Monday, Nov. 09, 2009

Too many lawyers rule Washington

In his Oct. 16 column "Recession Exposes Big Lie," Thomas Sowell takes aim at the government for causing our economy "meltdown." Simply put, he explains how government regulators in both Democratic and Republican administrations forced our banks to provide home mortgages to people who could not repay the loans, and the entire housing industry collapsed like a "house of cards." The rest, as they say, is history.

As far as he goes, professor Sowell is precisely on track, but he stops short of telling us just why our federal regulators would intentionally do something that they knew or should have known would inevitably cause economic chaos and lead to the destruction of our economy. The obvious answer to this perplexing question would be that most of these agency watchdogs in our federal departments are lawyers or administrators of one stripe or another, very few are economists, and fewer still have the financial wisdom or vision to see more than a few inches beyond their workplace cubicles.

But it is not quite that simple. There are capable people within these regulatory agencies, but the senior people, those who make the policy decisions, are beholden to the political establishment, and therein is the root of the problem. They are compelled to follow the political roadmap of the party in power, in spite of what the eventual impact may be.

As professor Sowell points out, both political parties were obsessed with the desire to increase the percentage of home ownership because that would be a good thing, and the politicians simply did not have the wisdom or the vision to anticipate the ultimate result. After all, most of them are lawyers, too!

It all started as an element of President Lyndon B. Johnson's initiative called the "Great Society." The idea was to provide taxpayer-subsidized housing for the poor and disadvantaged, primarily in metropolitan areas. The program had many good outcomes as it evolved, but it failed to provide the quality of housing that was expected.

The solution, our liberal politicians concluded, was to help the poor buy their own homes by forcing bankers to approve loans that later became known as "toxic" mortgages, because too many of these homeowners could not afford to make the payments. The outcome was inevitable. Like so many attempts by the liberal elements in our Congress at social engineering, it became a runaway freight train that was doomed to crash, and crash it did.

And so professor Sowell is correct in concluding that the big lie was exposed by the recession, but I also contend that the recession itself was caused, at least in part, by the big lie. Which in turn was caused by the misguided efforts of well-intentioned political liberals to use "social engineering" as a government tool to do good things without understanding the consequences of the economic interconnections.

Perhaps we should elect more butchers, bakers and candlestick makers to Congress instead of so many lawyers.