By Rep. Scott Garrett (R-N.J.) - 11/19/09 12:02 AM EST
While the effects of this crisis are still evident in our communities, we’ve seemed to survive the most turbulent period. Now is the challenge of figuring out how to pick up the pieces to prevent a similar occurrence from happening again. Regulatory reform is an important discussion — one that is not about partisanship, but ideas. Our Depression-era banking regulations are in need of significant reform, but we must make sure that we take into account the long-term stability of the industry, rather than simply react to the most recent crisis.
In the direct aftermath of the credit crisis last fall, President George W. Bush stated, “I’ve abandoned free-market principles to save the free-market system.” This sounds eerily similar to the so-called “Ben Tre Logic.” Ben Tre is a town in South Vietnam. After U.S. forces wiped out the town, an Air Force major was quoted as saying, “We had to destroy Ben Tre in order to save it.” Well, I don’t subscribe to this kind of backward logic, especially when it comes to America’s financial services industry.
The ad hoc, piecemeal approach of creating new program after new program has left our capital markets paralyzed. There are literally billions, if not trillions, of dollars sitting on the sideline waiting for the government to get out of the way. In addition, we have seen instances in which the U.S. government has bullied members of the private sector to get their way. How does this motivate investors and businesses to want to participate in the U.S. marketplace?
Bank of America’s Ken Lewis detailed how then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke forced him to acquire Merrill Lynch. President Barack Obama ordered Rick Wagoner to step down as CEO from General Motors in March. During the same month, the House of Representatives tried to nullify valid legal contracts over anger about bonuses given to employees at AIG.
Later in the year, the president called credit card CEOs to the White House to instruct them on their practices, and he also vilified hedge funds for refusing to save Chrysler from bankruptcy. The government interference in the marketplace only leads to greater market uncertainty and investor hesitancy, as no one can predict the next agenda item of Congress or the White House.
The answer to get the economy back on track is to cease the government’s assault on the private sector and encourage money to get off the sideline. We can do this by making smart reforms in our current regulatory structure that inspire confidence in the marketplace and allow businesses to flourish.
Garrett is the ranking member of the Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises for the House Financial Services Committee.