Democrats believe that it is the federal government's job to control all aspects of our lives including, but not limited to, our financial institutions, major industries and businesses. They believe that in the aftermath of the collapse of the U.S. financial markets in 2009, it is the federal government's job to shift from oversight to direct control.
Another showdown is looming between Republicans and Democrats over the proper role of the federal government following the financial collapse of major businesses like AIG, G.M., Bear Stearns, Merrill Lynch and others in 2009.
Last week the House last week passed its version of a financial reform bill along party lines. However, the Senate bill is yet to be brought forth for debate and the battle lines are still being drawn.
Republican and Democratic perspectives on how to properly deal with the aftermath of the "Great Recession of 2009" reveals the differences between the two parties in the proper role of the federal government in a free market economy.
The Senate Banking Committee, under the leadership of lame duck Democratic Chairman Dodd, passed its financial reform bill out of committee without one single Republican voting for it. In addition, all 41 Republican Senators signed a letter to Democratic Senate Leader Reid declaring their unified opposition to the Senate Banking Committee bill.
There are two main provisions of the Democrats' reforms that give too much power to the government and too little responsibility to financial institutions to act responsibly:
1. Government Control: Democrats seek to empower the U.S. Central Bank a.k.a.the Federal Reserve to create and enforce rules and regulations for institutions and consumers. The Fed would have the unilateral power to restrict the types of investments private financial institutions can make and could also restrict the amounts of investment. They also seek to appoint an unelected council of regulators to seize U.S. businesses and do with them as see fit including but limited to forced bankruptcies and liquidation.
2. Bailout Fund: America's largest financial institutions would be required to fund a $50 billion dollar pool raised through taxes on transactions to offset the costs of their own incompetence and failure. The government is telling financial services that they can do what ever they want as long as a "kitty" exists to help clean up the mess.
It is the government's job to create the necessary and proper oversight of the financial services sectors of our economy with the least amount of control but the proper amount of supervision. Oversight should be the shared responsibility of the legislative and executive branches of government.
Congress has the ultimate responsibility through the Banking Committees of the House and Senate to provide the ultimate oversight. In the aftermath of the financial collapse of 2009, Democrats in Congress now are seeking to shirk and shift their responsibility to others like the Federal Reserve, Treasury Department, SEC, FDIC and others.
Had the Democrats who controlled the House and Senate Banking Committees been doing their oversight competently, they surely could have headed off a lot of the trouble we experienced and continue to suffer by the financial collapse of 2009.
The buck needs to stop with Congress with regard to oversight. Our elected representatives are are the ones directly responsible to the people. Empowering agencies and bureaucrats is not the answer. It will only create a bigger problem in the future. Congress seeks to distance itself from responsibility because in the event financial trouble reappears they want to be able to blame it on someone else.
Our Founding Fathers knew that our government's greatest chance of success lies in "checks and balances" between the three branches of our government. Congress loves power but hates responsibility. The Executive branch loves power but could care less about responsibility because most of the bureaucracy directly controlled by the president is institutional.
In the aftermath of the "Great Recession of 2009" we need certainly need financial reform. But, what's even more important is that at this moment we must make sure we understand why the collapse happened last year and who and what caused it.
The bottom line is this: Republicans believe in reasonable and necessary reform with the least amount of government intervention. They support reform that hold the financial services sector responsible for their own actions. Republicans believe it is the ultimate responsibility of government to prevent a crisis before it occurs.
Democrats on the other hand, want to control the financial services sector rather than providing oversight of it. They also believe that as long as a fund exists to help offset bad business decisions, the American people will be adequately protected. They are not as interested in prevention as they are in dealing with a crisis after the fact. They have not prevented "too big to fail," nor have they created an environment by which companies are held directly responsible for their bad business practices.
The financial service sectors of our economy must he held to high standards, and all Americans must know that no U.S. company can be "too big to fail." Oversight must mean that Wall Street will be treated no differently than Main Street. The focus of true and meaningful financial reforms should not be on direct control and bailouts; it should be on oversight, responsibility and accountability.
Bradley A. Blakeman served as deputy assistant to President George W. Bush from 2001-04. He is currently a professor of Politics and Public Policy at Georgetown University and a frequent contributor to the Fox Forum.
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Former deputy assistant to President George W. Bush