Purveyors of Financial Destruction; Blame for National Decline Belongs with Democratic Incompetents
Byline: Richard W. Rahn, SPECIAL TO THE WASHINGTON TIMES
On Dec. 28, the Financial Times announced, China has again outshone the U.S. as the top venue for initial public offerings. How is it that since 2008, a self-proclaimed communist country raises more capital and has more new firms going public than the great bastion of free-market capitalism, the United States? Answer: Members of Congress have been killing the U.S. financial markets because of hubris, incompetence and a lust for power and money.
On Dec. 21, 2008, a Wall Street Journal editorial correctly stated after the U.S. lost the lead in initial public offerings (IPOs) for the first time: For all of this, we can thank Sarbanes-Oxley [accounting reform act, passed in 2002]. Cooked up in the wake of accounting scandals earlier this decade, it has essentially killed the creation of new public companies in America.
Knowledgeable people had warned members of Congress about the likely costly and destructive consequences of the legislation, but their warnings were ignored. Rep. Mike Oxley and Sen. Paul Sarbanes wisely retired once the downside of their handiwork became obvious, but the bill still has not been repealed.
In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act was named after Sen. Christopher J. Dodd, Connecticut Democrat, who was forced to retire because of his financial conflicts of interest, and the notorious Rep. Barney Frank, Massachusetts Democrat, who has announced that he, too, will retire (probably because he would not be re-elected). Mr. Frank was perhaps the biggest protector of Fannie Mae and Freddie Mac in Congress, but he had plenty of allies in this willful cover-up of the most costly financial scandal ever. The reason these men are not in jail or have not been sued is because they have protection that only public officials can accord to themselves, unlike those of us in the private sector.
The official Washington line has been that it was Wall Street that caused the Great Recession. Thanks largely to the tireless efforts of a former general counsel of the Treasury, Peter Wallison, and his American Enterprise Institute colleague Edward Pinto, we now know the financial crisis would not have occurred but for government housing policy implemented principally through Fannie and Freddie and the Department of Housing and Urban Development (HUD). The Securities and Exchange Commission (SEC) has confirmed that Mr. Wallison and Mr. Pinto correctly exposed the wrongdoing of government-sponsored enterprises (GSEs), including Fannie and Freddie. The SEC has documented $1.03 trillion in previously undisclosed subprime and alternative-documentation loans in Fannie's and Freddie's credit guaranty portfolios, and it goes on and on. …