Thank you for your letter regarding the economy, the financial markets and the proposal from the Treasury Secretary to the Congress.

We are in difficult financial times, and I am committed to protecting the savings and jobs of the people of Georgia by making sound decisions on both immediate actions as well as long-term actions.

First, our economic stress is rooted in the decline of the housing market. The cause of the decline was the funding of marginal credit mortgages (subprime) through the creation of mortgage-backed securities that were sold around the world. As the default and foreclosure rate on these mortgages increased, the value of the securities declined. As the values declined, the balance sheet of the financial institutions that bought them deteriorated. The market for these securities declined and ultimately evaporated, thus causing a liquidity problem for the financial institutions and a credit crisis for American consumers and small businesses.

In the immediate term, we must address the credit and liquidity crisis. In the long term, we must put in place the oversight and safeguards to ensure the transparency and accountability necessary to prevent this from happening again. The Treasury has proposed using up to $700 billion dollars to purchase, at a discount, these mortgage-backed securities. This would provide liquidity to the financial institutions and improve their balance sheets. The important question is this: “Is the taxpayer of Georgia protected?” If the Treasury properly discounts the securities to, say, 50 or 60 cents on the dollar, and holds the securities to maturity there should be little or no cost to the Treasury. More importantly, investors will return to the market and will compete with the Treasury to by these discounted securities and the market will be reestablished. I am working to ensure the safeguards necessary for maximum security for the taxpayer.

In the long term, we must bring transparency and accountability to Wall Street. While I am not a big government regulator, if the investment bankers on Wall Street were held to the same standards of transparency and accountability as our national banking system, this would not have happened. The security rating agencies such as Moody’s and Standard and Poor also share some of the blame for the way they rated the subprime mortgage-backed securities, and they should be held accountable. I will work hard for the right reform of Wall Street.

The term bailout has been used a lot in this debate. Not a dollar of the $700 billion will go to the brokers who created the securities. Instead, they will go to the investors who bought them, and then only after they take a significant discount or loss. Properly executed, the Secretary of the Treasury and the Chairman of the Federal Reserve believe this proposal will restore liquidity to the credit markets and return confidence in the financial system.