In his remarks on Wall Street Reform last Thursday, April 22, at Cooper Union in New York City, President Obama said this:
I’m going to quote: “Through the great banking houses of Manhattan last week ran wild-eyed alarm. Big bankers stared at one another in anger and astonishment. A bill just passed… would rivet upon their institutions what they considered a monstrous system… such a system, they felt, would not only rob them of their pride of profession but would reduce all U.S. banking to its lowest level.” That appeared in Time Magazine in June of 1933. (Laughter and applause.) The system that caused so much consternation, so much concern was the Federal Deposit Insurance Corporation, also known as the FDIC, an institution that has successfully secured the deposits of generations of Americans.
If Obama had been President in 1860, perhaps he would have also mocked this statement made by John Jay generations earlier, in 1786:
It is much to be wished that slavery may be abolished. The honour of the States, as well as justice and humanity, in my opinion, loudly call upon them to emancipate these unhappy people. To contend for our own liberty, and to deny that blessing to others, involves an inconsistency not to be excused.
–John Jay, letter to R. Lushington, March 15, 1786
Perhaps Obama would have spoken of slavery as an institution that had successfully secured the assets of generations of plantation owners.
As John Jay was right, the “big bankers” cited by Time Magazine in 1933 were right. The FDIC violates individual rights, forcing individuals to pay for the failure of others. The FDIC, along with the Federal Reserve System (begun in 1913) and all the other government controls of the banking industry, has turned Americans—including bankers—into complacent dependents on the government for assessing and guaranteeing the solvency of banks. What American today assesses the solvency of a bank before deciding to deposit with that bank? What banker doubted that the government would ultimately back the toxic mortgages bought and sold by the government-sponsored enterprises, Fannie Mae and Freddie Mac, which were created expressly to carry out the government’s welfare-statist policy of making homes affordable to more people?
In the same speech, Obama said this:
we‘ve produced a proposal that by all accounts is a commonsense, reasonable, non-ideological approach to target the root problems that led to the turmoil in our financial sector and ultimately in our entire economy.
By all accounts!? Could such a statement, in a prepared speech, possibly be honest?
I might grant that Obama’s proposal is, in a sense, “non-ideological”—that is, unprincipled. But, by my account, and by many accounts surely known to Obama (see here and here from just one day of The Wall Street Journal earlier that week), the proposal certainly is not commonsense or reasonable.
What does Obama think the “root problems” are? This paragraph offers his assessment:
Now, one of the most significant contributors to this recession was a financial crisis as dire as any we’ve known in generations—at least since the ’30s. And that crisis was born of a failure of responsibility—from Wall Street all the way to Washington—that brought down many of the world’s largest financial firms and nearly dragged our economy into a second Great Depression.
And what was this “failure of responsibility” born of? It was born of the Federal Reserve System, the FDIC, and what I described above: the complacent dependency on the government for assessing and guaranteeing the solvency of banks.
What is Obama’s solution? His solution is fifteen hundred more pages of regulations, so that Americans can be even more complacent and dependent on government to do their thinking for them.
Is anyone surprised that, of the fifteen hundred pages of proposed new regulations, not a word applies to Fannie Mae or Freddie Mac? As I wrote in February 2009,
The essential cause of the housing crisis was Fannie Mae and Freddie Mac—directed by long-standing welfare-state policy, and in effect using banks as their sales reps—making trillions of dollars in loans (“they own or guarantee roughly half of the nation’s $12 trillion mortgage market” [The New York Times in 2008]) to people who could not afford to buy a home in free society.
Fannie Mae and Freddie Mac are GSEs—government sponsored enterprises. The government turned them into pseudo-corporations solely for the deception of removing their expenditures from the official federal budget. The GSEs are agents of government welfare-state social policy.
In the past decade, Democrats (such as Bill Clinton and Barney Frank) in the federal government encouraged these GSEs to run amuck, and fought against attempts to regulate the GSEs. So here is Obama’s “logic”: Government failed to regulate government; therefore we need more regulation of citizens. Obama has the mentality of a tyrant. He makes no distinction between limiting government and limiting freedom of citizens.
Perhaps I was wrong. Perhaps Obama does make a distinction: he will not limit government, and he will limit freedom.
Consider one more, revealing statement from Obama’s speech:
We do not have to choose between markets that are unfettered by even modest protections against crisis, or markets that are stymied by onerous rules that suppress enterprise and innovation.
Obama opposes “markets that are unfettered”; that is, he is for “fettered” markets. But how does one fetter a market? A market is an association of consenting individuals, as are friendship and romance. The only way to fetter an association is to fetter the individuals who would associate.
When politicians, economists, and commentators depersonalize the idea of freedom, when they speak of free or unfettered markets but never of free or unfettered people, then freedom becomes easier for them to attack or more difficult for them to defend.