After several huge, government bailouts, and other measures placing trillions of taxpayer dollars at risk, the nation’s financial system remains far from stable. There is much more work that needs to be done before the economy will return to its growth path, but it cannot be more of the same, heavy-handed government mandates that have failed us time and again.
The ongoing financial crisis demonstrates why, first, we must limit political interference in the economy. It was sustained federal pressure to increase mortgage lending, through Freddie Mac and Fannie Mae, as well as the Community Reinvestment Act, which helped generate the huge economic bubble that just burst at great cost to every American.
Limiting political interference in the economy also requires limiting the ability of the Federal Reserve to manipulate the currency for political purposes. The Fed’s “easy money” policy over the last decade greatly contributed to an artificial increase in lending and property values. Unfortunately, it is the drop in those values which is the basis of today’s crisis. The ill-advised loosening of SEC regulations that had been in place to insure solvency and transparency in the operation of major investment firms, also contributed to the current financial crisis.
We must improve financial regulation to emphasize integrity and transparency. Many government agencies impose many regulations on the financial industry, but the quality of corporate and bank balance sheets remains unclear in too many cases. For instance, inter-bank lending has dropped because banks don’t know which banks are in trouble. We need better, more consistent regulation—not more regulation. Additionally, the laws and regulations on the books – supposed to insure integrity, transparency and soundness in financial institutions – must be enforced (as they have not been in recent years).
Government economic policies need to more effectively emphasize job creation. The best solution to unemployment is increased employment, not creating or expanding social benefits. That means permanently lowering tax rates and simplifying taxes. In contrast, cutting rates or adding credits for a couple of years offers no sustained relief or incentive for growth. Temporary, politically based fixes provide no sound basis on which companies and financial institutions are to able to make sound, long-term plans for hiring, inventory and production.
Majority Leader and Armed Services Chair Visit Kiev: European Leaders Increasingly For U.S. Arms to Ukraine | Vivian Hughbanks