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Crisis Creators Marshal Mobs Against Others

March 25, 2009

Crisis Creators Marshal Mobs Against Others

By THOMAS SOWELL | IBD 25 March 2009

Death threats to executives at AIG, because of the bonuses they received, are one more sign of the utter degeneration of politics in our time.

Congressman Barney Frank has threatened to summon these executives before his committee and force them to reveal their home addresses — which would of course put their wives and children at the mercy of whatever kooks might want to literally take a shot at them.

Whatever the political or economic issues involved, this is not the way such issues should be resolved in America. We are not yet a banana republic, though that is the direction in which some of our politicians are taking us — especially those politicians who make a lot of noise about “compassion” and “social justice.”

What makes this all the more painfully ironic is that it is precisely those members of Congress who have had the most to do with creating the risks that led to the current economic crisis who are making the most noise against others, and summoning people before their committee to be browbeaten and humiliated on nationwide television.

No one pushed harder than Rep. Frank to force banks and other financial institutions to reduce their mortgage lending standards, in order to meet government-set goals for more homeownership.

Those lower mortgage lending standards are at the heart of the increased riskiness of the mortgage market and of the collapse of Wall Street securities based on those risky mortgages.

Sen. Christopher Dodd has played the same role in the Senate as Frank played in the House of Representatives. Now both are summoning government employees and the officials of financial institutions before their committees to be lambasted in front of the media.

Dodd and Frank know that the best defense is a good offense. Both know how hard it would be to defend their own roles in the housing debacle, so they go on the offensive against others who are in no position to reply in kind, given the vindictive powers of Congress.

This political theater is in one sense cheap beyond words. In another sense, it is costly beyond words.

It is cheap because the politicians who are creating this distraction from their own role in the crisis also voted for the very legislation that enabled contracted bonuses to be paid by companies like AIG that received government bailout money. If members of Congress can’t be bothered to read the laws they pass, then they have no basis for whipping up lynch mob outrage against people who did read the law and acted within the law.

Just as everyone seemed to be a military expert a couple of years ago, when it was chic to say that the “surge” in Iraq would not work, so today everyone seems to be an expert on executive pay.

Whether the particular executives who received bonuses were the ones responsible for AIG’s problems, or were among those who warned against those problems, is something that those of us on the outside don’t know. That includes those in politics and the media who are making the loudest noise.

The politicians claim they are protecting the taxpayers’ money. But having politicians trying to micromanage any business is far more likely to make those businesses lose more money, including the taxpayers’ money.

Securities based on risky mortgages are what toppled financial institutions, but it was the government that made the mortgages risky in the first place, by making home-ownership statistics the holy grail for which everything else was to be sacrificed, including common-sense standards for making home loans.

Politicians and bureaucrats micromanaging the mortgage sector of the economy is precisely how today’s economic disaster began. Why anyone would think that their micromanaging the automobile industry or executive pay across a wide sweep of other industries, is likely to make things better in the economy is a mystery.

The real point is to pander to envy and resentment against people who make a lot of money. Envy is always referred to by its political alias, “social justice.” But to put the lives of the wives and children of executives at risk for the sake of Beltway grandstanding shows how low our political saviors have sunk.

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