Congress focuses on wrong things in bailout
The economy just hit a very large pothole, and if the drivers don’t get themselves out of it soon, they risk being permanently paved over by federal regulators.
There is no question that the economy needs some help and much of that help must, unfortunately, come from the taxpayers. Otherwise, the fallout could hurt much worse than the fall. Yet, it should come as no surprise that since Washington has gotten involved, the focus is not where it should be.
People who know virtually nothing about business — like House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid — are buzzing like mosquitoes around Treasury Secretary Henry Paulson — the former CEO of Goldman Sachs.
All sides agree that there should be a federal bailout of some kind. However, major holdups have developed around issues like congressional oversight and executive pay and not around more pressing business issues like effective risk management. Legislators are spending most of their time insisting that Congress be able to dictate what executives should make at companies that participate in the bailout.
Executive pay is an important issue. However, being less than one tenth of 1 percent of a typical company’s net worth, it’s not the single most important issue. Focusing on that amounts to political class warfare when we need to be thinking about how to get out of the mess left by the bursting of a massive mortgage bubble.
Furthermore, congressional oversight — if handled by the likes of Pelosi — won’t help anyone. Risk Managers at Fannie Mae and Freddie Mac repeatedly warned about the potential disasters of their high-risk loans.
However, those companies’ CEOs were encouraged by congressional leaders like Massachusetts Rep. Barney Frank to ignore the warnings and give mortgages to low-income, high-risk applicants as part of Frank’s social agenda. As chairman of the House Financial Services Committee, Frank will remain the most powerful congressional overseer in Washington.
We support a federal bailout and some level of congressional scrutiny over how taxpayers’ money gets spent in the process. But congressional oversight should keep businesses from making bad decisions, not encourage worse decisions.