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A Do-Nothing Congress Wakes Up

Jul
16
2008

For more than a decade, with the exception of the first 100 days following Newt Gingrich taking the House Speakership and the three months immediately after George Bush’s election, America has basically had a do-nothing Congress. It takes a crisis to get anything done.

And with the solvency of America’s housing financing system on the brink of failure, Democrats in Congress are playing a deadly game of chicken as they stare down the White House.

Any small crisis – “Social Security is going bankrupt in twenty years” or a “we’re welcoming out ten millionth illegal immigrant” doesn’t prompt Congress into action. It takes a serious crisis like “some lady in Florida is about to be euthanized” before Congress acts.

For more than a year now, Congress has known that the nation’s housing markets were in trouble. Credit was flowing too freely, people were acting irresponsibly, and our banks were losing money. Last fall, the issue took center stage as Congress and the President put up proposal and counter-proposal to stabilize the housing markets.

When instability in housing credit markets spilled over to Wall Street, prompting the collapse of investment bank Bear Stearns, the issue took center-stage in the Presidential election. In return there was plenty of finger pointing and little action.

In keeping with that tone – blame the other guy, a key element in any crisis – all Congress had done until last week was advance a housing bill which the President had already threatened to veto.

Late last Friday, however, the game changed, when a Reuters report suggesting that the Federal Reserve might open the discount window to mortgage backers Fannie Mae and Freddie Mac. The Fed’s action implied that these two institutions may be facing a liquidity crisis similar to that which send Wall Street into a panic just four months before.

The Treasury Department and Federal Reserve worked furiously over the weekend to come up with a plan to keep Fannie Mae and Freddie Mac afloat, thereby protecting the mortgages of millions of Americans. On Sunday, they unveiled a plan, but it’s a plan that would require action by Congress.

Uh oh. People like myself – no fans of government intervention – would prefer to leave well enough alone. If Congress is doing nothing, then they can’t do nothing to screw up my life. I can do that well enough on my own, thank you very much. With Congress’ approval ratings but a fraction of President Bush’s – who’s at historic lows – I would imagine most Americans would prefer that this Congress do nothing. Whatsoever.

So I got a sinking feeling in my stomach Monday morning when CNBC reported that Congress would consider amending its Housing Bill to include the proposals developed by the Fed and Treasury. The showdown over one piece of legislation had taken on a new intensity. In exchange for the solvency of the nation’s housing markets, President Bush would have to give in to Congress and sign legislation he would have otherwise vetoed. That’s what I – and pretty much anyone looking at this situation – might describe as a blatant effort to hold the nation hostage to one’s own partisan demands.

Luckily some folks in Congress are getting the point that now is not the time to play political hardball with the nation’s financial markets. Senate Banking Committee Chair Chris Dodd has signaled his willingness to take out the provisions of the housing bill that President Bush finds most objectionable.

I have no specific objection to what Congress is considering to address the housing crisis in part because I, like most Americans, have no ides of what exactly is in the bill. But if this action is worth taking now – if it would help the nation’s housing markets – then shouldn’t they have acted sooner?

If Congress believes that their housing bill might have helped avert the current liquidity crisis in the housing markets, then they shouldn’t have been dragging their feet to score political points. The message is pretty clear: If Congress isn’t willing to step up and admit some culpability, then they’re tacitly saying that the legislation that they had done nothing on for months, would in fact do nothing to help the housing markets.

Share  Posted by Scott Olin Schmidt at 8:31 AM | Permalink

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