Religion & Law

A video making the rounds on the internet of excerpts from a 2004 hearing before the House subcommittee on capital markets offers an interesting contrast to the conventional wisdom now taking hold about the cause and the blame for the current financial crisis. (The video is an advocacy piece and the captions are over-the-top, but the hearing excerpts show the actual words of the participants; for a New York Times article on the same hearing, see here)

The emerging historical revisionism is that our current credit crisis was caused by lax regulation generally of financial markets and should be followed by a new era of greater and broader regulation (i.e., more government). But the answer instead may lie in a surgical and nuanced regulatory initiative targeted toward governmentally-sponsored interventions into those credit markets (such as with Fannie Mae and Freddie Mac).

Likewise, while the popular myth is that conservative Republicans set the stage for this crisis by opposing regulation and putting too much faith in unbridled capitalism, the House hearing excerpted on this video featured repeated calls by Republicans for more regulation of Fannie Mae and Freddie Mac including better accounting rules and greater capital holdings, while Democrats vociferously opposed any such regulation, denied any financial security dangers with Fannie Mae and Freddie Mac, promised that housing loans have no risks, and characterized greater regulation of the credit market as likely to impair the ability of those in poor and minority communities to obtain easier credit and buy houses. Not exactly the perspectives that are presently being attributed to the political actors in the mainstream media now that the crisis has broken.

Now the $64,000 question is whether we will see a misguided reaction to this problem that increases government control and regulation of the economy generally, moving the United States toward a European style economy with perpetually low growth and high unemployment. Or instead will wiser heads prevail so that we might fix the real problem with targeted regulation and government oversight that does not try to plan the economy or burden the economy with excessive costs and taxes. I?m betting on the former reaction, but maybe I am just becoming too pessimistic about the ?Change? that?s coming.

Greg Sisk