Core of Conviction : My Story (9781101563571) (20 page)

Am I putting words in the mouth of the Obama administration? Not at all. Indeed, the truth about the administration's behavior is worse than that: The administration not only stiffed legitimate creditors but also threatened them if they complained. Here's what bankruptcy lawyer Tom Lauria, representing the secured creditors, told a Detroit radio station at the time: “One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight.” Those words of threat and intimidation were recorded by Michael Barone in the pages of the
Washington Examiner.
In May 2009 Michael wrote: “We have just seen an episode of Gangster Government.” He added: “It is likely to be a continuing series.” And Michael was right. The estimate of the total cost of all the auto bailouts—covering General Motors as well as Chrysler—has since risen to $14.3 billion. Again, that's our tax money they're playing with. The rule of law was steamrolled. If contracting parties can't rely on the rule of law and the sanctity of contracts, then smart people will prefer to do business where the terms of their contracts
will
be recognized and upheld—in other words, not in America.

Yet $14.3 billion is peanuts compared with the cost of bailing out Fannie Mae and Freddie Mac. In June 2011 the Congressional Budget Office estimated that the total cost of those subprime-mortgage-lender bailouts came to $317 billion. As I mentioned earlier, the problem of Fannie and Freddie goes way back, back to the days when Uncle Sam was convinced that it was a good idea to pump air into the housing bubble. And both parties were complicit in a further devious practice: paying private-sector-level salaries and private-sector-level lobbying fees to people working on behalf of what were ultimately public-sector institutions holding a claim on the public treasury. You've heard the phrase “private gains, public losses”? Well, that was the story of Fannie and Freddie. If their employees made money, they got to keep it. If they lost money, they stuck the federal government with the bill. It was as simple as that. What private business could compete with a government-backed competitor? They couldn't. And soon, Fannie and Freddie effectively controlled the secondary lending market for home mortgages in the United States.

As a member of the Oversight Subcommittee of the Financial Services Committee, I saw firsthand all the shenanigans as they were happening, and I sounded the alarm. In hearings I raised my voice, demanding more testimony, more documents, more information. And yet the establishment culture of Washington resisted any change in its cushy business as usual; Committee chairman Democrat Barney Frank, for instance, bullied and blustered committee members on both sides of the aisle, telling all of us that we didn't know what we were talking about, that everything was fine. In other words, he told us to shut up so that his friends and allies at Fannie and Freddie could continue to rake in millions during this ongoing scam.

Little did we know at the time that Frank had already conducted his own personal business as usual. Years earlier, he had pressured Fannie Mae into hiring his romantic partner, a man who would go on to receive a nice, comfortable salary.
New York Times
reporter Gretchen Morgenson, coauthor of a highly regarded 2011 book about Fannie,
Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon,
recalled these goings-on in a recent interview; she said that in 1991 Frank “actually called up the company and asked them to hire his companion.” She added, “Of course the company was happy to provide a job for his companion and rolled out the red carpet in a series of interviews with a variety of executives, and it ultimately did hire the man.” The obvious question: What did Fannie get in return for this hire? The answer: It got Frank's powerful help in repelling scrutiny of the organization's dubious activities. According to Morgenson, Frank was “very aggressive” when the director of the Congressional Budget Office looked into Fannie's suspicious dealings—that is, when the CBO director “was trying to call for increased capital requirements and to call for a focus on safety and soundness at Fannie Mae.” So what happened to the director? What happened, as Morgenson describes, was that “Frank really took him apart in testimony.” In other words, Frank did Fannie a favor in return for the favor that Fannie had previously done for Frank. Fannie and Frank: not so perfect together. This incident occurred well before Obama came to Washington, and yet it speaks to the culture of Fannie and Freddie—and to the ongoing reality of “gangster government.”

