… years before it happened. Here is a news spot from 2008 showing clips from Congressional hearings in 2004 — fully four years before the housing bubble burst and the financial meltdown took place — in which lawmakers were warned that there were serious problems with Fannie Mae and Freddie Mac.
These hearings were prompted by a report from OFHEO (Office of Federal Housing Enterprise Oversight). Armando Falcon, Jr. was the Director of OFHEO at the time, and he was eviscerated by a number of congressmen and women, who claimed that Fannie Mae and Freddie Mac were “sound,” and that Mr. Falcon was out to undermine affordable housing. This was untrue, as this article from The Nation magazine points out.
Those attempting to push for stronger oversight of the GSE were ignored. Mr. Falcon was asked to resign. But his concerns were vindicated by the events four years later.
What is most frustrating about seeing warnings like this is that it highlights the incestual nature of the relationship between big businesses, wall street, and politicians. Everyone has a (financial) stake in the other and because of the relationships, nobody is willing to blow the whistle on inappropriate behavior because of the adverse effects it may have on their own wallets. The ability to make money through relationships in politics has been too easy for too long. It seems crazy that members of Congress were essentially able to engage in insider trading up until January of 2012, particularly when we would hear speeches from politicians stressing fairness and stability within our financial markets. To be clear, there is certainly not an innocent party in these practices. Politicians from both sides are guilty of promising votes or support on pieces of legislation in exchange for contributions. Worst of all, the current political system encourages this type of behavior. People need money to get into office and in order to elicit the necessary funds for a successful campaign, you need to deliver on promises. The issue is that promises are getting made for the sake the of raising money, rather than making promises, based on sound, moral, grounds, that initiate funding on their own. Change for our country is impeded because there are underlying financial motivations of the parties in position to create change that cause people to hesitate despite the fact that they are aware of the NEED for change.
All true. But the more control government has over business, the more need there will be for business to influence government. And that means money. When government’s role is more limited, and confined to necessary regulation (admittedly, “necessary” is a modifier that is capable of significant differences of interpretation), then businesses tend to confine their persuasive efforts to consumers. The test, from my perspective is this: who has more of a role in determining whether a business succeeds? Consumers? Or politicians? When the answer is “politicians,” there is too much government interference, and the regulation/lobbying/regulation/crony capitalism cycle will be encouraged and difficult to break.
There is no question that there is an issue of government control/regulation and the negative effects it has on certain businesses. The greater issue, in my opinion, is that big businesses and lobbyists have too much influence on the decisions being made in D.C. The cyclical nature of the relationship between big business and politicians has been slowing change for quite some time and we have only seen progress made in Congress when necessary/drastic change is called for. I think one of the first steps to decreasing the influence government has on small business is through campaign financing reform and decreasing the influence big businesses have on politicians.