7 Ways Congress Helped Create The Problems They Are Now Trying To Solve

March 27, 2009 08:32 AM EDT by Brian Sullivan

7 Ways Congress Helped Create The Problems They Are Now Trying To Solve
Ronald Reagan said the nine most frightening words in America are "I'm from the government and I'm here to help."

Perhaps we could add a few words to that famous phrase now to: "I'm from the government and I'm here to help ... solve the problems I helped create."

Big government right now believes they are the answer to the economic problem. While Congress itself isn't the only party to blame, they are not blameless. Using the public anger over bailouts, job losses and house price declines, the President and much of Congress are selling the concept that only bigger government, more regulation and massive spending can make the changes necessary to solve this crisis. The big government plans include de facto nationalization of banks, printing trillions in new currency, regulating derivatives, forcing interest rates down to get already strapped Americans borrowing again and pushing through a budget with a deficit larger than all 43 prior presidents - including Bush II - combined.

The President seems genuinely confused at much of the public skepticism over these plans. As a fan of history, perhaps he should look to the recent past to understand why many in America are having trouble buying into the idea that government knows best.

With the exception of a few new members, this is largely the same Congress that in the past 10 years:
1. Not only allowed the housing bubble to inflate unfettered, but encouraged it with the passage and promotion of numerous bills designed to encourage lending to those even with bad credit. Even as late as 2006 and 2007, both parties were hard at work on laws that would eliminate a 3% down payment requirement for poor credit homebuyers even as the entire country knew the housing bubble was bursting.
2. Acted schizophrenically by pushing Fannie and Freddie to get bigger in 1999. Then held hearings about Fannie and Freddie's shoddy accounting and how they were too big and too out of control in 2003 and 2004. Just four years later, Congress has flip-flopped again and wants to convince us that letting Fannie and Freddie get bigger is the only way to help housing.
3. Completely missed and/or ignored the 10 year build up of the estimated $160+ TRILLION dollar derivatives market.
4. Congress passed and Bill Clinton signed the Commodity Futures Modernization Act in 2000 that largely allowed the derivatives market to grow without regulation
5. Allowed banks such as Bear, Lehman and others to borrow 30, 40 and even 50 times their capital base for a multiyear period.
6. Vote to give hundreds of billions to failing companies, tell America they won't give anymore, then give more when its discovered that throwing money at the problem doesn't actually solve the problem.
7. Accepted millions in campaign contributions from many of these same companies, including more than $9 million dollars from AIG over the last 20 years.
Of course, Reagan also said: "The government's view of the economy could be summed up in a few short phrases: "If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

So as Congress continues to hold hearing after hearing, desperately trying to find blame ... perhaps Congress should a hold a hearing of itself and ask why - as the nation's ultimate regulator - they failed as much as anyone, if not more.

14 Comments

political hobbiest

Possible Solution to Economic Crisis: Let us say there are currently 15m Americans over age 55 in work force. Take out the 2m who are in government offices, where the experience is necessary. We are left with 13m of Americans over 55 in work force. This is not an accurate number, only a scenario. We offer all those 13m Americans 200,000 to retire, under certain conditions of course. For example, of those who take offer, each must buy one vehicle from GM Chrysler. Also the must purchase medical insurance from retirement funds, not using Medicare. Given conditions, lets assume of 13m, 7m accept retirement funds. This would guarantee 7m automobiles purchased from GM; one crisis reduced. 7m medical insurance plans acquired; crisis reduced, more money Medicare saves. Much more consumer spending by more responsible Americans, including: homes, furniture, electronics, etc… Total cost of government, 1.4T Would you take it?

March 30, 2009 at 2:15 pm

Fred

Excellent report, now I would like to see that broadcast on the CBS, NBC and ABC evening news and printed in the daily papers. Congress has managed to shift the blame on everyone but itself. It's time for the American people to be made aware of the root of the problem. What we have had here is a PERFECT STORM of Democrats and Republicans together creating a disaster. This is not the only problem they have created. They have also combined their efforts to turn a blind eye to and excuse illiegal immigration. Join the Tea Party, send your reps a copy of a tea bag. Tell them if they don't begin to put the interest of the country as a whole first, instead of their special interests, that you will vote them out of office. Then work to find a better candidate.