For his part, Obama came to fit right in with the D.C. culture. Perhaps the corrupt ways of Washington reminded him fondly of Chicago's legendarily corrupt ways—you know, Obama's once good friend Tony Rezko, and all the rest. It was obvious that Obama wasn't fighting for real change or reform; he was simply going along with what the liberals in his administration—and the liberals in Congress—wanted him to do. The president seemed happiest making speeches about mythical economics, holding fund-raisers, hobnobbing with Hollywood celebrities, and hanging out at Martha's Vineyard.

Yet in Washington, whenever there's a problem, there's always a way, it seems, for politicians to make it worse. And that's how America got saddled with the Dodd-Frank financial “reform” bill, engineered by Frank and then-senator Chris Dodd of Connecticut. The latter, incidentally, chose not to seek reelection after public revelations that he had received a discounted mortgage from one of the banks he was supposed to be regulating. Meanwhile, the two of them, Dodd and Frank, teamed up in 2010 to enact the not-so-modestly titled “Dodd-Frank Wall Street Reform and Consumer Protection Act.” I might add that the “Dodd-Frank” at the beginning isn't just shorthand; those are the first two words in the formal name of Public Law 111-203.

Obama happily signed the bill into law on July 21, 2010, saying, “For the last year, Chairmen Barney Frank and Chris Dodd have worked day and night . . . to bring about this reform. And I am profoundly grateful to them.” Yet what, exactly, was Obama grateful for? What did this legislation actually do?

The purpose of the legislation, as stated in the preamble, is “to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail,' to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.” One rule of thumb that works pretty well is this: Whatever the stated name of a bill is—especially if it's authored by a liberal—the
real
purpose is almost always the exact opposite of the stated purpose. But all that fancy wording was, in reality, simply spin-doctored happy speak—the financial equivalent of the failed Goals 2000. Or, to use George Orwell's term for the deliberate inversion of truth, an update of Newspeak.

The nearly two thousand pages of Dodd-Frank proved to be just another mosh pit for lobbyists, allowing them to jump around from loophole to bailout to special carve-out. Indeed, Dodd-Frank represents yet another explosive expansion of the regulatory state that will continue to cost the U.S. economy trillions, as banks try to cope with new layers of uncertainty, confusion, costs, and court cases. As I have noted, hiring and job creation are functions of business confidence—faith in the future. Yet Dodd-Frank is just the opposite; it's an old-style haunted house of arbitrary bureaucratic horror. Included among its provisions is a dubious legal hybrid, the Bureau of Consumer Financial Protection, the brainchild of liberal activist Elizabeth Warren. The idea of a “proconsumer” federal regulatory body, of course, has been a goal of nanny-state Naderites for decades; now, finally, they have their prize. Yet believe it or not, the new bureau is to reside at the Federal Reserve; in other words, an allegedly protransparency outfit will be nestled amid the shadows and fog of the Fed. Isn't that special? Who says Washington politicos don't have a sense of humor?

C. Boyden Gray, former counsel to Vice President and then President George H. W. Bush and an expert in regulatory matters, makes a further critique; he argues that Dodd-Frank is unconstitutional. As he wrote in 2010, the bill creates “a structure of almost unlimited, unreviewable and sometimes secret bureaucratic discretion, with no constraints on concentration—a breakdown of the separation of powers, which were created to guard against the exercise of arbitrary authority.” Yes, Boyden is right: Dodd-Frank is unconstitutional, and if Congress refuses to repeal the bill, it should be struck down by the courts.

In June 2011, Thomas Boyle, vice-chairman of State Bank of Countryside, in Countryside, Illinois, shared too his grave concerns about Dodd-Frank, testifying before the House Small Business Committee:

 

I am deeply concerned that this [Dodd-Frank] model will collapse under the massive weight of new rules and regulations. The vast majority of banks never made an exotic mortgage loan or took on excessive risks. They had nothing to do with the events that led to the financial crisis and are as much victims of the devastation as the rest of the economy. We are the survivors of the problems, yet we are the ones that pay the price for the mess that others created. Banks are working every day to make credit and financial services available. Those efforts, however, are made more difficult by regulatory costs and second-guessing by bank examiners. Combined with hundreds of new regulations expected from the Dodd-Frank Act, these pressures are slowly but surely strangling traditional community banks, handicapping our ability to meet the credit needs of our communities.

