A Friday For The Ages?

There they are, the three stooges of the housing apocalypse: Barney "Fannie & Freddie" Frank, Chris "Countrywide" Dodd and Upchuck Schumer. Why exactly would we put these three in charge of solving the problem they created?

South Carolina Governor Mark Sanford weighs in today on the pages of the Washington Post:

Excerpts:

It seems that each new crisis is met with a new answer from the government. After Hurricane Katrina, the federal government assumed roles traditionally handled by state and local governments. After the Sept. 11, 2001, attacks, the government federalized 25,000 workers through the Transportation Security Administration. The example of security-focused countries such as Israel, which elects to have that function handled by the private sector, did not matter. Now, our federal government is likely to commit three-quarters of a trillion dollars -- more than last year's Pentagon budget -- to a bailout based on what happened in the credit markets last week.

An ever-expanding scope of federal commitment and power is not what made this country great. Expanded power in one place comes at a cost in other places. American cornerstones such as individual initiative and an entrepreneurial spirit -- born in free and open societies with private property rights and the rule of law -- have never fit particularly well within the context of an ever-growing federal government.
...

If Congress passes the proposed bailout, we will be destined to have far greater problems in time, leaving those who are prudent in their finances to foot the bill for those who are not.

... Whether (Paulson's) proposals are right or wrong is less the issue than the question of where we are, as a society, in terms of having government in the business of protecting people from their own financial decisions. Last week's events were rooted in distressed mortgage securities whose optimistic values were facilitated by quasi-governmental entities Fannie Mae and Freddie Mac. The investment banking capital write-downs were turbocharged by the Sarbanes-Oxley Act, which did what too many laws do -- it fixed yesterday's problem. The amazing expansion of credit was fueled by a Federal Reserve offering an easy-money policy that led us right into a credit bubble. All this was made worse by the government enabling some people's tendency to want more house than they can afford.
With that bubble popped, we will now go through a major financial de-leveraging. It will be painful. Yet to preserve what has made this country great, we need to be on guard against Washington offering endless cures to our ills.

...each of us as taxpayers must admonish those in Washington to get their own financial house in order. Washington is the master of creative and unsustainable finance, with $50 trillion in unfunded promises.
We will be told of bailouts that "won't cost anything." We should caution policymakers that this has never been the history of bailouts, and remind them of Milton Friedman's suggestion that the capitalist system never works without loss. ...

We should remind our leaders of Ronald Reagan's words that the closest thing to eternal life is a government program.
We will be told "trust us" on pricing assets, and we should not -- because no matter how pure one's intentions, no one watches your money like you do. This makes transparency and open bidding incredibly important.

The whole column is here.