Today marks the one year anniversary of the passage of the Dodd-Frank Financial “Reform” bill which was supposedly intended to reform Wall Street and the big lending agencies such as Fannie Mae and Freddie Mac, but it instead did the opposite. It has paved the way to strengthen government tied lending agencies and stifle private lending agencies. The National Review reports:
Yet Fannie and Freddie are bigger than ever, securitizing nine out of ten home mortgages and receiving unlimited guarantees from the taxpayer, thanks to the Obama administration’s Christmas Eve bailout of 2009. And one provision of Dodd-Frank has not only slowed the momentum of reforming the GSEs, but threatens to make them even bigger.
Dodd-Frank’s rules on “qualified residential mortgages” — as currently proposed in a joint regulation by banking agencies, the Department of Housing and Urban Development, and the Securities and Exchange Commission — aggrandize the GSEs by putting shackles on their private-sector competitors. The regulation sets overly strict rules for down payments for mortgages to be securitized, but then exempts from these requirements any home loan insured by the Federal Housing Administration or purchased by Fannie or Freddie.
The administration also closed the door on the option of creating any exemption for private mortgage insurers if they create models to reduce risk, as some have proposed. In the Obama administration’s view, the answer is government backing for mortgages, period.
What the then Democratically controlled House and Senate and the President did was pass a bill that was a mix of corporatism and crony capitalism. However, as with anything done by a government at any level—local, state, or federal—an additional issue is how the bill was negotiated and passed, not just what was in the legislation itself. In Spring of 2010 in the midst of the financial “reform” bill legislation discussions, Governor Palin wrote a Facebook post criticizing the negotiation process:
The current debate over financial reform demonstrates what happens when political leaders react to a crisis with a raft of new regulations. First off, the people involved in writing government regulations are often lobbyists from the very industry that the new laws are supposed to regulate, and that’s been the case here. It should surprise no one that financial lobbyists are flocking to DC this week. Of course, the big players who can afford lobbyists work the regulations in their favor, while their smaller competitors are left out in the cold. The result here are regulations that institutionalize the “too big to fail” mentality.
Moreover, the financial reform bill gives regulators the power to pick winners and losers, institutionalizing their ability to decide “which firms to rescue or close, and which creditors to reward and how.” Does anyone doubt that firms with the most lobbyists and the biggest campaign donations will be the ones who get seats in the lifeboat? The president is trying to convince us that he’s taking on the Wall Street “fat cats,” but firms like Goldman Sachs are happy with federal regulation because, as one of their lobbyists recently stated, “We partner with regulators.”
They seem to have a nice relationship with the White House too. Goldman showered nearly a million dollars in campaign contributions on candidate Obama. In fact, J.P. Freire notes that President Obama received about seven times more money from Goldman than President Bush received from Enron. Of course, it’s not just the donations; it’s the revolving door. You’ll find the name Goldman Sachs on many an Obama administration résumé, including Rahm Emanuel’s and Tim Geithner’s chiefs of staff.
Between lobbying efforts and campaign funding, it seems that too often the government allows itself to be beholden to special interest groups and only certain institutions, and, thus, legislation is often crafted to benefit favored institutions, rather than the American people. This is a bipartisan problem. In fact, it is interesting to note that in the last three months, Governor Romney received far more campaign funds from Goldman Sachs employees than even President Obama. Romney has also accepted more than half a million dollars in campaign funding from lobbyists during that period of time. Additionally, in 1994, Romney’s Bain Capital actually has partnered with Goldman Sachs in purchasing Dade International, a medical diagnostics firm. In doing so, 1,600 Dade employees were laid off between 1994 and 1999, but Bain Capital and Goldman Sachs would later cash in selling back their shares to Dade for more than $350 million. So when Mitt Romney tries to tout his job creating skills as a businessman, it should be noted that he has also destroyed jobs while partnering with a company that would later give him loads of campaign money.
A May piece in the Washington Examiner noted, too, that Romney has been a big supporter of corporatism through government subsidies to business– both during his time as governor and as he outlined in his book when he stated his support for energy subsidies. Contrast that with Governor Palin who recently said that she was opposed to all energy subsidies, favoring a free market, not government guided approach to the economy.
Additionally, as she noted in her book, Going Rogue, Governor Palin turned away campaign contributions that would be perceived as a conflict of interest and her 2007 ethics reform bill made it a crime for Alaskans to trade votes for campaign contributions. She also noted in the aforementioned Facebook post:
We need to be on our guard against such crony capitalism. We fought against distortion of the market in Alaska when we confronted “Big Oil,” or more specifically some of the players in the industry and in political office, who were taking the 49th state for a ride. My administration challenged lax rules that seemed to allow corruption, and we even challenged the largest corporation in the world at the time for not abiding by provisions in contracts it held with the state. When it came time to craft a plan for a natural gas pipeline, we insisted on transparency and a level playing field to ensure fair competition. Our reforms helped reduce politicians’ ability to play favorites and helped clean up corruption. We set up stricter oversight offices and ushered through a bi-partisan ethics reform bill. Far from being against necessary reform, I embrace it.
Commonsense conservatives acknowledge the need for financial reform and believe that government can play an appropriate role in leveling the playing field and protecting “the dynamism of American capitalism without neglecting the government’s responsibility to protect the American public.” We’re listening closely to the reform discussion in Washington, and we know that government should not burden the market with unnecessary bureaucracy and distorted incentives, nor make a dangerous “too-big-to-fail” mentality the law of the land.
As already noted, Governor Palin passed major ethics reform during her tenure. ACES, the oil tax structure she signed into law, revamped the previous legislation which favored predecessor’s cronies. AGIA, the natural gas pipeline project, was also negotiated and passed in a transparent manner and allowed all potential energy developers to submit their proposals. She has consistently fought against crony capitalism and corruption while advocating for competition and free market principles. One of Governor Palin’s greatest strengths lies in her consistency. This is what the Establishment in both parties fear. Her likely candidacy is a threat to the crony capitalism and corporatism that has become part of the political scene in Washington for too long. Whether it is campaign contributions, energy subsidies, Obamacare waivers to favored districts or states, preferential treatment of unions, or handcuffing the private sector, all of these would be fought against in a Palin administration. No other candidate or potential candidate can say they have fought against these types of unethical practices and won. That’s why it’s time to put a Lobbyist for the American people, not the large financial institutions or energy companies, in the White House.