July 22, 2008 | Commentary on Economy
Sen. Jim Bunning (R-Ky.) has pledged to block a Bush administration
proposal being steamrolled through Congress to grant the Treasury
Department and the Federal Reserve sweeping new powers. Slowing
things down would allow Congress to debate the issue fully before
approving measures that could put taxpayers on the hook for
billions in debt incurred by Fannie Mae and Freddie Mac, the
government-backed home-mortgage giants.
Fannie and Freddie are government-sponsored enterprises, or GSEs.
They are stockholder-owned corporations that were chartered by the
federal government to buy and package home loans and make loan
guarantees. Fannie Mae was founded in 1938 as part of President
Franklin Roosevelt's New Deal and has since been converted into a
Treasury Secretary Henry Paulson last week testified before
Congress and requested swift legislative action to expand the
Treasury's ability to lend to these two troubled GSEs and to allow
the department to buy stocks in them if necessary. Bunning was
stunned: "When I picked up my newspaper yesterday," he said at a
Senate hearing, "I thought I woke up in France. But no, it turns
out socialism is alive and well in America. The Treasury Secretary
is asking for a blank check to buy as much Fannie and Freddie debt
or equity as he wants."
Politicians sometimes try to solve problems by providing no-cost
guarantees, but the S & L debacle showed that this type of
government intervention actually subsidizes excessive risk and
leads to taxpayer bailouts. Without true reform of the GSEs, the
Bush administration's plan to expand a risky form of government
intervention by putting taxpayers at risk for future bailouts of
investment banks would be unwise. A Fannie and Freddie bailout
might be worthwhile if that was the price we paid to privatize
these reprehensible examples of crony capitalism. But if this
proposal merely keeps Fannie and Freddie unreformed, the taxpayers
will lose in every possible way.
Bunning (a baseball Hall of Famer) should be applauded for
throwing some verbal fastballs at Secretary Paulson during the
Banking Committee hearing last week. Let's hope Bunning digs in to
make sure the Congress doesn't take any action that would harm the
long-term economic growth of our nation.
Rep. Michael McCaul (R-Texas) has introduced legislation seeking
an accounting of how many American children are in Pakistani
radical Islamic schools, or madrassas. The McCaul resolution
encourages the U.S. "to work with the government of Pakistan to
secure the return to the United States of all American children
being educated in madrassas in Pakistan." Imran Raza, a
Pakistani-American documentary filmmaker, has made a gripping film,
The Karachi Kids, about the plight of two American boys forced into
a madrassa in Pakistan who were forced to memorize the Koran before
being freed and returned to the States.
Raza was in downtown London on July 7, 2005, when terrorists
attacked, motivating him to understand the radicalization process
of Islamic youth. In his investigation he discovered two American
children in an Islamic school in Karachi, Pakistan. This movie
should spur a national debate about the true nature of the most
radical form of Islam. Conservatives should applaud McCaul and Raza
for elevating this controversy into the public debate.
Home-Grown Energy at Last?
Last week President Bush lifted the executive order that barred
energy production off America's shores. If Congress reciprocates,
American consumers could have access to more than 19 million
barrels of oil and nearly 84 trillion cubic feet of natural gas
(probably more, as these preliminary estimates tend to be on the
low side). Oil's flirtation with $150 a barrel should be enough to
convince Congress to lift its 26-year-old restriction on American
Congress has been missing in action as oil prices doubled over the
past year. House Speaker Nancy Pelosi called Bush's action on
offshore production "an absolute hoax." But what has Pelosi and her
colleagues done in the past year to lower the price of
Congress has failed to pass a single energy production bill in the
past year. Instead, they have spent their time on green building
standards, increasing regulations, raising taxes, designating
historic and scenic trails, bailing out mortgage companies,
increasing ethanol mandates and increasing subsidies for
How high do oil prices have to go before Congress decides it's
time to act?
Brian Darling is
director of U.S. Senate Relations at The Heritage Foundation.
First appeared in Human Events