No Bailout for Congress

Written by Chuck Floyd on 2008-10-01T12:29:48+00:00

I am opposed to a "bailout" of Congressional responsibility for the economic mess that we are now experiencing.  We need to ensure the market has the money to loan "qualified" borrowers, not the politically correct who cannot pay back their loans.

We need confidence in the ability of the political process to produce a rational, bold response that lets the market correct itself.  Let's start by unwinding the many government mistakes that created the housing bubble, repealing the various laws and regulations specifically designed to put people into homes that they could not afford. Let's scrap the Community Reinvestment Act, break up Fannie and Freddie, and put the pieces back in the private sector. If "liquidity" and the availability of capital is the immediate problem, let's repeal the tax on capital gains and other tax provisions that punish savings and capital accumulation. The Flat Tax does all of this in one fell swoop. And, finally, let's repeal the various distortions in corporate accounting policies like Sarbanes-Oxley.

It is clear that the Fed has become more of a social engineer than guardian of sound money and protection of the public. Easy credit and low interest rates, intended to ease shocks to the economy, only distorted relative prices and fed the housing bubble.  We must have a stronger dollar.

Let the market work and let the corrections happen. CEO's now need to lead their companies for the benefit of their stockholders, not their pay packages. As BB&T Chairman John Allison put it in a letter to Congress this week: "Corrections are not all bad. The market correction process eliminates irrational competitors. There were a number of poorly managed institutions and poorly made financial decisions during the real estate boom."

The biggest roadblock to change is that the same old politicians who put us in this crisis will be the same ones who try to draft legislation to get us out of this mess.  I do not think that they will admit their own mistakes and repeal their favored programs.

Let's listen to successful businessmen who know the answers, such as stop the mark to market, lend to those that can repay their loans, lower taxes, and change all of the legislation that hurts business.  The accounting principles must be clear and not driven by politics, but clear accounting principles.