iCitizenForum by Colonial Williamsburg

The $700-billion fix

Here we go again. There’s no reason to have faith in the fix, no matter its final form. Career members in Congress created this financial crisis and will surely make a mess of the solution. It’s hardly reassuring that the members of Congress that created this predicament are involved in its solution.

Members of Congress prostitute themselves to special interests in order to raise funds for their re-election campaigns. These career politicians, in fulfilling their obligations to special interests, are the source of many of the difficulties we face. Their other motivations are to have the President of the U.S. be a party member and be the majority political party in both Houses of Congress. Accordingly, blaming the other political party is the de rigueur fault, resulting in the polarization of this country.

After the Enron fiasco, Congress hastily adopted the fair-value accounting rule, SFAS 157, requiring current market value for all assets. Under rule 157, long term assets fluctuated like the stock market. In economic downturns, there was undue pressure for companies to raise cash. The recent drop in the economy caused the demise of major insurance, banks, and investment firms. Another case of Congressional haste causing unforeseen circumstances.

In this environment of obligated members of Congress, especially the banking committees, Fannie Mae and Freddie Mac were able to prevent any oversight of their corporations. In fact, beginning in 1999, presidential administrations and Congress have encouraged Fannie and Freddie to increase the volume of mortgages for middle and low income families. A few months ago, Congress thoughtlessly rushed to raise the dollar limit on mortgages that Fannie and Freddie could accept, to prove to voters that their capable representatives were acting to alleviate the financial crises. Of course it made the situation even worse.

The members of the Congressional banking committees were responsible for preventing any oversight of Freddie and Fannie. Yet, some of these same committee members had the audacity, the effrontery, the shamelessness to declare that this financial crisis could have been prevented and never should have happened, as if they weren’t to blame.

This $700 billion Trouble Asset Relief Program, TARP, was defeated by a vote in the House of Representatives on Monday, September the 29th. The voting decisions were reportedly based upon: fear of not being re-elected (Americans were against TARP 100 to 1), anger against the leadership of the House, acceding to special interests, anxious to embarrass the President’s administration, preventing a presidential nominee for getting credit for its passage, and partisanship. No wonder we face an economic crisis. Few members of the House allegedly voted because of their concern about the effect on the American people. The larger question is why do we continue to re-elect these incumbents?

Read Woodrow’s previous blog The Career Politician Virus.