Congressman Rep. Steve King, Iowa District 5, spoke Monday at an Open House at the new Plymouth County Republican Headquarters, 19 Central Ave. S.W., in Le Mars. King shared his thoughts on the upcoming election and the $700 billion bailout passed by Congress. Standing behind King from left are Dick Dirks, Chad Ericson and Jim Truemper. [Click to enlarge]

How will Congress' approval to buy $700 billion in mortgage debt from American banks in an effort to free credit markets affect the average taxpayer?

Rep. Steve King, of the 5th U.S. Congressional District of Iowa, who voted against the measure, said he doesn't know its effects. He shared his thoughts on the matter in an interview with the Daily Sentinel Monday.

"I think that in a down market, if you go out and sell everything to try to preserve it, if this is a temporary spike downward, you could lose a lot of money," King said. "If there's resale value underneath any of your investments, don't panic."

King said the downward trend of the stock market won't stop until investors are confident it has reached its lowest point.

"I believe this is a very significant event," he said of the market trend. "I think it's going to be a longer period of time (to recover)."

King said he's most concerned for the retirement-age investors.

He gave an example of an owner age 65 or older selling his or her business, cashing it out and investing the profit in the stock market in a diversified portfolio counting on that income to supplement his or her Social Security.

"Now that income stream has been significantly reduced, and in some cases if they invested it in the wrong firm, the income probably stopped," King said. "They can't go back and buy the business again and decide 'I'll work another five or 10 years.'"

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King said he voted against Congress' bailout plan because of four main reasons.

"First it's $750 billion," King said. "That is a huge amount of money, and when we add it to the amount of money that has been distributed this calendar year it comes to $1.9 trillion."

That equals out to be more than a $6,000 debt per person in America or $24,000 for a family of four, King said.

Why spend all that money, he said, when there is a free market solution that includes suspending capital gains taxes imposed on corporations and using rescue money to bring some $12 trillion in U.S. capital that's stranded overseas.

"In my view, we would attract hundreds of billions of dollars into these fair markets where we need them," King said. "And that would shore up the capital in this situation, which is really the problem."

Using the free market solution is a better option, he said, because it puts more responsibility in the hands of those that caused the problem.

"It's more responsive, it's quicker, it's better," King said. "It wasn't the taxpayers that did this."

A second reason he voted against the bailout plan is because the Community Reinvestment Act, which first passed in 1979 and again in 1993, was not repealed.

"It promotes giving mortgages to people that can't meet their payments, and also giving mortgages on homes that don't have assessed value," King said. "That should never be in our law, encouraging lenders to make bad loans."

He also voted "no" on the bailout, King said, because it did not place any regulations on the two largest mortgage finance companies, Fannie Mae and Freddie Mac. Those companies do not currently have the same regulations as the private lending companies do.

King said he filed a bill Friday that would include implementing those four strategies: a free market solution, waiving capital gains taxes, reforming the Community Reinvestment Act and regulating Fannie Mae and Freddie Mac eventually making them private companies.

He spoke again of his bill at an Open House Chamber After Five gathering at the new Plymouth County Republican Headquarters, 19 Central Ave. S.W., in Le Mars, Monday.

Based on Monday's drop in the stock market means Wall Street isn't convinced the bailout was the right move, King told those gathered.

"What's done is done, more than $700 billion is spent," King said. "Let's stand and wait a few days until it stabilizes before we really pass judgement on this."