10.01.2008 0

Congress Needs to Lead to Prevent Future Bailouts

  • On: 10/23/2008 12:02:00
  • In: Economy
  • You knew the $700 billion-turned-$800+ billion financial sector bailout was going to pass. And eventually it did.

    The details were what mattered. In that sense, John Boehner, John McCain, and the House Republicans who stood on principle throughout negotiations of the bill are heroes. They made it better than it would have been had the original Paulson plan passed, or if the Frank-Dodd proposal—with its taxpayer giveaways to ACORN, the trial attorneys, and unions—had passed.

    But the principle against government interventionism in free markets matters, too. And so, Senator Jim DeMint and his Senate colleagues, and the 108 House Republicans who could not in good conscience vote for the proposal because it did not address any of the root causes of the financial crisis are also heroes. They lead the way to telling us what needs to be done next.

    All conservatives should unite around where to go from here. Everyone agrees—Senator McCain included—that the bailout was merely a tourniquet. Now the wound must be administered. We suggest starting here:

    1. Repeal of the Community Reinvestment Act.

    2. Repeal of the 1995 Clinton Administration regulations that forced lending institutions to give loans to individuals lacking the ability to repay the loans.

    3. Repeal of the $600 million so-called “affordable housing fund” from the Foreclosure Prevention Act of 2008 that funnels money to organizations like ACORN and others implicated in promoting Sub-prime mortgages.

    4. Repeal of all funds earmarked for ACORN, a report of the Members of Congress who requested and authored such earmarks, and an audit of all such funds allocated this year.

    5. The complete dissolution of Fannie Mae and Freddie Mac once all assets have been sold.

    6. Elimination of the dual mandate at the Federal Reserve.

    7. Elimination of the post-Enron accounting regulations that caused several firms to appear as though they were in trouble when they were not.

    8. Balance the budget and pay down the national debt so that the U.S. government does not endanger itself with insolvency, as it appears on the brink of doing with the national debt ceiling soaring above $11 trillion.

    One of the reasons that the bailout did not receive widespread support was because it did not appear to correctly diagnose the problems that have led to the crisis. We suggest that it was errant government policies that brought about widespread defaulting of loans that ought to have not been administered in the first place.

    The American people need to know the truth. In an ideal world, the bailout would not have been passed as presented. Misguided government policies leading to catastrophe should have been met with real reform. Instead they were met with denials from the Congressional majority as to why the nation found itself in this mess.

    The truth must be told.

    To fail to lay the crisis at government’s feet is to tacitly accept the Democrats’ narrative that this is all Wall Street’s fault, but in point of fact, this government policy to give out the cheap loans is at fault. And those blaming the free market now to appeal to voters are actually unwittingly backing that socialist narrative.

    There is a greater principle at stake: You break it, you bought it. The bailout has passed. And now the government has to take responsibility for what it did.

    If government fails to take responsibility now would hand those who hate liberty, hate choices, and hate individuals a victory. It lets the narrative be “let the market fail,” “the market doesn’t work,” and “only government can work.” But that’s not what really happened, is it?

    We know what happened. The government promoted easy money. A cheap dollar. Loose credit. And it led to everything from inflation to the current financial crisis. Without addressing the government-created causes of these problems, these crises will not be averted in the future.

    Instead they will worsen. Leaders who reluctantly supported the bailout, and leaders who stood against it on general principle need to now work together on curing the disease that caused the crisis—Big Government.

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