Conaway discusses $700B bailout

U.S. Rep. Mike Conaway urged Average Joes to keep cool in the face of Wall Street's meltdown and advocated a more free market approach to solving the nation's financial crisis that's starting to threaten the stability of global markets.

Conaway was in town for a press conference Tuesday to announce the University of Texas of the Permian Basin's $5 million grant for its upcoming engineering program, but questions about his Monday vote on the proposed $700 billion Wall Street bailout dominated the event.

Conaway was one of 228 representatives who voted against the Emergency Economic Stabilization Act of 2008, which would have authorized the Treasury Department to spend taxpayer dollars on private financial institutions' tanked assets in an effort to balance the books and eventually restore security to shaky markets.

"In the final analysis, I just didn't think it was the right thing to do," Conaway said. "I really did struggle and was really confused as to which way I was going to go until the last second."

Conaway said he advocates a two-pronged approach to coax private investors into buying troubled assets instead of relying on a $700 billion Treasury infusion.

He said he favors increasing the Federal Deposit Insurance Corporation's $100,000 bank account insurance limit to boost consumer confidence and hopefully stem the tide of money being pulled out of banks "unnecessarily." He'd also like to see the creation of a sort of tax holiday, where investors could take advantage of capital gains and income tax breaks if they're willing to buy up Wall Street's failed assets, including scourged mortgage-backed securities. 

Conaway would also like to see an insurance fund set up to back all mortgage-backed securities where lenders would pay fees to participate.

He said the idea was included in Monday's failed act, but it wasn't a requirement.

"I'm not sure that banks would do it on their own," Conaway said.

He said Congress should work to come up with a bailout plan that uses the best of both worlds - government oversight and private money.

"Bureaucracies and government entities don't liquidate assets well," Conaway said. "There's $700 billion worth, and trusting the federal government to liquidate that orderly and in ways that protect the taxpayer and maximize the taxpayers' risk-and-reward ratio would be suicidal."

Congress will reconvene to hash out the issue Thursday.

Noted economist Ray Perryman said action is needed soon.

"We are fortunate to have a strong economy in the area at the present time, but we are not immune to what is going on," Perryman said in an e-mail to the Odessa American in response to an interview request. "If a package is not passed soon, it will have a notable effect on credit availability for everyone."

Perryman said as long as the economy is perceived to be at risk due to inaction, oil prices will endure downward pressure, which could negatively affect the Basin eventually.

"Banks are not willing to lend in the current environment, even the overnight loans among banks are stressed," Perryman said. "This affects the ability of small businesses and consumers to do the things that make the economy function. Our local banks are very healthy, but the whole system makes it harder to get a car loan and home loans."