March 30, 2009 at 12:23 pm

Corey in GA

It is important to realize the government's very significant role in creating this crisis. However, I do think it's ironic that one of your main points is ridiculing the call for more regulation when one of your main points is that the government, "Allowed banks such as Bear, Lehman and others to borrow 30, 40 and even 50 times their capital base for a multiyear period." Exactly how would they have disallowed that? Through more regulation? The government was significantly to blame for this crisis, but let's not exonerate all the executives that made incredibly bad bets on debts and left the bankrupt companies hanging while keeping their millions of bonuses based on shadow profits. Let's not forget the CEO-decided base pay for the CEO's. There is a systemic fault in a system where executives make millions from a company and have little to no incentive to ensure that company's survival beyond their tenure. Perhaps all pay above $1 million per year should be in company stock payable at the lowest price over the following five years after their tenure. THAT might instill some integrity into a group that is showing very little of late.

March 27, 2009 at 2:38 pm

chuck

Former Chrysler CEO Lee Iocca phrased it this way: Goverment problem prolongers,Companies problem solvers. Think on it. I ran across that when I read his autobio twenty years ago.

March 27, 2009 at 1:02 pm

Robert Dickson

Everyone I've read seems to be ignoring what may have started the landslide--consumers' maxed credit cards, shaky mortgages, car loans, and negative savings, then add the doubled cost of gasoline and you get the trigger. Because most have to commute to work, first people stop shopping, eating out; then fall behind on credit card payments, next let house payments slip, then car payments, and the whole national house of cards begins to collapse.

March 27, 2009 at 12:03 pm

ALLAN L

YOU ARE RIGHT ABOUT THE WHOLE MESS

March 27, 2009 at 11:36 am

Ed Waterman

You hit it perfect Brian. I did my research as well and as far as I can peg it, Barney Frank and Chris Dodd were aware of the housing bubble in the 90's, even before the massive appreciation in 2005 (homes in my neighborhood appreciated 42% just in 2005 when inflation was probably 3% or so). They both were taking money from Fannie and furthermore, Barney Frank blocked requests to regulate subprime lending and backstopping the risky loans at Fannie. An executive at Fannie Mae (Herb Moses) was in charge of affordable lending (including zero down and sub prime products) and made millions in commissions and bonuses, while lobbying for more lax regulation. Herb was also gay and HIS LIVE IN BOYFRIEND WAS BARNEY FRANK, who happened to chair the banking committee that regulated (or didn't regulate enough) his boyfriend's industry and SPECIFICALLY the products he was pushing. Why has the FBI not blown this up??? The result has devastated our nation. Our state (Washington State) has over 400,000 people looking for work. The result for us??? We lost $250k on our home, when the banks froze our customers couldn't finance our products and we lost two VERY profitable businesses and $700k in market cap (bankrupted them), my wife was layed off her job of 20 years and we are now facing bankruptcy, foreclosure and, since our credit is now destroyed, possible homelessness with our three beautiful children. We lost over $1 million in net worth in 10 months. Our anger is indescribable.

March 27, 2009 at 10:51 am

JohnC

the best one to always remember is - "THE GOVERNMENT IS THE PROBLEM!" And it's getting worse every day!

March 27, 2009 at 10:23 am

earle

Brian,you mentioned banks such as Bear Sterns,Lehman,and others which are investment banks. I'm confused,because aren't we talking about the big banks,such as Citigroup, BofA, Wells Fargo,and JP Morgan Chase to name a few that actually leveraged-up? Thanks

March 27, 2009 at 10:04 am

(1 Reply)

Nelson

Throw everyone out of office and start over. It can't be worse than the pile of Crap they are feeding us now...

March 27, 2009 at 9:43 am

Kirk

'Of course, Reagan also said: “The government’s view of the economy could be summed up in a few short phrases: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”' Never a more true depiction of the current role of government. I often wonder what the framer's of the constitution would have changed if they had observed our current situation. Then again, maybe nothing needs changing. Perhaps more people should read it. Maybe the problems of government lye in the shortcomings of men. A population without responsibility and accountability will have a government of the same.

March 27, 2009 at 9:21 am