By Brandon Greife, Thomas Jefferson Street blog
Trust is earned, not given away. By every indication, Americans trust the government less today than they have in the recent past. As the public’s belief in big government approaches all-time lows, Democrats continue to extend Washington’s hand into new areas.
A recent Pew Research poll found that just 22 percent of Americans say they trust Washington either all or most of the time. Standing alone this figure would suggest that the federal government should be working to make itself scarce. Nevertheless, a slim exception exists. While the public is generally distrustful of the government, a majority (61 percent) seem to be willing to make an exception for stricter regulations for Wall Street. No surprise then that Democrats, scrounging for anything to boost their November chances, have taken up financial regulatory reform. The public, who seems all too ready to set aside their skepticism in order to fight against Wall Street, should be wary that the Democrats bill takes their trusting attitude too far.
Democrats should be applauded for crafting a powerful and effective storyline. They have portrayed this as a fight against the Gordon Gecko Wall Street. The Wall Street where “greed, for lack of a better word is good. Greed is right, greed works.” They have surgically played up the need to reform the egregious practices of the financial sector while simultaneously downplaying the fact that the federal government is going to be the one to enforce those reforms. What has gotten lost in all the debate has been that this bill boils down to trust.
For instance, section 113 of the bill establishes a Financial Stability Oversight Council to identify firms that “pose a threat to the financial security of the United States.” The bill includes factors to consider; but do you trust the government to choose who fits this squishy definition? Section 203(b) allows the Secretary of the Treasury to seize a firm that is “in danger of default” whose failure would have “serious adverse effects on financial stability.” Again, the bill provides factors, but the ultimate decision on the definition of “serious” comes down to a decision made by a government official. Section 1155 grants the FDIC authority to guarantee the debt of a financial institution if regulators make a finding that a liquidity “event” exists. I’m beginning to sound like a broken record here, but do we really want to grant unelected bureaucrats the ability to make such crucial and difficult determinations?
Sections like these litter the Democrats’ bill. Dozens of new bureaucracies are given vast new powers to make judgment calls on the use of taxpayer money. We are being asked to trust these new bureaucracies. Worse, we are asked to trust them when not too long ago the author of the reform legislation, Chris Dodd, did not. Have we forgotten that last November Dodd introduced a bill that would strip the Federal Reserve of its power to oversee banks. When talking about why he removed a great deal of authority from the Fed he said,
“We saw over the last number of years when [the Fed] took on consumer protection responsibilities and the regulation of bank holding companies, it was an abysmal failure.”
Fast forward six months and Dodd and his fellow Democrats are now asking Americans to trust the same types of government institutions that he called an “abysmal failure.”
The financial sector needs reform. Nevertheless, there is quite a difference between true reform and new bureaucracies. American’s trust of government is near its lowest point in the last half-century, do we really trust them to make the critical decisions to prevent another financial crisis? We shouldn’t give away our trust before the government earns it.