William Hamilton: The bail-out: A cheesy deal
September 29, 2008
As Rod Machado, the famous aviation humorist likes to say, “Remember, the mouse trap always provides free cheese.”
The corollary to that saying is, “The second mouse gets the cheese.”
So, while the members of Congress (notably, Rep. Barney Frank and Senator Chris Dodd), who trapped us into the subprime mortgage crisis by their failed oversight of the financial operations of Fanny Mae and Freddy Mac, are on TV pontificating about how they averted a national market meltdown. It is fair to ask, who gets to be the second mouse? The mouse that gets the cheese.
Who can fault those of limited means who were attracted to government-backed offers of a free-cheese mortgage with nothing down, 110-percent financing, low initial monthly payments and cleverly-concealed, upwardly-adjustable rates? Who can fault those who wanted to upgrade from their current home to a better home? Free or almost-free cheese is hard to resist.
Polling data shows the congressional malefactors and their helpers in the Sinistra Media have convinced the public that Wall Street greed is the primary cause of the mortgage meltdown. Close, but no cigar. In the pantheon of malefactors, Wall Street takes second place to certain members of Congress.
John Fund, writing in the Wall Street Journal, said, “We will look back on the failure of Congress to reform the government-sponsored enterprises at the heart of the mortgage meltdown as one of the most expensive derelictions of duty ever. Fannie Mae and Freddie Mac used their lobbying clout, political contributions and even charitable largesse to charm or bully anyone demanding reform in their lending practices.”
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Will Rep. Frank and Senator Dodd and the Fanny Mae and Freddy Mac CEOs and certain mortgage brokers they helped enrich get more of the cheese? Instead, let’s hope some of the congressional and Wall Street malefactors will be spending some serious time in Club Fed.
If the public takes a close look how this mess came about, we will see a renewed interest in congressional term limits. If stock holders take the same close look, they will vote a number of corporate directors out of office and replace them with directors who will not roll over and play dead when their CEOs want a pay raise or a golden parachute.
Meanwhile, where is the justice for the poor people whom President Carter’s Community Reinvestment Act was supposed to house? Instead of a home, they got a house of cards.
Where is the justice for those members of Congress who tried to rein in the abuses of Fanny Mae and Freddy Mac and got the cold shoulder from Rep. Frank and Senator Dodd? No wonder the approval rating for Congress is down to 17.8 percent.
A side-by-side comparison of the original bail-out plan with the revised version insisted upon by House Republicans suggests all Americans should be thankful for the revolt of conservative Republicans and Democrats in the House. But if the Congress really wants to get the economy going again, it needs to make the current tax cuts permanent, eliminate the capital-gains tax and eliminate the death tax.
Just those three actions would bolster the dollar worldwide. Our economy would regain its fiscal footing. People would have the money to make their mortgage payments. Other people would have the money to purchase some of the unsold homes that are overhanging the housing market right now.
Last weekend, congressional negotiators had to get into and stay in the arena to duke it out eyeball-to-eyeball. That’s not something that can be done via cell phone. But even though negotiators such as House Republican Minority Leader, John Boehner, and Senator John McCain made the Emergency Economic Stabilization Act of 2008 more palatable, many conservatives will vote against it.
William Hamilton, a syndicated columnist and a featured commentator for USA Today, studied at Harvards JFK School of Government. Dr. Hamilton is a former assistant professor of political science and history at Nebraska Wesleyan University.
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