By Dr. J. Robert McClure III, JMI President & CEO
Ever since the bottom dropped out of the economy in 2008, the narrative on the Left has been that capitalism is to blame – “unfettered capitalism” they call it — as though they’ve discovered the source of all the evil in the world. Therefore, their narrative concludes, the remedy is greater governmental oversight … by federal bureaucrats.Yet the financial entities most closely regulated by the government — and the two entities most responsible for the mortgage meltdown and subsequent economic nosedive in 2008 — are Fannie Mae and Freddie Mac, de facto mortgage companies overseen by federal bureaucrats. They approved high-risk sub-prime mortgages, then packaged and sold them to investors, all the while guaranteeing these risky loans with taxpayers’ (your) money.So there was no such thing as “unfettered capitalism” at work. Rather it was the federal government’s meddlesome policies that created a distorted, dysfunctional market, not a free market. And yet today, this most regulated government entity in America clearly needs more oversight, I suppose, because it has requested an additional $8.4 billion bailout on top of the roughly $140 billion it was given in 2008. Privatized profits and taxpayer losses…The Fannie and Freddie debacle serves as one of the thousands of recent useful examples of what occurs when a paternalistic government meddles with the free market. If the referee (government) wants to set the rules and play the game, it will always, always win. The answer instead is to break up Fannie and Freddie and let “unfettered capitalism” do the job it knows best how to do.