Political mischief to blame for financial chaos
By Jay Ambrose
From runny noses to hurricanes, nothing bad happens in the world unless George Bush did it, and here’s the fix. Elect Barack Obama as president, fill Congress with additional Democrats, contend the economy is in ruins and then give America the most in-your-face, do-everything, expensive government it’s ever seen.
Pay really close attention, and that, you will discern, is the message behind this campaign year’s liberal rhetoric. It comes from professional and citizen commentators and, of course, from the politicians themselves. Not the least of these is Obama himself, who figures a negligent Bush team gave us the moment’s financial chaos and that the need is more regulation, more expensive programs and punishing taxes for the rich.
John McCain also thinks regulations need to be updated, although he does not yap endlessly like his opponent about us facing something similar to the Great Depression .
Neither candidate explains more than the tiniest fraction of what went amiss as houses were sold for ridiculously high prices, phony deals were cooked up to allow purchases by people who could not afford them, the mortgages were leveraged to buy securities, homeowners defaulted on payments and home prices came tumbling down.
When you search out what initiated the disaster that now has major financial institutions tumbling down, as well, you find political mischief of an interventionist kind.
Bad risks
Once upon a time banks made pretty darn certain they didn’t give home loans to bad risks. It was a reluctance that didn’t sit well with federal officials, regulators and both Republican and Democratic members of Congress, who were among those claiming unfair discrimination. And so, students of the subject remind us, you got pressure and laws and unintended, disastrous consequences abetted by some irresponsible buyers and by some happily deceptive lenders who thought maybe they could get away with this thing after all.
It was not Bush-era legislation that then opened doors to get us in more of a mess, but a Clinton-era law that eased the way for ever larger, less inhibited financial institutions. One wise analysis says, too, that by lowering interest rates a little bit, and then more, and then by another inch or so, the Federal Reserve did its bit in encouraging borrowing that finally got crazily out of hand.
And let’s don’t forget the big-time CEOs, whose ineptness frankly dumbfounds me. Apparently assuming against all the lessons of history that the good times would keep on rolling forever, they threw prudence out the door and finally had to scream for help to the federal government.
We all know, of course, that the federal officials heard the screams and put billions and billions of taxpayer dollars on the line to bail out Bear Stearns, Fannie Mae, Freddie Mac and most lately AIG. The reason offered was that the common good was jeopardized, but the common good would also be jeopardized if the government kept it up. It didn’t, instead telling Lehman Brothers and Merrill Lynch they were on their own, thereby allowing the discipline of free markets to administer pain to those who deserve it.
It’s this pain more than any new regulations catching up with the present situation that should prevent repeats of the overreach, although if some reasonable, revamped rules help the cause of market sanity and transparency without actually worsening things, let’s have them.
What we don’t need is more Bush-blame or Obama-style scare talk about how wrong McCain was in saying the fundamentals of our economy are strong. If Obama disagrees, he ought to do what he has never done — tell us which fundamental is faltering.
Last quarter growth
We don’t need his discouraging and potentially self-fulfilling references to the Depression, when, in fact, we had 3.3 percent growth the last quarter and oil prices are coming down.
We don’t need his lavish spending proposals with no way to pay for them, or his fervor to redistribute wealth, his anti-corporate rants or his plans for new entitlements when the federal government is already faced with an entitlement bubble likely to burst if nothing is done.
That possibility — too much ignored in this campaign — could make the financial crisis of the moment seem picayunish.
X Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers, is a columnist living in Colorado.