Letter to Congress

I just sent this letter to Congress:

To: Sen. Evan Bayh, Sen. Richard Lugar, Rep. Dan Burton, Sen. Harry Reid, Sen. Chris Dodd, Rep. Nancy Pelosi, Rep. Barney Frank

Respected Members of Congress:

This week has already been, and will no doubt continue to be, an important week in American history. As we have been told, our financial system, the backbone of both the American and world economy, is on the brink of collapse. The true magnitude of the issue on the horizon cannot be predicted or understood by anyone. However, there are certainly indicators that the crisis is real. Credit is tight. The markets are unstable. Institutions are on the verge of collapse. Despite these troubling times, we encourage you to be thoughtful, prudent, and careful in your decisions.

Wall Street is a funny place. Markets act and react thousands of times a day - even on days with one-hundredth of the frenzy we have witnessed in the last two days. For you, our elected representatives, to react too quickly to those movements alone is both unwise and unjust. Action may be required. We urge you to put aside political fear, partisan loyalties, upcoming elections, and personal bias. There is a process which has developed over the last two hundred years to enact effective legislation. Please do not put aside all wisdom which has been gained in order to appease anyone. The world is not going to end tomorrow.

So, we urge you to hold hearings. Go through the legislative process. Take advantage of the collective wisdom of expert witnesses, administration officials, and other members of Congress both young and old. Give the American people a plan which addresses the true issues we face. We recognize and appreciate your efforts over the last two weeks. However, hearings have been limited. Negotiations have also been limited. Open up the process.

But, if you must act this week, please be judicious. The bill which failed the House vote earlier this week deserved to fail. It granted unprecedented power to the Secretary of Treasury with limited oversight. It failed to protect the taxpayers adequately. We ask you if you would risk your own money and wealth, and that of your children and grandchildren, on the bets of the Secretary. Please do not make these bets with our money. The basic economic principle of "no free lunch" must be observed in any action taken. We understand the fact that this is not about bailing out Wall Street, but helping "Main Street". But, consider the cost of investment. Consider what it is that we are attempting to solve.

Consider the following. We are to assume that a lack of credit is at the heart of the issue. Indeed LIBOR reached very high levels earlier today. Money is not cheap - why is that? We all know that lending is based on confidence and collateral. These "toxic assets" are difficult to value and, in some cases, do not have a true market to determine value. So, we believe we must reform our accounting to improve regulation and disclosure regarding the value of these and other assets. Instead of merely suspending or reforming "mark-to-market" accounting, we should pursue a revised balance sheet which reports both book value and fair value. This will allow potential creditors and investors an opportunity to better understand a company's assets in both value and risk. This cannot happen overnight. Institutions will require time (perhaps 60 days) to appropriately disclose these valuations. In the meantime, we can take steps to both prevent a market meltdown and protect those who may be most vulnerable in this period of uncertainty.

Since this reform will not remove short-term volatility or improve liquidity, we can consider the following actions. First, we can suspend regulatory requirements placed on financial institutions which place limits on borrowing relative to their capital. In close coordination with the SEC and/or a Congressional oversight board, institutions with assets which are perceived to be far undervalued via mark-to-market, should be allowed to borrow. This, in conjunction with prudent actions by the FED, should help with liquidity. Second, we must look at potential impacts of a market downturn. Wall Street traders and long-term, value investors do not need protection. However, those Americans who are close to retirement age and rely on pensions, 401(k)s or other investments could be given protection via some sort of investment insurance. Additionally, jobs may be impacted. This can be countered with temporarily enhanced unemployment benefits and tax incentives for businesses which create jobs during a troubled time.

We know that we cannot solve this problem on our own. We don't know if any of you will actually read this. But, we also know that none of you can solve it on your own in closed door negotiations with select individuals. We are on the precipice of rough times. But, rough times are natural. The government cannot stop all bad things from happening to everyone. In fact, attempts to do that are dangerous steps towards socialism. We fear that we have tread down this path too far already. Stop. Re-evaluate. Remember the principles upon which this country was founded. Rough times will lead to better times because, like you, we believe in the American people and the American system.

Best regards,
Matthew and Nicole Wittlief, residents of the 5th Congressional District of Indiana