Sen. Mike Crapo: Taxpayers need more protection

Sen. Mike Crapo thinks a new financial rescue bill will come before Congress this week.

In a telephone interview Tuesday with two Idaho news organizations, the Idaho Republican said he would not have voted for the bill the House defeated Monday. That bill would have authorized the government to spend up to $700 billion to buy bad mortgages from banks to ease the credit crisis. Crapo said he wants stronger protections for taxpayers than the failed bill offered.

Most House Republicans voted against the bill. Idaho's two House members split, with Rep. Bill Sali opposing the bailout and Rep. Mike Simpson supporting it reluctantly.

"I still have strong concerns about this proposal, and I have no doubt that Congress needs to take action," said Crapo, who has developed expertise on banking as a member of the Senate Banking Committee. "I don't believe it is proper for the U.S. taxpayer to be first in line to face the risk of loss from these toxic assets."

"A better plan would be one in which the U.S. was in a preferred equity position, and the shareholder and other debt holders of these distressed companies would be first in line to take the losses if losses occur."

EXCERPTS:

Q: How important is it that something gets done this week?

A: We have been told that time is of the essence. In fact there was great concern about what would happen in the global markets if we did not at least announce that Congress was coming close to a deal last weekend.

You saw what happened on Monday when the House failed to act. The Dow dropped nearly 800 points.

I personally believe ... that there is time to work this through and get it right. We've already seen economic consequences, but we've also seen the markets have enough confidence to keep moving in a shaky fashion until Congress can resolve this matter and provide some protection and stability for American consumers.

Q: What are Idahoans telling you about the bailout bill?

A: Idahoans are very very strongly opposed to the original Paulson proposal. They are just now evaluating the revisions that the House voted on yesterday, and many if not most Idahoans are still concerned about the proposal.

They don't yet have confidence that the right proposal is on the table, and many frankly believe that such drastic action by Congress is not necessary.

Q: You've said you don't think this money will be recovered. Why not?

A: I didn't say I don't think we will recover anything on those assets. What I meant to say is if the U.S. taxpayer is in the position of having to purchase the most toxic assets in the global economy, that puts the taxpayer first in line for picking up the losses that may come if the assets don't regain their value in time.

It's very possible they will regain their value and no one will suffer losses as a result, but I think there will be losses, and they could be significant. If there are losses from the mistakes of global investors, they should be assumed by the shareholders and other owners and existing debt holders who financed these shaky investments.

Only in the last instance should the taxpayer be put on the line. The plan that came before us puts the taxpayer at the front of that line, and that's one of my major concerns.

Q: Congressmen Simpson and Sali spit in Monday's vote. Are you and Senator Craig on the same page on this issue?

A: I know the division in the votes of Simpson and Sali indicates the difficulty in how to approach this issue. We truly do have a gun to our head here in Congress with a very short time to act. And very significant, negative economic consequences for our constituents if we don't act correctly.

It's hard to predict how Senator Craig and I will vote until we see the new proposal that is being negotiated.

I'm going to be looking to see the risk of any loss will be borne by the owners of these companies who made the risky investments and those who financed them.

Q: The Republican Party is divided by this plan. Are there compromises that could be made to bring them back together?

A: That will be difficult because there is a significant difference among Republicans about whether we need to move forward. Even those Republican who believe we must act have a very strong disagreement with any of the proposals on the table because none are something we would like to see the federal government get into.

It will be very hard to find some approach that will develop broad consensus in either party frankly, so I expect votes in the House and Senate will be close.

They were very close to passing it yesterday, and my guess is they will keep the current model and try to improve it to pick up the few extra votes they will need to pass it. If that's the case, I'll be disappointed. I think we need to change the approach rather than tweak the old approach.

Q: If the bill passes this week and money is pumped into the system, how soon would taxpayers begin to see capital freed up and the credit markets loosen?

A: If Congress does take bold action, first and foremost, the complete seizure of our credit markets that is predicted to occur, probably will not occur, and we will continue to see credit markets operate and the basic activities of our economy continue. So a significant amount of the potential damage that could have occurred will have been avoided, and people will never see the negative consequences of that threat.

However, if Congress acts quickly and effectively, we will still see some convulsions as the economy makes adjustments to the serious overleveraging we have seen.

Americans should be prepared for difficult economic time for some time to come.

Brad Talbutt: 672-6737