Belmont Club

None So Blind

The looks at Barney Frank’s admission that he failed to see the dangers to Freddie Mac and Fannie Mae because he was blinded by the fear of the Republican “right”.

Frank, in his most detailed explanation to date about his actions, said in an interview he missed the warning signs because he was wearing ideological blinders. He said he had worried that Republican lawmakers and the Bush administration were going after Fannie and Freddie for their own ideological reasons and would curtail the lenders’ mission of providing affordable housing. “I was late in seeing it, no question,’’ Frank said about the lenders’ descent into insolvency.

It is a variation on that very old political theme: Bush made me do it. This despite the fact that in early 2003, Congress had been warned by the director of the federal office responsible for overseeing Fannie and Freddie, Armando Falcon, who said “in a 118-page report of the companies’ potential for a catastrophic failure that could jeopardize the economy.” This was followed by efforts by the Bush administration to rein in Fannie and Freddy somewhat via new Treasury rules.

But Frank and other Democrats still opposed tighter regulation, Frank most notably in his public statements saying there was nothing wrong with Fannie and Freddie. He and other House Democrats also sent a letter to President George W. Bush in June 2004, saying the proposed crackdown could “weaken affordable housing performance . . . by emphasizing only safety and soundness.’’

Frank’s most convincing excuse is that he wasn’t chairman of the House Banking Committee until 2007. “My mistake was a nonoperational one”, he said, which if it means anything suggests that he rose to power too late to commit the blunder he was fixing to commit earlier. The collapsing economy has become a hot potato that both parties are eager to hand to the other. If the Rassmussen poll is any guide, more voters are now beginning to blame Democrats than Republicans. “Bush did it” is slowly but surely morphing into “Obama did it”.

The Wall Street Journal says that the only miracle President Obama has wrought so far is to make Bush look good. CNN reported that the former President is nearly level with Obama in terms of popularity and that “Democrats would be wise to think twice before bringing up the name of President Bush on the campaign trail this fall.”

Washington’s best blame shifting gambit has been for one party to blame the other. Paradoxically this strategy creates a kind of self-protection for the larger herd. Although the elite is rotated, the same general set of people are left in charge at the conclusion of each election except that they take turns. The public is often left with the illusion that one set of policies has been ‘punished’ when in fact, the same set of policies continue, albeit at faster or slower rates. Victor Davis Hanson noted that the Republicans and Democrats advanced deficits in a bipartisan manner up until the crash. He argues that November will show whether the public now perceives the question in terms of Washington vs the USA instead of the traditional Republican vs Democrat.

In 2008, the public was furious at George W. Bush, not because he was too much of a right-wing tightwad, but because he ran up a series of what were then thought to be gargantuan deficits. The result was that under a supposedly conservative administration, and despite six years of an allegedly small-government Republican Congress, the deficit nearly doubled from $3.3 trillion to $6.3 trillion in just eight years.

Barack Obama apparently never figured out that he had been elected in part because that massive Republican borrowing had sickened the American people. So in near-suicidal fashion, he took Bush’s last scheduled budget deficit of more than $500 billion — in a Keynesian attempt to get the country out of the 2008 recession and financial panic — and nearly tripled it by 2010. Obama’s new red ink will add more than $2.5 trillion to the national debt — with near-trillion-dollar yearly deficits scheduled for the next decade. All of that will result in a U.S. debt of more than $20 trillion.

Has the public figured it out? That is an open question. As for Washington, it is far from clear whether the politicians are truly awake to the dangers of the deficit, which by definition, means their bloated existence. From their public pronouncements it appears that neither Barney Frank nor Barack Obama are aware that Big Government is no longer in vogue. For them it is a matter of more programs, more regulations, more Hope and Change. Like the Bourbon dynasty they appear to remember everything and learn nothing.

From all accounts, a political tsunami will hit Washington this November, but even with the wave upon them, some politicians appear as blithe as ever. There are none so blind as they who will not see.

Tip Jar or Subscribe for $5

Join the conversation as a VIP Member