Tuesday, February 24, 2009

Isakson Outlines Keys to Getting Economy Back on Track

U.S. Senator Johnny Isakson, R-Ga., today outlined four principles he believes are imperative to helping improve the U.S. economy during a speech on the Senate floor.

“Our people are in difficult times. We have difficult economic circumstances and it's imperative that we move forward together, members of the House and Senate with the executive branch, to find the solutions to the challenges before us,” Isakson said. “I believe it is time to address the fundamentals of our economy and the fundamental problems that we face.”

First, Isakson believes jump-starting the demand for housing is essential to boosting the economy. Isakson announced he will continue to push a housing tax credit for all purchasers of any home without income restrictions. Isakson’s $15,000 tax credit for all purchasers of any home was removed during conference negotiations between the House and Senate on the final version of the economic stimulus bill, despite its unanimous approval by the Senate. Instead, House and Senate negotiators made only small modifications to the first-time homebuyer tax credit that was enacted in 2008 as part of the Housing and Economic Recovery Act of 2008.

Second, Isakson called for all homeowners to be eligible for the re-financing opportunities outlined by President Obama to help homeowners in trouble. Isakson does not believe responsible homeowners should be penalized or denied access to the proposed re-finance opportunities.

Third, Isakson called for the SEC to reinstate the Uptick Rule in order to stabilize the markets and protect the American consumer from traders forcing down the price of a stock. In his remarks, Isakson argued that the market deterioration was impacted by short sellers rushing to the market, shorting financial stocks and accelerating the decline of those values. Isakson called for the Uptick Rule to be reinstated to ensure that traders are not coming into the market to take advantage of these difficult economic times.

Finally, Isakson stated that Mark to Market rules (FAS 114) are disproportionately penalizing the very people we serve. Given the declines our nation has seen in the mortgage-backed securities and in real-estate, mark to market has caused tremendous problems for our nation’s banks.

“When the FDIC comes into your bank and says you are going to have to mark to market as real estate asset that might have been worth $20 million two years ago but is unfortunately worth $6 million today due to the economy, you are going to have to take a $14 million dollar loss in your bank asset ledger. Mark to market is making good loans look like problems therefore taking good banks and making them into troubled banks.” Isakson said. “This is devastating to our bankers as real estate is absorbed over time and not in one fell swoop. Mark to market should not be an arbitrary write-down to zero, it should be a recognition of the transition of values in a down market or in an up market. This issue hits at the heart of residential real estate construction lending thereby further crippling our economy from returning to a prosperous nation.”

Isakson said mark to market rules should be replaced with a mechanism of amortization or “smoothing” to absorb the assets over time. This will allow the absorption of those assets over time to be more reflective of reality and less reflective of the dire straits that our nation is currently in today.
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