In the hot seat

U.S. Rep. Mike Conaway's wife knew it might get ugly.

She sent an e-mail to the couple's Sunday school class last week - just before Conaway voted on the $700 billion economic rescue bill - to reserve a spot on the prayer list.

And with a voicemail box full of angry messages and 2,600 explainer letters mailed out Wednesday, Suzanne Conaway might not have had such a bad idea.

"I understand why they're mad," Mike Conaway said Thursday.

"They" are his constituents.

Angry West Texans have been calling Conaway's offices ever since the congressman's Oct. 3 approval vote for the Emergency Economic Stabilization Act.

Conaway said 90 percent of those calls have been critical of his decision, one of the hardest he's had to make since taking office in 2004. The District 11 representative is up for re-election in November.

His opponent is Libertarian John R. Strohm of Austin.

"I voted this way not to protect my job, not to cower to the loudest voices in the room, but with thought and preparation, a background in banking and a background as a CPA that I brought to the table," he said.

Odessa City Councilman Royce Bodiford stressed Friday that he didn't contact Conaway's office to express his disapproval as a representative of the city - just as a disappointed constituent.

"It bothers me that (members of Congress) are not listening to the people," Bodiford said. "Our government is a government of We the People. It's so stated in the Constitution. I get the feeling that some of our representatives, be they on the Senate or on the House side, get to Washington and they suddenly feel like they know what's best for us and don't really consider their constituency enough."

Conaway voted against what was first billed as a billion-dollar bailout Sept. 29. 

At a University of Texas of the Permian Basin press conference the next day, he said it would be "suicidal" to expect the federal government to protect taxpayers while liquidating $700 billion worth of assets that could be bought up from failing financial institutions in an effort to balance the books and eventually inject stability into upside-down markets.

Now, a little more than a week later, Conaway's making appearances across the district to explain his switch for the $700 billion U.S. Treasury boost that many are labeling as a step toward socialism.

"When I came to Congress four years ago, the discretionary budget - everything but entitlements - was about $735 billion," he said. "So we're talking about one year's worth of total government into a new program that, for many of us, we worry that it's nationalizing an important segment of our country and is a step away from what we see as the proper role of government."

Conaway said increasing the Federal Deposit Insurance Corporation's $100,000 bank account insurance limit to $250,000 helped sway him to the other side, but he was mainly afraid that if the rescue package didn't pass, the global economy would grind to a virtual halt because of frozen credit markets, which would cause a "catastrophic meltdown" of the lending cycle.

"It's that system that provides the lubricant for the gears of our economy to mesh," Conaway said.

That lending cycle starts when banks loan large sums of money to other financial institutions or businesses on a short-term basis, often overnight.

This gives banks enough to lend money to customers and cover their cashed checks. Companies cover payroll and operating costs with these short-term loans until the business cycle converts those expenses to cash. When the credit market is healthy, construction companies can take out loans for new equipment, and credit-worthy applicants can get things like home, school and car loans.

But because financial institutions' assets tanked along with mortgage-backed securities, they're starting to get stingy, hording away cash in case their customers come knocking with withdraw slips. That means lending has slowed way down, which makes it harder for the economy to move along like it normally does - hence the Dow Jones drops.

"The question is, can credit-worthy customers get a loan?" Conaway said. "If they can't, that's a detriment to the economy that we don't need. If these folks can't get that liquidity, then jobs are lost and the transactions that would otherwise happen are lost to the economy."

The hope

Conaway and his colleagues who voted for the Emergency Economic Stabilization Act hope the credit markets will be calmed by allowing the U.S. Treasury to buy billions in tanked mortgage-backed securities from failing financial institutions. Getting those bad assets off their books should free up the lending cycle, which should get the economy rolling again, he said.

"This is not like an entitlement program," Conaway said. "Securities will ultimately liquidate because the securities will pay off, either by their terms, or the homes will be sold and they'll be refinanced in the private sector. This thing has a natural end."

He said if everything goes as planned, the government could be out of the mortgage business in 10 years. And Treasury Secretary Henry M. Paulson, Jr. will only have half of the $700 billion to work with during the next few months.

He'll have to provide Congress with an economic progress report after $350 billion has been spent, and representatives will take another vote on whether to disperse the rest.

"I hate to call a $350 billion program a pilot project, but we'll get a look," Conaway said. "And if it's doing what it's supposed to we'll say OK, here's the other half."

Conaway said it's impossible to tell what kind of progress he'll have to see before letting Paulson have the rescue bill's second chunk, but he's hoping to see any improvement over the current situation.

He said the nation's third quarter economy shrunk 3 percent, a stark contrast to the second quarter's 2.8 percent expansion. The Wall Street Journal reported Friday that investors have lost $8.4 trillion of their wealth so far.

"These are perilous signs," Conaway said. "Nothing has gotten better. I've as convinced as ever that voting for that thing ... was the correct thing to do."

The congressman said if the rescue package doesn't work and taxpayers end up short after five years, the president will have to present a plan for financial institutions to pay a tax of some sort to make up the difference.

But all of those qualifiers may not be enough to get Conaway's disapproving constituents to look past his vote.

"The cynic would have said, ‘OK, this is going to pass. Just vote no then you get your cake and eat it too'," Conaway said. "That's great, except it's a lie. If this is the litmus test for whether or not they'll ever support me again, then it is what it is. I want their vote, I'm asking for their vote. But if it cost me my job, it'll cost me my job."

BEAR MARKET:

Frozen credit markets affecting states in a big way, mainly because lending is tight, which makes it hard to get capital to complete construction projects and cover payroll. Here's a glance:

>> California: Gov. Arnold Schwarzenegger warned he may have to beg the feds for a short-term loan to cover operating costs for schools, nursing homes and police if the state can't borrow a short-term $7 billion loan on the credit market.

>> New York: The state has a $1.2 billion deficit that could balloon into $2 billion by the end of the fiscal year.

>> Massachusetts: The state's pension fund shrunk by nearly $4 billion in September.

>> Minnesota: Expansion of 9-1-1 communication system scrapped.

>> Missouri: Plans to repair the St. Louis airport and fix 802 of the state's worst bridges have been delayed or scraped.

Source: Associated Press.