EOM interview with Congressman Lincoln Diaz Balart... by SunshineUnderground

"I know now that this issue, this issue of preventing a pyramid from forming again based on the housing market, I mean we have to have significant hearings and implement new regulations. There is no doubt about that " - Lincoln Diaz-Balart to Eye on Miami.

Eye on Miami caught up with Lincoln Diaz-Balart Saturday just after the candidate had finished going door to door in West Broward. He may not have the same charisma as his opponent, Raul Martinez, but Diaz-Balart seemed to be in his element in a policy discussion, and appears to be the kind of person who relishes a good debate... (click on 'read more')

He showed some ideological flexibility by calling for more regulations to prevent a repeat of the current housing/financial slump, but could not name any case in which he disagreed with President Bush on economic policy before the latest financial crisis. McCain came up twice in passing, and each time Diaz-Balart sited his differences with the Republican nominee. His words are best judged in context. Here's the transcript:

Eye on Miami: A frequent attack used against you and your brother has been than you both are one in the same with the president. Can you site one example where you have disagreed with Bush on economic policy?

Lincoln Diaz-Balart: In the most high profile initiative since I've been in Congress and certainly since he's been president, I disagreed with him, and that was the bailout of Wall Street.

EonM: We can come to that in a minute, but I want to talk about before the bailout, before the downward...

LDB: Well, I do support keeping taxes as low as possible, and that I think there is a point of agreement with [Bush], but not just with him, but I think it's pretty much a philosophical principle for most Republicans. So I believe in keeping taxes as low as possible and helping small businesses, by keeping regulations low and in that way encouraging them to hire people. So I've had disagreements with him and in the most high profile one comes to mind now not only because it's recent but obviously because it's very high profile.

EonM You said that as a Republican, you believe in low taxes, and with that comes a commitment to low spending. But with the Bush administration we've seen large increases in spending and in the federal deficit. Why do think that has happen, have you disagreed with it and where do you stand on it now?

LDB: Well you know, I did vote for the increase in Medicare benefits, the creation of Medicare part D, which was a significant new program, and I thought about it, and I voted for it based on the fact that I think the people on Medicare should have help to buy their prescription medicines. I know McCain opposed it. Some people opposed it based on the spending issue. I came down on the side of supporting it. But, in regards to why the deficits have been larger than we've wanted them, certainly that we expected them [to be] - you know we've had a recession compounded by 9/11. And we have two wars going on and that's been very costly and I think that's probably why we've seen a lot more spending than we would have wanted to see.

EonM: So you don't think spending has been too much?

LDB: I think we've shown significant restraint on spending, and if you look at how spending has grown in the non-defense, non-homeland security fields, there really was some restraint. But I think deficits are larger than we would have expected or wanted because of the wars.

EonM: You mentioned the bailout - why do you think it became necessary, and what was the role Florida played?

LDB: I think Paulson has really served the president in an incorrect manner. He created the impression that the economy was about to disintegrate. And he certainly conveyed that very convincingly, and people came to the conclusion that the credit crunch required his proposed solution, but he didn't convince me and when I met with him and discussed this matter, he basically gave me the feeling that he was going to bailout a few big guys on Wall Street and that's pretty much what he's done. And you know, in my community, when people need a loan to expand their small business or their home, they don't go to Wall Street. They go to the neighborhood bank. And the neighborhood banks here, you know a lot them have gotten in trouble because of the housing issue, because the housing market has fallen and they were in that market, and I don't see Paulson's bailout helping our community's credit crunch.

EonM: Would you be in support of measures to address that?

LDB: The legislation that we passed in July, the Foreclosure Protection Act. It hasn't had much time to work yet, but at least it gives incentives for lenders to work out better deals with homeowners to keep them in their homes and I wanted to see more of that in the bailout. I also wanted to see Wall Street put some skin in the game, in other words, you know, it was extraordinarily unilateral, and I never fell for it, I never liked it and quite frankly, every day I'm happier with that vote.

EonM: Some say things might be different now for McCain had he gone the other way...

LDB: Some of us expected him to adopt a different posture. He began on the right track from my vantage point, but in my view he didn't follow through enough. But look, there was a real feeling conveyed by Paulson, and not just by Paulson, but by the President and the leaders of both parties in Congress, that the economy was coming to an end and the Paulson approach was the right way to go...

EonM: I want to look at the root of it for a second though - why do you think that the housing bubble was created here? How could that have been prevented and what would have been the role of government in preventing the crisis from occurring?

LDB: There were a number of factors. Without any doubt, there was encouragement for Fanny and Freddy to guaranteed the purchase of loans that were not well thought through. And there was a lot of money being made at every stage of the process in what really was a pyramid. Lending institutions not only made loans where money was made at the initial stage and then at the refinancing stage, loans where people were basically told, "Don't worry, you'll refinance in a year or two when your payments are going to be a lot of higher, by that time, you'll refinance and your payments will go down again." So a lot of people we're pushed those loans and then, as you know, they created those financial instruments, that went beyond the loans themselves.

EonM: The derivatives,..

LDB: Yeah, so money was being made at every stage of the process.

EonM: Do you think that there should have been regulations in place to prevent something like that from happening?

LDB: Yeah, but there is no doubt that the pyramid that was allowed to develop, with its origins in the housing market, was wrong. People were encouraged to get into loans that they shouldn't have. And then financial instruments were devised and were even insured - we've seen the AIG problem - these financial instruments were insured, supposedly in a solid way. And it was fake. And now the government is coming in and saving them..

EonM: But looking at all that now, what regulations should have been in place and what regulations can be in place to prevent a pyramid like that from forming again?

LDB: That's one thing we need to do now. It's evident that what happened, shouldn't happen again. I think one of the problems we saw is that people didn't have a point of reference, with regards to this in the past. You know they had a point of reference with regards to the Great Depression - so there was regulations with regards to financial institutions, securities and exchanges commission. With regards to the instruments that were created in regards to the housing market, what I call the pyramid, they didn't have a point of reference and government was kind of left behind, in terms of oversight.

EonM: You may not be able to go into specifics now, but you would support some kind of regulatory structure that would address that.

LDB: Sure. And there has to be more government oversight. There is no doubt. We don't want those pyramids to be possible

EonM: Can you name any specifics now?

LDB: Well, you know, it's a complicated matter. And when the bailouts came before congress I studied the issue very intensely. I know now that this issue, this issue of preventing a pyramid from forming again based on the housing market, I mean we have to have significant hearings and implement new regulations. There is no doubt about that.
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The conversation went on from there. Diaz-Balart said he was proud of the money South Florida’s Congressional delegation has procured for Everglades restoration, but acknowledged more could be done. I tried to ask if he would be willing to use the bully-pulpit to address the danger to the Everglades posed by the shifting of the Urban Development Boundary, but he didn't seem to want to touch that issue as it's not within the authority of the federal government. Diaz-Balart did say that the purchase of Everglades land from U.S. Sugar was not a "done deal" and that he had questions about the proposal that would have to be answered before he could support it. Finally, if there was any vote he regretted casting, he sited his support of congressional term limits during the “contact with American” period – he said that if they had passed (they didn’t) it would have hurt the institutional memory of Congress.


- Jared Goyette (SunshineUnderground)