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Liberals shifting the blame

October 15, 2008 | By Nathaniel Ward

For years, liberals in Congress pushed government-sponsored mortgage giants Fannie Mae and Freddie Mac to achieve their policy ends even as they avoided fixing the organizations' abuses. Now that the financial markets are unsteady, they want to pin the blame not on these government-sponsored enterprises but on free enterprise.

The Left is looking to spin the economic crisis to their own advantage, Heritage Foundation expert Ernest Istook argues on Human Events Online. They know "that whoever shapes public understanding of what caused today's economic crisis can shape America's politics -- and its future -- for a great many years to come. Thus, they're pushing the notion that too little government regulation was at fault.'

In fact, lack of regulation is only part of the story. It wasn't too little regulation of private financial firms that's to blame—if anything, laws like the Community Reinvestment Act went too far, Istook says—but too little regulation of government-sponsored companies like Fannie Mae and Freddie Mac.

Despite early and prescient warnings from experts including Heritage's Ron Utt, liberals collaborated with Fannie and Freddie to avoid taking responsibility for their failure. Heritage president Ed Feulner explains how they achieved this:

Fannie and Freddie evaded attempts to regulate them. A big reason is that they cultivated powerful friends in Congress, such as Sen. Christopher Dodd, D-Conn. As chair of the Senate banking committee, he pocketed more than $165,000 in campaign contributions from people associated with Fannie Mae and Freddie Mac.

Over in the House, the GSEs also enjoyed vocal support. "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis," Rep. Barney Frank, now head of the House Banking Committee, said in 2003. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Today, these same liberals who for so long resisted doing anything about Fannie and Freddie are now crying out for a Congressional investigation. "Clearly, these gentlemen cannot credibly lead an investigation into the collapse of the very companies they championed," Feulner argues.

To get at the real root of the financial crisis, Feulner proposes a "Financial Crisis Commission," independent of the Congress. And what might this commission find? Feulner says that "a fair and complete investigation seems likely to confirm that wisdom by revealing that many of today's problems were triggered by our elected officials -- not by a failure of the free market."

Other Heritage work of note

  • Protect America. Heritage expert James Carafano has co-authored an article with Clifford May about the "terrible threat" Iran poses to the United States. The article, which ran in the Houston Chronicle and Salt Lake City's Deseret Morning News, warns of Iran's "drive to obtain the means to carry out an EMP (electro-magnetic pulse) attack." The next president needs to take this and other threats very seriously and make the proper steps to protect and defend the nation, argue Carafano and May.
  • Every year, roughly 70 young conservatives are chosen to be interns at The Heritage Foundation. Our internship program was established in 1979 to help train the next generation of American leaders, to ground them with real-world experience and a sound understanding of our nation's fundamental principles. You can read a full report on the 2008 summer internship program on MyHeritage.org.
  • Protect America. The government's overall national security policy should focus less on the threats of the moment and more on ensuring our nation's long-term strength, Heritage's James Carafano argues in a debate on Google Knol. He notes that "if the White House sets its national security priorities by lurching from one crisis to the next, there will be no priorities beyond the morning headlines on CNN." His debate opponent, Nina Hachigan of the leftist Center for American Progress, argues instead that "terrorism, nuclear proliferation, disease and climate change" should dominate national security concerns.

In other news

  • The Bush administration has removed North Korea from the government's list of state sponsors of terrorism.
  • Two members of Cuba's national soccer team defected to the United States before a match against the American team in Washington, D.C. This just goes to show that, campaign rhetoric notwithstanding, America remains a beacon of freedom in the world.
  • Though the Left won't admit it, supply-and-demand works: as demand falls, so does the price. That's just what happened with gasoline, as prices have plummeted in recent days. Now it's time to expand our energy supply to ensure that increased demand in the future can be more easily met.
  • Ethicists in Switzerland are discussing the possibility of plants' rights. The Swiss Constitution already mandates that researchers comply with certain "plant dignity" requirements.

Coming up at Heritage

To attend these or any other events at Heritage please RSVP at Heritage's website. Or you can view these events live online. All times are Eastern.

  • On Wednesday, November 15 at 5:00 p.m., Judge Robert Bork will speak on what the federal judiciary, especially the Supreme Court, has been doing to undermine the Republic and the consequences this has had on the confirmation process.  He will then address what—if anything—can be done about it.
  • On Thursday, October 16 at 10:30 a.m., Heritage energy expert Jack Spencer hosts a panel discussion on new nuclear technology with four guest energy experts.

Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. David Talbot contributed to this report.