Buyouts, bailouts, bankrputcy. Precedent was set, the floodgates opened since the big-government, reactionary solution to a faltering Bear Sterns back in March. Freddie and Fannie followed and now an $85 billion “loan” to AGI (but not Lehman Brothers). So when does the bleeding stop and at what point does the government (or better yet, the public) say enough is enough to using taxpayer dollars to “save” private, free-market corporations that gambled with too much risk and lost?
Our lame duck president, who took two days to ponder the most recent crisis, is doing all he can to prove responsive and address the struggling economy. It falls to the president to shore up confidence. His top economic man, Treasury Secretary Hank Paulson, was forceful in calling it “The worst week since the Great Depression.” President Bush then cancelled his travel schedule and took a more tempered approach when responding yesterday: “In recent weeks, the federal government has taken extraordinary measures to address the challenges confronting our financial markets.” Extraordinary? Obtuse is more like it. For all the excuses about keeping these companies solvent for the sake of the economy, the bottom line is this: The goverment failed us and is further leading us down a financial collison course.
None of this bodes well for the conservative message of spending restraint, stewardship over taxpayer dollars, transparency through oversight and free-market capitalism. The recent decisions smack of hypocrisy. So it should come as no surprise that we’ve seen John McCain’s lead over Barack Obama evaporate. While one can’t blame Mr. McCain for what’s happened, voters likely blame his party. The polls are pointing in that direction at the moment. But both parties are at fault here.
Ironic, since it is Mr. Obama who ranks second among congressional members to receive contributions from Fannie Mae, Freddie Mac and Lehman Brothers, and has opposed reform measures to regulate them. His response to the crisis was to ridicule Mr. McCain’s idea to form a commission to review the situation, without offering much in the way of a solution of his own. An analysis of what went wrong and what can be done could be helpful. Knee-jerk, rhetoric-filled reactions aren’t.
For Mr. McCain’s part, he claimed he tried but failed to reform Fannie and Freddie with legislation three years ago, when he warned, “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.” The senator did not try hard enough. There were lessons to be learned from the Keating Five incident and campaign-reform efforts.
Mr. Bush may not have been tough enough by some estimations. Mr. McCain, on the other hand, resurrected the “maverick” with his proposition to go after “the primary regulator of Wall Street.” He said: “The Chairman of the SEC serves at the appointment of the President and has betrayed the public’s trust. If I were President today, I would fire him.” By “him,” Mr. McCain was referring to Republican Chris Cox. Lots of tough talk.
Aside from that and the finger-pointing, realistically, there is nothing either presidential candidate can do between now and November to deal with the crisis. That is, unless each gets off the campaign trail, goes back to being a full-time senator and pushes through a reform package that would demand immediate oversight - legislative strategy that heads off future disasters, while protecting taxpayers. Now that would be a plan.
Perhaps a certain popular vice presidential nominee summed the week’s affairs up best when candidly responding to a reporter’s question on the government bailout: “It’s understandable but disappointing. Our taxpayers are being called up once again,” Sarah Palin said over a cup of joe. In other words, while the government is looking out for the “big boys,” who’s looking out for joe taxpayer? And when does he get a bailout?
What has been missing from the 110th Congress, while members of the House and Senate have been on the campaign trail or on book tours, is the crucial antidote called legislative oversight.
By Douglas Holtz-Eakin
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