Then Treasury Secretary Paulson arrived on Capitol Hill in September of 2008 with a simple plan and a simple message that went something like “give me $700 billion dollars in the next few days or the world as we know it will end.” Congressional leaders emerged from that meeting and immediately began negotiations. Those negotiations centered on the inclusion or removal of one clause or another in order to obtain enough votes to reach the ultimate goal of giving Secretary Paulson the money he sought.
During this time an unprecedented public relations campaign ensued to persuade the public that this was a “Main Street” bailout not a “Wall Street” bailout. We were told that we weren’t rewarding those who had behaved recklessly; we had to do this to save “Main Street.” There was significant discussion about the process for implementing the bailout. And at the end of it all, the bailout that was passed by Congress was done with no serious consideration ever given to any of the several other possible solutions offered by members from both sides of the aisle.
Consumers have instinctively and with great cause had strong reservations about the size and single minded approach to the bailout. For all the talk of what would happen if we didn’t pass a mega bailout package, there was precious little discussion about the potential negative economic effects of passing this bill.
The artificial manipulation of our economy on such a massive scale is bound to have a myriad of consequences well beyond simply “unclogging” the credit pipelines. Surely the idea that we might actually be making things worse merited at least passing consideration before rushing to the ATM.
Since that time, we have seen the amount of liability assumed by US taxpayers soar to in excess of $13 TRILLION dollars and seen the corporations who received bailout money payout hundreds of millions of dollars in bonuses and send hundreds of millions more to overseas investors. All the while, the economy continues to decline and credit continues to be tight. “Main Street” continues to struggle, while “Wall Street” has been enriched on the backs of working class Americans.
The American public has rightfully expressed outrage at the notion of using taxpayer money to bail out high flying Wall Street types and at attempts to use this crisis as an opportunity to funnel money to corrupt special interest groups like ACORN or to other pet projects like STD studies. But, even worse yet, there has been no effort to address and reform the root causes of this crisis.
Nothing about the regulatory scheme that got us into this mess has changed. The Community Reinvestment Act still requires banks to give loans to people they know can’t repay them. Fannie and Freddie, now operated by and backed by money from the US Treasury are still required by law to meet certain quotas for subprime loans, which makes even other lenders not subject to CRA requirements comfortable generating these loans with the knowledge they can offload them to Fannie Mae. So, even if the behemoth twins of the mega bailout and stimulus package are successful at “unclogging” our system and jumpstarting our economy, we still have not taken steps towards recovery. We have merely have begun a new progression towards the next bailout.
Some have decried the lack of regulations as the reason for our current economic situation. There is certainly room for better oversight and transparency requirements so that investors and consumers can make informed decisions. However, the root of this crisis is exactly the opposite—misguided regulations such as the CRA. And as government continues to reach farther and farther to assume more and more control over the day to day operations and decisions of American commerce in an effort to “fix” things we are guaranteed to see the same regulatory mistakes compounding to worsen the situation, lessen consumer choice and put us further into debt. Taxpayers deserve accountability for how their money is spent or lent. But socializing our economy in an effort to achieve accountability is not the solution. Rather the need for accountability and the inability of government to achieve it is a stronger argument that taxpayers’ money shouldn’t be involved and that government is ill suited to run a business.
True solutions to our current economic woes should be consumer-centric, not government-centric. The solutions should offer consumers more choices, now fewer. After all, it’s consumers who have always made our economy strong. And they have done so, not because of, but in spite of the wisdom of Washington DC.