It’s becoming a bad habit in Washington: policymakers tilting at windmills while ignoring real problems.
For example, while most Americans were concerned mostly about jobs, President Obama spent the better part of a year flogging his health care “reform” bill (which will do nothing to boost employment) through a reluctant congress. Now the president is using the BP oil spill to push for a “cap and trade” climate-change tax bill, even as Americans wonder if we can’t, oh, stop the leak first.
This disquieting pattern extends also to efforts to “reform” the financial industry.
Last month the Senate passed a 1,300-page bill that aims to prevent future banking meltdowns. It would create a Consumer Financial Protection Bureau (a new layer of federal bureaucracy), encourage a new set of financial institutions that are “too big to fail,” (setting the stage for future bailouts) and stand up an extremely powerful Financial Stability Oversight Council (that could order a private company to break itself up, stop selling certain products, or even go out of business).
But the bill would do nothing to reform two companies that helped inflate the disastrous housing bubble in the first place. Fannie Mae and Freddie Mac, two “government sponsored enterprises,” are “too big to fail” and, apparently, too big to reform.
This isn’t an oversight. It’s a policy decision.
“This is a big, massive bill as it is,” Sen. Mark Warner, D-Vir., says. “We’ll come back next year and take on Fannie and Freddie in a more thoughtful way.” So, wait ’til next year, eh? Hope that policy works out better for taxpayers than it does for, say, Cubs fans.
Unfortunately, lawmakers are coming at this problem from the wrong direction. They won’t solve the problems that plague our financial markets until they deal with Fannie and Freddie, since those companies are such big pieces of the problem.
Before the housing collapse, Fannie and Freddie controlled as much as half of the nation’s residential mortgage market. Since then, both companies have gone belly up, and rely on the federal government to keep them alive.
In just the first three months of this fiscal year, Freddie Mac announced losses of $8 billion and requested $10.6 billion more in taxpayer help. For its part, Fannie Mae lost $11.5 billion and wants $8.4 billion more. And keep in mind that the companies have already blown through some $145 billion in taxpayer money.
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