This morning I received an e-mail update on the recovery package from my congresswoman, Anna Eshoo. In it she writes:
Each of us is outraged about the circumstances that have brought our ﬁnancial system to near collapse. In my view, the Administration has practiced “cowboy capitalism”, saying the markets must be allowed to run free, but they instead let Wall Street run wild without accountability, without transparency and without enforcement or regulations to protect the American taxpayer.
First, she claims we are all outraged about the circumstances that led up to this without naming specifics that we probably would disagree on. Without government created institutions like Fannie and Freddie that artificially encouraged home ownership, the current problem would have been less significant. Without government subsidies to home owners that renters don’t get (i.e. mortgage interest is tax deductible but rent is not) home prices would not have inflated as high as they did – and thus the total cost of the problem would be less. Congresswoman Eshoo, on the other hand, seems to view “cowboy capitalism” as the source of the problem and tries to wash her hands of the problem even though she’s been in office since 1993. Take some responsibility yourself, congresswoman.
She goes on to say the current administration let companies run free with no accountability. Give me a break. How about letting them fail? There’s some market based accountability for you. You, Congresswoman Eshoo, are removing the ultimate accountability by endorsing the rescue package.
Towards the end of her letter, congresswoman Eschoo enumerates elements she’s hopeful the legislation will include, the final point is:
Protection of School District and City/County Investments
• Assist school districts, cities and counties who had investments in failed institutions.
Why should school districts and local governments who made bad investments be bailed out? This is so typical of big government arbitrarily picking the winners (in this case government investors) and losers (private investors) based on their personal biases of what is good and what is bad. This kind of federal government hand holding of local governments only encourages the behavior of local governments continuing to invest without considering the catastrophic case (i.e. large reduction in home prices). She is also pandering to fearful parents. Everyone wants their kids to have a good education, so her suggestion is to give the schools with the worst financial management the most money. Great idea.
In acknowledgement of reality (i.e. congress is going to pass this bill regardless of the public’s opposition), congress could make it a lot better than it is. They are trying to pass this thing way too fast. Mark Cuban wrote a good post with some ideas for making it more effective. If congress is going to turn this bad idea into reality, they should seriously consider some of his suggestions.