A Louisiana political wag famously said “vote for the adulterer; it’s important’. He was referring to a congressional face off between a highly corrupt machine politician, and a reformer who had once consorted with prostitutes. The point of statement is to say, “yeah, this guy cheated on his wife, but the alternative is a lot worse.”
That’s how I feel about the bailout/rescue/securitization (names based on whether you are against/for/neutral towards it). There were better ways to do this, as I pointed out in a recent posting. The various regulatory anchors such as the Community Reinvestment Act, Mark to Market accounting mandates, and the Bank Holding Company Act helped cause, exacerbate and block private sector solutions (respectively) to this crisis. None of those things made it to the top of the list for the administration or for Congress. None of them were really on the table.
I’ve spent most of this week on the phone with the White House; my friends Larry Kudlow and Brian Wesbury have been on constant touch with leaders on the hill. Since the received Washington wisdom was that under-regulation caused this crisis, the beltway crowd was slow to see the damage done by the costly unfunded mandates which they had imposed on investors.
Little by little, some light got in and the final version allows the hapless SEC Chairman, Chris Cox, to suspend the Mark to Market government mandate. No one knows whether he will have the good sense and backbone to use that new discretion and stop breathing down the necks of the damaged institutions. There’s also a provision which creates a commission to study the effects of Mark to Market regulations. Who will be on the commission? There’s a lot riding on the answer to that question.
- House Begins Debating Compromise Bailout Plan
- Taxpayers Will Be Losers in Rescue Plan: Whitney
- Congress Approves $25 Billion in Loans to U.S. Auto Makers
So, the choices were:
1) The super-bloated Paulson-plus-Frank modifications plan (complete with CEO wage controls for virtually the entire credit and banking system, and a slush fund for the nuts at ACORN who helped get us into this mess).
2) Do nothing in a fit of right wing ideological purity and left wing anti-market populism, and watch with smug satisfaction as the global credit system imploded.
3) Get some supply-side voices into the discussion, slim down the size of the bailout, add some privately funded insurance and lift the mark to market regs.
Grown-ups know that sometimes you have to order from the menu, even if you don’t especially like anything that’s on it. In this case, the grown-ups prevailed.
Jerry Bowyer is chief economist at Benchmark Financial Network, is a member of the Kudlow Caucus, and makes regular appearances on CNBC. He also writes extensively on finance and history for the National Review, The Pittsburgh Post Gazette, Crosswalk.com, and The New York Sun. He can be emailed at email@example.com.