They're Working on It
Kid Reporters talk economy with Congress
Scholastic Kid Reporter Addie Backhus with Minnesota Representative Keith Ellison at his office in Minneapolis, October 20, 2008. (Photo courtesy Addie Backhus)
After Congress approved a $700 billion economic bailout bill earlier this month, its members adjourned for the year and went home to their districts. All 435 members of the House of Representatives are up for re-election, while a third of the Senate seats will be on the general election ballots on November 4.
Congress must now face the voters to explain the bailout and their individual votes. Scholastic Kid Reporters paid a visit to their own Representatives' local district offices to ask about the bailout. They wanted to know what caused the crisis, how the bill will help solve the problem, and how to prevent something similar from occurring.
Cause. . .
Representative Jim Cooper of Nashville, Tennessee, voted yes, both times the bill came before the House of Representatives. The first time, the bill was defeated. The House aproved it the second time. Cooper, a Democrat, told Kid Reporter Aaron Broder that he voted for the bill because "if we aren't willing to rescue our own economy, who is?"
The cause was simple, says Cooper. "Too many people borrowing too much money," he said. "Whether that was individual homeowners who got too big a mortgage and couldn't pay it or financial institutions that became overleveraged."
Another Representative who voted yes twice called it a "rescue bill, not a bailout bill." Republican John Campbell of southern California, explained the importance of the distinction to Kid Reporter Mariam El Hasan.
"Words matter, and I don't think it was a bailout of anybody," he said. "It's a rescue of our whole financial system, all our banks, everything."
The main problem was one of confidence, Representative Rush Holt, of New Jersey's 12th District, told Kid Reporter Danielle Azzolina.
"Most business is based on confidence," the Democrat said. "What happened is everybody lost confidence. Nobody believed that if one bank loaned money to another bank, that bank was going to be able to pay them back next week. Things reached a crisis several weeks ago when nobody seemed to trust anybody else. There was no confidence remaining."
Even those who disagree with the bailout agree that confidence is the key.
|Kid Reporter Aaron Broder with Tennessee Representative Jim Cooper at his office in Nashville, October 10, 2008. (Photo courtesy Aaron Broder)|
Louisiana Republican Steve Scalise voted no both times. The District 1 Representative told Kid Reporter Abi Lista he thought there was a better way to solve the problem "that didn't put taxpayer money at risk to bail out people who made irresponsible decisions on Wall Street."
The crisis is not caused by a lack of money, he said, but a lack of confidence.
"There are a lot of people who have money who are sitting on the sidelines because they are afraid to put money in the stock market," he said. "Banks are afraid to lend to other banks right now. The first thing to do is restore confidence." He says the market should be able to do that on its own, and not rely on government funds.
. . . And Effect
Voting yes for the bailout was a tough choice for Minnesota Representative Keith Ellison. Kid Reporter Addie Backhus asked the Democrat from the 5th District why he chose to support the bailout.
"I called a number of people who understand financial markets and those people helped me understand that we would have even more layoffs and more people losing their jobs if we didn't do something," he said. "I voted yes because I knew that if banks didn't lend money to each other, then businesses would not be able to get lines of credit." Without credit, no one could borrow money to make payroll, people would be laid off, and "kids just like you whose moms and dads might not have a job would become a big deal."
Concerns about the effect of the bailout bill pretty much split along party lines. Republicans weren't comfortable with the amount of government involvement, and Democrats saw a need to regulate an industry many claimed was out of control.
Republican Doug Lamborn of Colorado's 5th District told Kid Reporter Ashlyn Stewart he voted no twice because of three concerns. First, $700 billion was too much money. Secondly the Republican Representative is not convinced the government should be interfering so dramatically in free markets. "And number three, many of us felt that was not the best plan to get the job done," he said.
Despite his concerns, he said he would "make sure the plan gets carried out in the best way possible in the future."
Democrats and even some Republicans see regulation as the key to preventing similar problems in the future.
"Part of the reason people lost confidence is people started buying and selling things that should have been out of bounds—it should have been against the rules (regulations)," said New Jersey's Representative Holt.
|Kid Reporter Mariam El Hasan with California Representative John Campbell at his office in Newport Beach, October 23, 2008. (Photo courtesy Mariam El Hasan)|
John Campbell in California said to look to the cause to solve the problem.
"I think we have to completely change how we regulate business and how we regulate and controls banks and all the financial institutions," Campbell said.
Cooper in Tennessee suggested another approach as well.
"We need to learn not to borrow so much money, to live in more modest houses, to be prepared to pay your bills on time and have a rainy day fund," he said. He pointed out Aesop's fable of the grasshopper and the ant. "Who survived the winter?" he asked. "The ant, because he stored up food for the winter. The grasshopper did not make it."
Bailout at Work
The bailout has already begun to work, according to Minnesota's Keith Ellison.
"The credit markets are thawing out, and there's more lending going on than there had been, so it's looking a little bit better," he said.
Why? Because the U.S. backed its banks, says Holt.
"What the Congress did, more than putting up $700 billion, what it put up was confidence, the backing of the United States," he said. "You can have confidence that anything you loan will be paid back, because the United States says, 'We'll stand behind them (banks and businesses).'"
To learn more about the current economic crisis, read full transcripts of each interview with the Representatives, and play an economic word game, check out our Special Report—Kids and The Economy.
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