici served as chairman or ranking member on the Senate Budget Committee throughout the savings and loan crisis of the 1980s and the economic recession of the 1990s. He's widely credited — or blamed — for convincing the first President Bush to break his "Read my lips: No new taxes" pledge. He helped negotiate the Balanced Budget Bill of 1997 with President Clinton.
        With that kind of experience in the economic trenches, Domenici's opinion on fiscal matters carries great weight on Capitol Hill and beyond. Early last week, he came out in support of a plan President Bush and his economic advisers proposed for dealing with the Wall Street crisis. That included investing $700 billion of taxpayer money to buy up so-called "toxic" mortgages.
        Domenici told the Journal on Saturday that congressional negotiators were nearing a deal and could have a bill in place for approval by today.
        Domenici dismissed objections of House Republicans — including Rep. Steve Pearce of New Mexico — who sought major changes to the bill, even though it appeared that the final legislation will address some of those concerns.
        "I don't think a lot of the House Republicans have looked at it carefully enough," Domenici said "They didn't cause me to change my mind."
        Domenici said the need to pass some type of financial rescue legislation is urgent.
        "The longer we wait, the more the market has problems and the more the confidence of the world in us being the financial leader dwindles," he said. "We've got to get the confidence back. And the longer we wait, the more difficult that's going to be."
        He said that Americans are justified in their anger about infusing such a massive amount of taxpayer money into the market but that failing to do so could grind the economy to a halt.
        "The problem is, if we don't do this and what is projected to happen happens, it's not just Wall Street that gets hurt — it's every street and it is everybody," Domenici said.
        As the senator looked toward his impending retirement, he said he realized that fellow conservatives will judge him harshly for supporting the president's plan to salvage the nation's credit system.
        "I am a pure capitalist, and I recognize that some will say, 'You are not — you have injected the government into all our businesses by doing this,' " Domenici said. "But I was elected to use my judgment, and my judgment says there will not be much to save and we're going to be a long time getting out of this mess if we don't fix it this way."
        He also lamented the rage that some Americans — justifiably, in his opinion — are directing toward Congress.
        "People are, to an extent, justified for being upset with Congress for not doing its work, not getting things done on time, and for letting the laws of our land on banking, for instance, get so out of line that things like this can happen," Domenici said.
        Domenici's Take On Current Crisis
        WASHINGTON — Lawmakers sometimes struggle to explain how the proposed $700 billion financial bailout would improve commercial activity and help revive the fragile economy.
        Sen. Judd Gregg tried an automotive metaphor Saturday, attributing it to Sen. Pete Domenici, R-N.M.
        "It's as if there was a massive car wreck in the middle of an eight-lane highway," with traffic backed up for miles, Gregg told reporters. "And on those cars and trucks were the loans for students, were the payrolls for people working their job, were the ability to buy a house through borrowing money, were the credit card account lending levels so people could go into a store and buy things, were the ability, basically, to go to the ATM."
        "What the federal government is going to do," he said, is "to buy that accident, pick it up, move it out of the way. And then we're going to resell the cars we bought that were in the crash, hopefully for more than we paid for them. And we're going to allow the commerce to begin again."