You, the American tax payer, should be watching with concern this week as Congress debates the president’s proposed “Wall Street Bailout,” which would offer up to $700 billion of your money to buy up distressed (not failed) mortgages. Unfortunately, this issue has become so murky due to some of the economic complexities that most Americans are watching with a befuddled helplessness rather than the more appropriate righteous outrage. But when you kick away the five-dollar terminology cluttering up this crisis, it once again comes down to the quintessential American debate: the size and role of government.
Let’s go back to the beginning. Contemporary political rhetoric paints this disaster as a function of ravenous Wall Street greed and a “Wild West” policy of deregulation in Washington. Nothing could be further from the truth. This financial implosion is a direct result of too much meddling in Washington, specifically Congressional mandates that advance a social agenda. Fannie Mae and Freddie Mac, which should be names that live in infamy, were the plaything of Congress for decades and are the symbol of federal mismanagement. Congressional Democrats literally used Fannie Mae and Freddie Mac as a social experiment, offering loans to high-risk candidates in the interest of providing housing to low-income Americans. Unfortunately, regular mortgage companies saw a bad example being set and, moreover, were forced to follow suit in order to remain competitive. Seeing signs of economic destabilization, the Bush administration attempted several times to force more oversight of the overseers, but were rebuffed repeatedly by Fannie Mae and Freddie Mac’s Democratic champions. In answer to one such attempt as early as 2003 to reform the government-owned mortgage giants, Democrat Barney Frank said, "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis."
I could go on and on about what a fiasco Fannie and Freddie represent, pointing, for instance, to the top five recipients of campaign contributions from these now defunct government corporations: Senator Christopher Dodd (D – CT), Senator John Kerry (D – MA), Senator Barack Obama (D – IL), Senator Hillary Clinton (D – NY), and Senator Paul Kanjorski (D – PA). But the important take-away is that these two institutions represent the root of our current economic crisis, and that should at least tell us one thing: if government meddling got us into this mess, government meddling will NOT get us out. But now President Bush is trying to ram through a gargantuan piece of legislation that will expand government authority and concentrate it in the hands of a single bureaucrat, Treasury Secretary Henry Paulson. And the two Senators chasing Bush’s job, particularly Barack Obama, are laughably blaming an out-of-control Wall Street and advocating even further federal regulation of private enterprise.
Whether anyone is willing to talk about it or not, we're slipping further and further into socialism with each new financial crisis that Washington is promising to save us from. They've set our house on fire and are asking to borrow our bucket to help put it out. They have rapidly nationalized major financial institutions and are clamoring to acquire even more substantial private interests. And this is just the Republicans. The Democrats, who have been dreaming of an opportunity like this for decades, are astonishingly criticising the administration for not taking its nationalization policy even further as Congress debates the $700 billion bailout proposal, demanding salary caps for CEOs and equal housing amendments be included before passage. This is absolute madness.
But whether or not this “Bailout” legislation is passed through Congress like a hot potato, this economic disaster is instructive for the American tax payer. For God's sake, the government does not know how to run a business, particularly your business. And the time-honored federal axiom of throwing more money at the problem should elicit angry howls from all of us, because our parents were promised that the pocket-picking would stop with their generation. At some point we need to slap the government's hand and take its toys away if it won't play nice, or we'll end up right back here in 2018.