BRATTLEBORO- Congressman Peter Welch discussed the impact of federal economic recovery efforts on Vermont’s economy with local residents at a public forum at the Latchis Theater Saturday morning.

Welch acknowledged that the $787 billion American Recovery and Reinvestment Act recently approved by Congress angered many Vermonters, but he said the expenditure was necessary to protect ordinary Americans from a global financial meltdown he said was spurred by greed. “I have always supported paying our bills as we go,” he said, “But the federal government has become the spender of last resort.”

Welch said the country’s financial institutions leveraged huge profits as markets were rising, and suffered huge losses as the markets crashed. Although subprime mortgages have been pegged as one of the major contributing factors to the current financial crisis, Welch said borrowers who defaulted on their loans are not to blame. The financial institutions that issued the subprime loans knew their buyers couldn’t repay the loans. “And they didn’t care,” he said.

Mortgage originators pressured people to take mortgages they couldn’t afford, Welch told the crowd, and financial institutions like Lehman Brothers put the mortgages into mortgage-based securities, and sold them to investors. “They sold the proceeds of the first year of the loan to someone, the second year to someone else. Thirty different entities might own the loan.” When payments became onerous and mortgage holders tried to renegotiate their loan terms, “there was nobody to talk to,” Welch said.

“How did we get here? The folks on Wall Street have come close to destroying our financial system,” Welch summed up.

Although Welch said he would have preferred more infrastructure investment in the stimulus package, he said Vermonters would see a substantial amount of relief from the bill. Vermont will receive almost $1 billion in tax cuts and payments directly to state government – saving an estimated 7,100 jobs.

Welch said 95% of Vermonters will see a tax cut of about $1,000 per year. Taxpayers will see the cut as a reduction in their weekly withholding, rather than in a one-time stimulus check.

The state will also receive $45 million in additional Medicaid funding. “That will take a lot of the pressure off the Legislature and off taxpayers,” Welch said.

Vermont is also slated to get $130 million in transportation funding for bridges and highways. “Infrastructure improvements have a lasting value,” Welch said. “The benefits will be enjoyed for generations.”

The stimulus package also includes $21 million for state energy efficiency programs, including renovations and energy efficiency projects at schools. Vermont will also receive $60 million in special education funding. “Special education is an unfunded mandate, and it’s incredibly expensive,” Welch said. “That money is going to come to communities to meet our special education obligation.”

Representative Ann Manwaring, of Wilmington, told Welch that the best thing the federal government could do to take the pressure off Vermont taxpayers was to fully fund special education. “Two-thirds of our education costs are paid by property taxes,” she said. “I hope you’ll keep that education money rolling in. It helps taxpayers in Vermont.”

Health care reform advocate Richard Davis asked how long it would take for the stimulus to have an effect, and how Vermonters should manage their expectations. “We’re hearing that we need to transform state government because the federal money is going to run out before anything gets better,” he said. “Can we have some degree of comfort that things will improve?” Welch said he was confident that the Legislature would “keep their eyes on the prize.”

“Richard, everything’s going to be okay,” he joked.

Jonathan Morse, of Marlboro, thanked Welch for “putting the blame where it belongs,” and urged him to stand up for Vermonters. “I want to see these people nailed,” he said, referring to the perpetrators of the financial collapse.

Welch said he understood that many Vermonters chafed at the idea of bailing out financial institutions such as AIG, but he said he was convinced it was necessary. “Our Vermont bankers, builders, and borrowers had nothing to do with the collapse,” he said, “but it is our problem. We are affected by it. It’s our retirement savings and our college funds that are at risk.”