Restitute Tax Dollars Lost in Lehman Collapse
When Lehman Brothers collapsed in September 2008, it represented the single largest bankruptcy in the history of the United States. As a result, more than 40 municipalities from around the country lost close to $1.7 billion. I've introduced the Restitution for Local Government Act to assist the affected municipalities in recouping these lost tax dollars.
In my Congressional District, San Mateo County and its public institutions were part of the collateral damage and are still reeling from the losses today. When Lehman collapsed, San Mateo County lost $155 million. Teachers are being laid off. Schools are not being built or renovated. Roads are not being improved. Transportation plans are being scrapped, and critical upgrades in public safety have ceased.
San Mateo County is required by California State law to hold operating funds, reserves and bond proceeds in an investment pool. Their investment pool held funds on behalf of the county and local cities, school districts, transit agencies and the community college district.
Last week, I testified before the House Financial Services Committee about the damage caused to San Mateo County by Lehman's collapse. I also heard first-hand from the Lehman Bankruptcy Examiner how the collapse of Lehman Brothers resulted from risky, deceptive practices which exemplify some of the worst excesses of Wall Street. San Mateo County was not 'playing the market' or rolling the dice by investing in Lehman's products. They invested in the most highly-rated, conservative securities. But today they are victims of the abuses and deceit of a financial institution which at one time was considered to be one of the soundest and safest in the nation.
My legislation will require the Secretary of the Treasury to use any profit made by the sale of troubled assets acquired through the Emergency Economic Stabilization Act of 2008 to be used to purchase the securities, bonds, and other financial instruments issued by Lehman Brothers which were held by local governments on September 12, 2008. The bill directs the Secretary of the Treasury to establish a $1.7 billion remediation fund, and grants him the authority to assist the public entities affected by the collapse of Lehman Brothers.
Under my legislation, public entities will get their money back and taxpayers will know where the money goes. The bill specifically states that any local government which receives money from this new fund must report back to the federal government on how this money is being used, and demonstrate job creation, retention, and economic activity equal to the amount of funds received. I think this is a fair approach to a problem that continues to haunt communities across the country. At a time when financial institutions were deemed "too big to fail," today we cannot overlook those who are being treated as though they are too small to help.