Singing the Bailout Blues

I think Jay Leno summed up the essence of the Wall Street bailout best when he remarked, “Congress keeps saying that not only are taxpayers going to get back the $700 billion, oh, they’re going to make money on the deal, too. Yeah, yeah. See, now you know where the ‘con’ in congressman comes from.”

Understanding the “con” in Congress

by Chuck Muth

It is a testament to the inherent wisdom of the American people that despite the enormously complicated nature of this financial mess, the vast majority fully understood that the $700 billion bailout was wrong. Trusting the government to fix the very problem it created is like trusting an arsonist to put out a fire he himself lit.

The first sign that this deal stunk like yesterday’s diapers was the rush to do it. That’s almost always a sure bet that our political overlords have something to hide; something they need to get done before the rubes wake up and smell the burnt coffee.

The second sign: The Politics of Fear. In marketing, budding advertising executives are taught that the fear of loss is a far more powerful motivator than the hope of gain. So if you really wanna sell a product, scare the tar out of people. “Happy Days Are Here Again” doesn’t sell nearly as well as “Apocalypse Now.” And this Wall Street bailout was being sold as the only way to avoid financial Armageddon. The fear campaign was designed to cause widespread panic — and it worked.

At least in the halls of Congress.

And thirdly, when proponents began their coordinated PR campaign to re-label the “Wall Street bailout” as a “Main Street rescue,” that was the propaganda machine’s equivalent of putting lipstick on a pig (no offense, Obama). It was the government’s way of calling the “garbage man” a “sanitary engineer.” It was, indeed, a con. The people didn’t buy it — but Congress did.

So how did we get into this pickle in the first place?

Well, I guess we could blame Canada. But in reality it was … liberals.

How can we know for sure it was their fault? Simple. Whenever liberals say “Let’s stop all the finger-pointing,” you can bet it’s because the finger is pointing right at them. And since liberals are so fond of excusing bad behavior by looking for “root causes,” let’s look at the root cause of this financial meltdown — not just to affix blame where it belongs, but to assure it doesn’t happen again.

It all came down to this fundamental philosophical question: Is home ownership a “right” or a “privilege”? Conservatives instinctively know the answer is “privilege.” Home ownership is something to be earned. You save enough money for a down payment and establish a credit record of trustworthiness.

But liberals believe home ownership is a “right” the government is responsible for providing. As such, it passed “well-meaning” legislation under Jimmy Carter — the Community Reinvestment Act (CRA) — which forced banks to extend home loans to people who lacked good credit or the financial means to repay the loan. This “well-intended” policy was put on steroids by the Clinton administration. And as we all know, the path to financial hell is paved with good intentions.

Making a bad situation worse, the government created “companies” called Fannie Mae and Freddie Mac to guarantee these bad “affordable housing” loans with taxpayer money. So not only could people who shouldn’t get home loans get home loans, but banks that shouldn’t have extended those home loans to people who shouldn’t have gotten them in the first place were able to do so by passing off the risk to Fannie and Freddie.

Suddenly, even minimum wage burger-flippers were qualified to buy the home of their dreams. Thus, the demand for houses grew faster than developers could build them. As demand grew for a shrinking supply of homes, the cost of those homes sky-rocketed. Even people with good credit got caught up in the frenzy and bought homes they ultimately couldn’t afford.

And then the bubble burst.

Bad home loans were stacked up like dominoes, and when they started falling there was no way to stop it. Leading us to the $700 billion (and counting) Wall Street bailout. But this government solution to this government-created problem will probably mean the situation is only going to get worse, much worse, before it gets any better.

I think Jay Leno summed up the essence of the Wall Street bailout best when he remarked, “Congress keeps saying that not only are taxpayers going to get back the $700 billion, oh, they’re going to make money on the deal, too. Yeah, yeah. See, now you know where the ‘con’ in congressman comes from.”

Thanks, Congress.

Chuck Muth is president of Citizen Outreach, a non-profit public policy advocacy organization in Washington, D.C. The views expressed are his own and do not necessarily reflect the views of Citizen Outreach. He may be reached at: chuck@citizenoutreach.com.

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