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Sep 23 2008

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Pelosi Torpedoes TARP

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Nancy Pelosi will be mute.

We know this with certainty since George W. Bush will no longer be President next January.

And it seems that without President Bush, Ms. Pelosi has nothing to say.

Faced with the biggest financial crisis since the onset of the Great Depression, Madame Speaker had these soothing words for the nation:

“What we have now is a manmade disaster, a disaster that sprang – comes from the Bush failed policies, the failure of the Bush administrations [sic] to steward our economy in a responsible way.”

There was a time when citizens looked to Washington for leadership and reassurance.  Yet, Democrats are treating the seat of power as a national closet of anxieties, stating the obvious gravely, seeing the future ominously and considering the present helplessly, oblivious to the impact of their words.

The market meltdown is an obvious, serious problem. But for wise decisions to flow there is also a dire need for a fuller, honest perspective as we both assess and address the crisis.

First, “failed economic policies?”

Setting aside for a moment the merits of talking down the national economy at a moment when consumer confidence is fleeting and fickle yet intrinsically essential to any market recovery, where’s the factual evidence?

Since 2001, the US Gross Domestic Product has expanded by more than a third, or nearly $4 trillion. That’s the equivalent of adding Germany and the Netherlands to the US economy.

Even with the multiple shocks from the energy market and Wall Street, unemployment is lower today than Bill Clinton’s first year in office. The stock market, for all its gyrations, is still over 10,000. It was at 7,500 in 2002, only six years ago. Both as an actual number and a percentage decline, recent Dow Jones history is dwarfed in market precedent by the 685 point drop when the exchange opened after 9-11 and the 22% loss of value on Black Friday in October 1987.  And while the run on mortgage-related bonds held by banks are linked in part to home foreclosures, foreclosures today are less than 3%. During the 1930s, when there was an actual depression, they were at 50%.

We can argue legitimately about what constitutes “sound fundamentals” for the economy, but the sheer absence of comparative facts generates its own insidious inertia. As the commodity most in need, perspective is the quality in the least supply.

Consider the drive-by scalp-hunters, anxious for targets of blame, seizing upon the passage of legislation by a Republican Congress as a prime culprit of today’s calamities.

The Gramm-Leach-Bliley Act (GLBA) repealed legislation that walled off consumer banking from investment banking, updating a law drafted by people born in the 19th century for a 21st century economy. It has been repeatedly cited by pundits and market watchers as a cause for the current market turmoil.

This, in turn, has been a virtual bonanza for Barack Obama and Congressional Democrats who have already linked one of the law’s key sponsors, former Senator Phil Gramm, to the McCain economic team, conjuring all the unsubtle inferences of an economic house of horrors should McCain win the presidency.

But this is as dishonest as it is simplistic.

What goes unsaid is that the legislation passed in 1999 and was signed into law by Democrat Bill Clinton. It passed overwhelmingly; 90-8 in the Senate and 362-57 in the House. Among those supporting the measure was a Representative from the San Francisco Bay area, Nancy Pelosi.

Yes, Phil Gramm was an original sponsor, but so was Jim Leach, who recently crossed Party lines very publicly to endorse Obama for President. And in tagging Gramm as part of the problem for his authorship, Obama failed to note that his running mate voted for GLBA as well.

Yet a pattern of distortion and half truth becomes a media fact.

But the contortions don’t stop there. Look a little deeper. That there is ample blame to go around in the market mess is undeniable. But to lay this blame at the foot of the Bush administration is irresponsible.

According to the Washington Post,

“In 1995, Bill Clinton’s HUD agreed to let Fannie and Freddie get affordable-housing credit for buying subprime securities that include loans to low income borrowers. The idea was that subprime lending benefited many borrowers who did not qualify for conventional loans.” 1

In other words, subprime loans were a tool in Democratic policies to extend home ownership to a larger and more diverse pool of Americans that would otherwise not qualify for standard loans with prudent credit procedures, using Freddie and Fannie as the vehicle.

But this noble goal of expanding the “American Dream”, which morphed into an ultimately unsustainable factor in the Freddie/Fannie meltdown and takeover, has not deterred Nancy One Note’s finely tuned sense of culpability:

“To aggressively address the financial crisis, we will investigate the Bush administration’s mismanagement of financial regulation, how it led to this crisis and what solutions Congress can act upon.”

All well and good, but as this “investigation” begins, one must ask, where exactly have the Democrats been for the last two years? Not to put too fine a point on it, but wasn’t this what the Democrats were suppose to be doing all along;  to restore clean, responsive government and oversight after 2006?

While you are thinking about that, consider Henry Waxman, the legendary Chairman of the House Oversight & Reform Committee.

Since 2007 he has held multiple hearings on alleged fraud and abuse in Iraq, political interference in climate change and, famously, the “real” story on exposed CIA employee Valerie Plame. He has even held hearings on the effectiveness of domestic abstinence programs. But with all that oversight power, he didn’t have time for legitimate oversight that wasn’t somehow designed to embarrass the Bush administration.

While Waxman was busy showcasing partisans, looking into contracts and looking under the covers, the Bush administration has a record of calling for Freddie and Fannie reform seventeen times, but to no avail.

And as far as financial responsibility, and claims that the Republicans are hostile to regulation, it bears mentioning that the most far reaching reform of business practices since the New Deal was passed by a Republican Congress and signed into law by President Bush – Sarbanes Oxley.

In the end, Democratic vacuousness is laid bare when Pelosi & Co., while publicly berating Bush and his Administration for ineptitude, are determinedly implementing its financial initiatives, designed by the very people whom they accuse of mismanagement.

We would be hard pressed to write political fiction this good.

Clearly, the Democrats have perfected the siren song of cataclysm. It can be an enviable position – to be the bearer of bad news – but at its heart it conveys only a message and not an answer. And it is here where the Democrats prove themselves most unserious. Righteous indignation is no substitute for tangible solutions. Blame is no substitute for action. Victimhood should be dispelled, not celebrated.

None of this would be particularly worrisome if it weren’t for the fact that Nancy One Note and the Democrats may very well get the keys to the country, lock, stock and barrel in 40 days.

Blaming George W. Bush and the GOP may be immensely satisfying emotionally, but it’s a disturbing and egregiously incomplete substitute for governing a nation.

Come November 4th, don’t say you weren’t warned.


1. “How HUD Mortgage Policy Fed the Crisis,” Washington Post, June 10, 2008

 

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