The Enid News and Eagle, Enid, OK

Local and State News

September 23, 2008

Lucas: Alternatives too severe for U.S. without bailout

The proposed $700 billion federal bailout of financial institutions will address a national problem that has to be confronted, said U.S. Rep. Frank Lucas.

If not, the alternatives are too severe, he said.

“The property boom on the East and West coasts became an investment bubble that has now burst,” Lucas said.

Many real estate mortgages that were in the hands of banks, insurance companies, pension funds, private investors are now worth dramatically less than they were originally. That has set off the crisis in financial institutions, said Lucas, a Republican who represents Oklahoma’s 3rd Congressional District.

“Basically, we’ve seen liquidity within the market. The flow of capital money came almost to a stop,” he said. “That’s endangering the entire financial system of the U.S. and the world.”

U.S. Treasury and the Federal Reserve board have injected hundreds of billions of dollars into markets, taken control of Fannie Mae and Freddie Mac mortgage companies, forced the sale of one of the biggest investment banks and allowed another to go bankrupt, but that still has not stopped the problem. Lucas said the proposal is to buy $700 billion in mortgages at market value, which is substantially decreased from their original value, and hold those assets until they can be safely put back into the system. That will accomplish two purposes, Lucas said: taking the mortgages off the market and injecting capital into many financial institutions.

“But, just like so many times the devil is in the details,” he said.

Lucas has some questions before he definitely decides what action he will take. He wants to know if the bailout will work. He wants to know if it will stabilize the financial system and get credit moving again. He also wants to know how many extra requirements Democrats will place in the legislation.

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