Mr. President, I stand here today to highlight my grave concerns about our financial system and the American economy. A disaster that is building for months and, in fact, years, last week, quickly hit the hit the breaking point.
The latest crisis spread seemed to come so suddenly and spread so far and went straight to the heart of the global financial system. There's no doubt we are seeing now the biggest financial challenge we've seen since the great depression and we also are witnessing the most remarkable degree of government involvement in our financial system since the 1930's. It's truly remarkable, just consider the list: Bear Stearns, Fannie Mae, Freddie Mac, Lehman brothers, A.I.G. these named used to be confined to the business pages and now they're at the top of the front pages. Now, I have strong feelings, about what happened here. During the past eight years, the financial and economic policies of this administration has been off course. They have not managed or led the economy in a responsible manner. We've gone from a large budget surplus left by the Clinton Administration, large budget surplus, to an even larger budget deficit.
This administration has been reckless in how it managed the government's finances and it has been reckless in how it managed its responsibility to ensure a strong, stable, financial system. This administration acted as if the rules don't apply anymore. Loopholes here. Loopholes there. Don't really use the regulations you have.
It permitted large financial institutions to run amok, to turn the economy into a gambling hall playing with funny money and now finally in the 11th hour, the house managers, Bernanke and Paulson, have finally been asked to step in to shut the game down. It's hard to exaggerate the magnitude of what's happened.
As financial journalist Steven Pearlstein observed last week, this is what a category four financial crisis looks like: Giant blue-chip financial institutions swept away in a matter of days. Banks refusing to lend to other banks. Russia closing its stock market to stop the panicked selling. Gold soaring $70 in a single trading session. Developing countries' currencies in a free fall. Money-market funds warning they might not be able to return every dollar invested. Daily swings of three, four, five hundred points in the Dow Jones industrial average. It’s a painful reminder that when you strip away all of the complexities and trappings of the magnificent new global infrastructure finance is still a confidence game and once the confidence goes there’s no telling when the selling will stop. In some repse3cte= it may look like all the action is in New York, or London or Tokyo, but we know that everyone’s affected.
This is a broad-based financial crisis. Everyone's affected. You're trying to buy or sell a home, you're affected. If you're trying to refinance your home, you're affected. If you're trying to get a student loan for your college tuition, you're affected. If you're a small business owner trying to extend your credit line, you're affected. If you're a farmer trying to buy a new tractor, you're affected. Maybe the only people in America who aren't affected are the people that kept their money in their mattresses and we know that's not the answer.
You know, you look at what's happening to the middle class in the last eight years. Their wages are down an average of $2,000 a year, their expenses up $4,400 a year. That's a net loss of $6,400 a year. That doesn't even include people who have babies or need child care or people who have after-school care or the added extra expenses for college. $6,400 a year. We need solutions and we need them now.
Secretary Paulson has presented his proposal and I believe that we need to change that proposal. I believe there's more we need to do. I believe in the long term, we need a comprehensive plan, including both a short-term rescue strategy and a long-term approach for economic recovery and rebuilding. Secondly, we must minimize as much as possible the costs to American taxpayers. Private companies who get themselves into deep trouble shouldn't get a free bailout on the backs of America’s middle class. Third, this plan can't be limited to helping out Wall Street. We must help the middle class. We must save Main Street from the mistakes of Wall Street and it must address head-on the underlying issue of the housing market and the foreclosure crisis. That means providing protection and support to struggling homeowners and restoring confidence in the residential real estate market.
Finally, if this plan proposes that the federal government come to the rescue of private financial institutions, then the government must secure greater oversight of how these companies conduct their business going forward. For companies that receive assistance, there should be some kinds of limits based on dividends. Key executives should have a look-back provision placed on their compensation, and there should be a prohibiting of these golden parachutes. I can't tell you how angry this makes me, Mr. President.
You look at, say, Lehman brothers. The longtime chief of Lehman brothers, Richard Fuld Mr. Fuld earned about $45 million. This amounts to roughly $17,000 an hour. $17,000 an hour. That he earned. And basically the firm has been obliterated. Last year, CEO's of public companies averaged 344 times their pay the average pay of workers. As Warren Buffet once said -- and I’m taking this from an article by Nicholas Kristov that was in the New York Times -- as Warren Buffett has said, in judging whether corporate America is serious about reforming itself, CEO pay remains the acid test. And as Mr. Kristov said in this article, it's a test that corporate America is failing. Now, people can make their money, I suppose, but once we start, as taxpayers, the United States government, be buying their assets, be backing up their assets, to are bearing the risks, to ask taxpayers to bear the risk, then we have something to say about this executive compensation and we must say it in any type of a rescue plan.
We also have to make sure going forward that the appropriate financial regulations are in place that these loopholes are closed. There should be changes in corporate governments to improve the independence of corporate boards and to reduce reckless behavior. There should be limits on speculative behavior. Now, I know everyone's focused a lot on Wall Street, but I’ve got to tell you what's happening on Main Street. In my state, the state of Minnesota, the unemployment rate is at its highest that it's been in 22 years. Minnesota's second-quarter growth in personal income was just 1%, the 49th lowest in the country. Even that 1% increase is more than wiped out by inflation. Home values in the twin cities area dropped nearly 14% in the second quarter of this year compared to last year, and heating costs this winter are expected to increase by double digits. The latest forecast shows that the cost of natural gas is expected to be 17% higher than it was last winter. Prices for fuel oil are expected to be 20% higher. Now, the American people, Mr. President, still have faith in our nation. They know that our country and our economy still have great potential. We have the talent; we have the resources, the know-how, the entrepreneurial spirit and the passion for innovation. The public is still bullish on America, Mr. President, even though Merrill Lynch may not be.
Although our immediate and urgent goal must be to stabilize the financial system and restore confidence, we also must spend this week asking those tough questions and making sure we have some answers and making sure that the proposals that go through this congress include those limits I talked about on executive pay. If we're going to be asking taxpayers in this country to bear any of this risk, we must include a long-term plan for better financial regulation of these companies. And they must include a focus not just on Wall Street but also on Main Street.
