Even as our government officials claim that the worst of the recession is behind us, their actions hardly indicate that they believe it themselves. The financial reform bill that the House of Representatives passed last month authorizes the Federal Reserve to provide up to $4 trillion in emergency relief to big banks the next time things come crashing down. This flies directly in the face of the oft-heard assurances that the bailout spree is over. Obviously not, as the House is laying the groundwork for the continuation of the money bonanza.
And what a bonanza it promises to be. The authorized figure is far more than anything we have seen so far. To give a sense of scale, it exceeds by a factor of five the amount of President Obama's stimulus package.
The bill is the brainchild of Barney Frank, the ultra-liberal chairman of the House Financial Services Committee. Believe it or not, this is the same Barney Frank who has been calling for tighter regulations of Wall Street and its practices. And yet at the same time, this man is prepared to give the bankers unprecedented amounts of money. How can this be?
If we want to understand why a politician takes the positions he does, we can usually figure it out by following the money. Barney Frank is no exception. A recent article by Kevin Connor offers some revealing data and facts. Since rising to a leadership position on the House Financial Services Committee in 2002, Frank has been getting almost half of his campaign contributions from what is referred to as FIRE. The acronym stands for the finance, insurance, and real estate industries. In other words, some fifty percent of Congressman Frank's campaign cash is supplied by that bundle of special interests loosely referred to as Wall Street. So liked is Frank by them that they have made him a leading beneficiary of their generosity on Capitol Hill. Notes Connor:
Only two members of the House have taken in a larger share of their money from Wall Street over the past two campaign cycles - Paul Kanjorski, a Democrat, and Spencer Bachus, a Republican. And during the 2006 cycle, Frank took in more money from FIRE than any other Democratic member of the House, and all but a few Republicans.
In light of the above, Frank's willingness to authorize $4 trillion for his benefactors should come as no surprise. The truth is that Barney Frank is in the back pocket of Wall Street, and judging from his "reform" bill, his sponsors are getting an excellent rate of return on their investment. This is, however, something Frank would not want his liberal base to figure out, given that in public, he poses as the scourge of unscrupulous financiers. Nothing could be farther from the truth.
The case of Barney Frank shows the cancerous corruption at the heart of our system, whereby lawmakers write favorable legislation in exchange for bribes. To make the whole racket even more perverse, such legislation often involves massive transfers of cash. In practical terms, it means that politicians use the power of the state to take money from one group of citizens and give it to the special interests who finance their careers.
Many people think that to stamp out this corruption, we need some reform bill that would regulate how campaign donations are given and received. But this is a futile hope. There have been bills of this kind, but politicians have always found ways around them. After all, such bills must be written and passed by the very people whose conduct we seek to regulate. Because of this, we can be certain that the measures they propose will be weak and loophole-ridden.
Neither will it do to vote the bums out. This has also been tried before, and always with the same result: Most of those who replace the bums eventually turn into bums themselves. We saw it in 1994 when the Gingrich Republicans, riding a wave of national disgust with congressional shenanigans, threw out the spendthrift, earmark-addicted, special-interest-beholden Democrats. But barely a decade later, one could hardly tell the difference between the new boss and the old one, and in 2006, the latter were sent packing by an angry electorate. The Democrats who took their place promised the most ethical Congress in history. Instead, we got a gang of thieves whose pilfering of our national wealth makes Bernie Madoff look like a choir boy.
The problem is not that all our politicians are inherently corrupt before they come to Washington. Surely not many travel to the nation's capital hoping to end up as harlots of special interests. But such is human nature that only a few can resist for very long the perverse incentives of the corrupt system. It is not unreasonable to assume that many of us would stumble in just the same way were we to find ourselves in their position.
The way to fight this is not by forcing our congressmen to write self-correcting legislation, but to deal with the problem at its root, which is Washington's ability to regulate almost every aspect of our lives. This in turn invites two kinds of bribery, which are in Beltway-speak euphemistically called "campaign contributions." Bribes of the first kind are given by those who seek to escape onerous regulations that Congress constantly threatens to impose. Bribes of the second kind are made by those who wish to appropriate other people's wealth. Many bribes are given with both objects in mind. Barney Frank's latest piece of legislation bears unmistakable evidence of this double-play. Bribed to the hilt, Frank concocted a bill that essentially gives Wall Street a free pass while authorizing immense amounts of money for the next emergency.
The only way to get rid of such corruption is to deprive Congress of its vast regulatory powers. There is truly no reason why politicians should superintend any portion of the private sphere. Finance, health care, energy, housing, farming, and all the rest should be left wholly to the market, since the market invariably delivers goods and services in the most economical and cost-efficient manner. Every time politicians decide to regulate, they only make matters worse. There is not a single regulatory regime that would make the working of any part of our lives more efficient or less costly. It is no accident that those areas that are most heavily regulated -- such as health care and finance -- tend to be the most problem-ridden. But this does not bother Barney Frank and his colleagues a bit, because their ability to control and regulate is the main source of their clout and cash.
If we want our lives back, we must strip politicians of that power. They are not supposed to have it in the first place. The federal government was not established to run every aspect of our lives. It was set up for the primary purpose of protecting the lives, liberty, and property of American citizens. But these days, our federal representatives show little zeal for safeguarding these. And when it comes to liberty and property, it would seem that their desire is to take away as much as they can.
We are now paying the price for losing sight of this country's founding principles and granting politicians extra-constitutional powers in the misguided belief that they would solve our problems. That was an unwise thing to do, because instead of the goodies they promised, they have delivered abuse, theft, and corruption. We need to look no farther than Barney Frank's "financial-reform" legislation to see it.