In other words, as Dodd-Frank plays out in real-world America, it will wrap red tape around banks that had nothing to do with the crisis in the first place. It will throttle credit to small businesses; it will keep unemployment high. That's the bad news. Meanwhile, the legislation will make Beltway lobbyists rich. But that's not good news. That's not good news at all.

In my own House committee, I opposed Dodd-Frank as it made its way through the committee. I opposed it once more as it went through the House as a whole; I voted against its final passage, and I immediately introduced a bill to repeal Dodd-Frank.

Okay, now let's turn to the Obama environmental policy. Here we see, as always, the usual green liberalism. But underneath it all, we see something more—corruption through government connections. As an example, I'll repeat what everyone knows: The Obama administration has declared war on carbon dioxide. Its “experts” say we need to block CO
₂
in order to save the penguins. I might note, of course, that CO
₂
is what makes plants grow, so surely it can't be all bad. Moreover, the whole science of “climate change” is ultimately unknown, scarcely even knowable—as well as riddled with its own academic corruption, as in the “climate-gate” fiasco. And so it would be supremely foolish to legislate caps on carbon. Let's ask ourselves this question: If the problem is too much carbon, then why is the answer taxing ourselves to give more money to the givernment?

Yet in 2009, as the economy worsened, the Obama administration chose to push its “cap-and-trade” plan. It was touted as a way to save penguins and polar bears, but what it really would have done, if put in place and enforced, is create a new Enron-like carbon-speculation scheme, to the delight of insider wheeler-dealers. Like all bubbles puffed up by the government, the system would have blown up eventually, as did Enron, but the smartest sharpies in the room would have taken out their gains first; too much potential exists for corrupt market manipulation—and that's why they loved the whole scheme. Cap-and-trade managed to pass the Nancy Pelosi House—without my vote, of course—but it was so awful that even the Harry Reid Senate wouldn't vote for it.

So what happened then? What did the Obama green bureaucrats do when Congress wouldn't do as they wished? They went ahead and tried to regulate carbon emissions anyway, blithely ignoring Congress's constitutional prerogative. That's why the Environmental Protection Agency should be renamed the Job Killing Agency of America.

So this is the Obama pattern. It's a pattern of gangster government. And it has spread widely, its malefic stain infiltrating the entire federal establishment. It follows four basic rules, I might add.

First:
“Never let a crisis go to waste.” Such are the famous words of Obama's first White House chief of staff, Rahm Emanuel. What they mean is that leaders should intimidate the populace so as to achieve political ends. That is, they should stoke a sense of crisis, so that the panicked population will gratefully bow down to Washington bureaucrats, hailing its beneficent rescuers. And often the tactic works; examples include the “stimulus,” the auto bailout, Obamacare, and Dodd-Frank. That's also what Obama managed to accomplish in the summer of 2011, when, in the midst of the showdown with Congress over the debt ceiling, he struck fear into the hearts of senior citizens:
Well, you know,
he told them,
I'm not sure that people will get their Social Security checks.
That created a real scare. It was pure political gangsterism, of course.

Second:
Make legislation so complicated that ordinary Americans can't understand it. That's why we see all these multithousand-page bills, unintelligible in their bureaucratic jargon—the bureaucrats and lobbyists know exactly what they are doing when they write them all in “bureauglyphics.” And here's the corollary: When they fail in their understanding, they'll give up and submit to the state. Or those who are more resourceful will hire a lobbyist to explain it to them; most likely, of course, the lobbyist will be part of the same D.C. gang, so even more money will stay in “the family.” That's the way that the IRS has always operated, and it works—I've seen it firsthand. And the same money-milking model extends to the rest of the federal leviathan. The root of all this is the level of disrespect that the administration displays toward the American people. When bills are indecipherable, when money and terms are hidden in subsequent rules and regulations, such actions trample on the consent of the governed. That is to say, on us! How can we consent to the laws that we live under if the president and other top leaders willfully hide their meaning from us?