Congress writes the laws (rules) that everyone is expected to live by but when those laws (rules) cause major problems it’s never Congress’ fault. It’s as if, once the President affixes his signature or a law is passed by veto override, Congress is immediately absolved of all responsibility. Congress blithely moves on to the next indignity because, after all, it’s not their fault anything fails.
Congress Tries To Fix What It Broke (Not) (emphasis mine)
Regulation: As the financial crisis spreads, denials on Capitol Hill grow more shrill. Blame an aloof President Bush, greedy Wall Street, risky capitalism — anybody but those in Congress who wrote the banking rules.Such denials won’t hold against the angry facts banging on their doors. The only question is whether the guilty party can keep up the barricade until Election Day. […]Stick to our narrative, she [Pelosi] scolded: The bursting of the housing bubble was another story of market failure and deregulation.”The American people are not protected from the risk-taking and the greed of these financial institutions,” she said, while calling for investigations of the industry.Only, the risk-taking was her idea — and the idea of all the other Democrats, along with a handful of Republicans, who over the past 30 years have demonized lenders as racist and passed regulation after regulation pressuring them to make more loans to unqualified borrowers in the name of diversity.They were the ones who screamed — “REDLINING!” — and sent banks scurrying for cover in low-income neighborhoods, where they have been forced to lower long-held industry standards for judging creditworthiness to make the subprime loans.If they don’t comply, they are threatened with stiff penalties under the Community Reinvestment Act, or CRA, a law that forces banks to make home loans to people with poor credit risks.
So, we have a damned if we do, damned if we don’t situation dictated by Congress. But, no, it’s not their fault. Read the rest of the article which ends with:
The FBI is now investigating 24 large mortgage lenders for alleged abuses. But who will investigate the pols and the lobbyists and the community agitators who made the bad decisions that ultimately forced businesses to make their bad decisions?
For a run down of how we got to this situation, Jonah Goldberg sums it up this way:
[…] The self-proclaimed angels in Washington will tell you they’ve been working tirelessly to expand the American dream of homeownership by making mortgages available to people unable to plunk down 20 percent on a house. Franklin Raines, the Clinton-appointed former head of Fannie Mae from 1998 to 2004, made it his top priority to make mortgages easier to get for people with poor credit, few assets and little money for a down payment.The fine print to this noble intent was an ill-conceived loosening of standards. For instance, the Clinton administration reinterpreted the Jimmy Carter-era Community Reinvestment Act to politicize lending practices. Under the CRA, the government forced banks to prove they weren’t “redlining” — i.e., discriminating against minorities — by approving loans to minorities and various left-wing “community group” shakedown artists whether they were bad risks or not. (A young Barack Obama got his start with exactly these sorts of groups.) Sen. Phil Gramm called it a vast extortion scheme against America’s banks. Still, the banks were perfectly happy to pass the risky loans to Raines’ Fannie Mae, which was happy to buy them upThat’s because Raines was transforming Fannie Mae from a boring but stable financial institution dedicated to making homes more affordable into a risky venture that abused its special status as a “Government Sponsored Enterprise” (GSE) for Raines’ personal profit. Fannie bought the bad loans and bundled them together with good ones. Wall Street was glad to buy up these mortgage securities because Fannie Mae was deemed a government-insured behemoth “too big to fail.” And others followed Fannie’s lead. […]
Gee, I thought it was a failure of not enough regulation and free market principles because that’s what Bush advocates for the economy and this crisis is his fault, you know. Nancy Pelosi and Harry Reid said so. At least that’s what Congress would have us believe. Read the rest. As it is, I’m quoting large swathes of a couple of articles.
Raines, by the way, is one of the Obama campaign’s top advisors. As I type, Obama is delivering his feel good speech in the background about how the free market is bad, bad, bad and pointing to globalization. I’m sure the spin later will be breathtaking.
Congress is filled with lawmakers, not economists, yet it always insists it knows best. It heaps bad legislation on top of other bad legislation “fixing” something they don’t have the slightest idea how to fix. So what has Congress bought with our tax money? Bear Stearns, Fannie Mae, Freddie Mac, Merrill Lynch, Lehman Brothers, and AIG inserting the federal government into the market in a big way, far beyond the scope of their powers enumerated in the Constitution, which, of course, has everything yet nothing to do with this current economic mess.
Who pays for it? We do.
Who profits by it? We don’t, but there are hundreds of sets of fingers that will, while holding no responsibility for any of it. Should these acquisitions, at some point turn a profit, don’t expect trickle down from them. Congress doesn’t work the way the free market does. We’ll still be paying for the takeovers while they reap the rewards.
Who loses? We do. When are we going to stop allowing the government to absolve itself of responsibility that always puts the rest of us on the losing end? Our forefathers started a revolution over less than what we allow the federal government to do to us. Oh, we complain mightily every single time, but then, we turn around and vote the same people in to continue with their “business as usual” because, of course, it’s not their fault, is it?
And to think, this is just one problem for which Congress holds no responsibility.
Crossposted to: Hang Right Politics