Leaders of the liberal majorities in the House and Senate yesterday tried to claim they had completed a deal with the White House to address the Wall Street crisis. From the beginning, leaders on the left have both demanded the White House deliver conservative votes for any deal and then refused to include any conservatives in the negotiations. After yesterday, the leadership on the left now knows it will have to work with conservatives to get a compromise done.
If the left is serious about preventing a credit lockdown that threatens to cripple our economy, it must adhere to sound conservative principles when crafting any compromise. At a bare minimum, any financial rescue legislation must:
- Provide sufficient market liquidity to comprehensively resolve the financial situation.
- Focus on a systemic approach that attacks the entire problem, instead of bailing out specific companies.
- Allow the Treasury Department to liquidate the investments in an orderly way.
- Return all proceeds from the sale of assets to the treasury.
- Specify the types of markets where Treasury can act.
- Use objective criteria for how Treasury should price assets for purchase and sale.
- Provide for meaningful judicial review.
- Sunset all regulatory authority.
- Establish an oversight board.
In addition, as The Washington Post editorialized yesterday, what’s needed is a clean bill that contains only items essential to the immediate liquidity crisis. Any financial rescue legislation must not:
- Give the Treasury Department unbridled discretion to intervene in the economy.
- Turn the government into the nation’s largest landlord.
- Give the government the power to rewrite contracts.
- Make government an equity owner of Wall Street.
- Divert revenues from taxpayers to other purposes, especially to housing slush funds.
- Dictate the terms of employment for private sector businesses.
- Impose new regulations on the financial industry.
- Require firms to raise capital.
- Ease capital standards.
Heritage’s Bill Beach, director of the Center for Data Analysis, told The New York Times yesterday, “We are in a very serious place. There is risk of contagion to the entire economy.” As a general principle, the federal government should not intervene in markets. But in rare situations, government institutions have a critical role in helping to assure the integrity of the market’s infrastructure. The above guidelines will help to reconcile these two principles in light of the current crisis.
- The Bank of England moved on Friday to inject $30 billion in cash into money markets as part of a coordinated effort with the Federal Reserve, the European Central Bank and the Swiss National Bank.
- Playboy magazine tycoon Hugh Hefner has been advised to cut back on staff at his multimillion dollar glamour empire as it struggles to cope during the global economic turmoil.
- A House select investigative committee concluded yesterday the liberal House majority did err when it ended a key immigration vote early last year.
- According to Rasmussen Reports, only 30% of voters think the federal government should step in to rescue troubled financial markets.
- According to Gallup, 78% of Americans say Congress should approve a historic bailout of the financial markets.