"[W]hat's not in the Dodd bill demonstrates that there is little to no will on the part of Senate Democrats to even deal honestly with how the government caused the financial crisis to occur. Republicans can wield the upper hand in this debate by holding the majority to account for covering up for the real villain of the crisis: government."—Bill Wilson, President of ALG.
April 27th, 2010, Fairfax, VA—Americans for Limited Government (ALG) President Bill Wilson today praised Senate Republicans for blocking the Dodd financial takeover bill yesterday, and said "now is the time for Republicans to establish firm preconditions for real financial reform by reining in the government-run agencies that contributed to the crisis in the first place."
Wilson said he recognized that while agencies will be resistant to reform, that "it is the role of legislators and their sworn duty to rein in the excesses of government when failures of this magnitude occur. The Dodd bill is just a whitewash."
"Legislation that does not address the government causes of the crisis is a sham," Wilson declared.
Wilson said that "What's in the bill is bad enough. It will give the government unlimited authority to seize companies, tax the citizenry and spend money without any vote in Congress. And shareholders whose assets are liquidated will be barred from challenging the theft in a court of law. All of that needs to go."
Wilson continued, "But what's not in the Dodd bill demonstrates that there is little to no will on the part of Senate Democrats to even deal honestly with how the government caused the financial crisis to occur. Republicans can wield the upper hand in this debate by holding the majority to account for covering up for the real villain of the crisis: government."
In an ALG editorial published today, the group calls on the Senate to address and reform five government agencies in any legislation debated: Fannie Mae, Freddie Mac, the Federal Reserve, the Federal Housing Administration, and the Department of Health and Human Services.
The editorial cites research by former chief credit officer of Fannie Mae, Ed Pinto, demonstrating that Fannie Mae and Freddie Mac weakened mortgage underwriting standards and mislabeled high-risk mortgage-backed securities, defrauding investors; that the Federal Housing Administration (FHA) lowered down payments on mortgages; and that the Department of Housing and Urban Development's (HUD) Community Reinvestment Act regulations reduced lending standards and forced banks to give loans to lower-income Americans that could not be repaid.
That research was summarized in part in a letter Wilson sent yesterday to the U.S. Senate urging members not to proceed to debate, and to instead "to demand a completely new bill that actually addresses the root, government causes of the crisis" that Pinto outlined.
The ALG editorial also calls upon Senate Republicans to bring transparency via the Government Accountability Office to "the Federal Reserve whose ultra-easy money policies and lower-than-justified interest rates that allowed the credit bubble to inflate to catastrophic proportions in the first place."
According to research by Stanford economics professor John Taylor, "the Fed's target for the federal-funds interest rate was well below what the Taylor rule would call for in 2002-2005. By this measure the interest rate was too low for too long, reducing borrowing costs and accelerating the housing boom."
Wilson concluded that "Senate Republicans have an opportunity to give the American people a detailed account of the government policies that caused the crisis that must be repealed, and the responsible agencies that must be reformed. If they truly want to bring an end to 'too big to fail' they will insist that any legislation must rein in the excessive risk-taking that was mandated by government policy."
Letter to the U.S. Senate, ALG President Bill Wilson, April 26th, 2010.
"'Down a Rabbit Hole:' The Threat Posed by the Dodd Bill to the Private Sector," April 22nd, 2010, Americans for Limited Government.