Bumpy though the last decade has been, most Americans have continued to trust in the basic institutions that undergird the nation’s economy. Until now.
Recent polling reveals a public toying with doubts about American-style capitalism yet equally suspicious of the alternatives. Ironies abound: nearly half of Americans express reservations about capitalism, yet overwhelming majorities distrust large government stakes in major industries and object to the way federal stimulus dollars are being spent.
As a dyspeptic public alternately blames and looks to Congress, President Obama, and “big business” for solutions to our economic woes, Americans have largely missed the real sea-change: the sudden, almost uncontested aggrandizement of power by unelected agencies operating with limited oversight.
On April 6th, The New York Times reported on the Federal Deposit Insurance Corporation’s plan to insure 85 percent of the Treasury-issued debt that private investors will use to subsidize the acquisition of toxic assets. Called the Public-Private Investment Program (PPIP), it eclipses the Troubled Asset Relief Program (TARP) in size, yet was never authorized by Congress. At $1 trillion in debt obligations, it blows the FDIC’s $30-billion cap out of the water, yet the agency is skirting that cap by projecting, astonishingly, no losses whatsoever.
To review: the FDIC is insuring assets that are so risky that private investors refuse to even touch them until the Treasury Department subsidizes in excess of 90 percent of potential losses, and the FDIC, which is reinsuring against the prospect of default, projects that not a single toxic asset will fail. Well.
Such arrogance is not limited to a single agency, nor to the current administration. President Bush’s last Treasury Secretary, Hank Paulson, often spent TARP money in ways never contemplated by Congress. In some cases, the Treasury Department spent TARP money more prudently than Congress had envisioned—which does precisely nothing to change the fact that the Department received a Congressional mandate, thanked that august body for its advice, and proceeded to do whatever it wanted with the $700 billion.
Then there’s the Federal Reserve, chaired by a modest and quiet man whose vision for central banking is anything but. The result has been 15 new lending programs under his short tenure, bailing out one industry after the other in rapid succession. In recent months, the Fed has offered assistance with home mortgages, credit-card debt, and auto loans by invoking its “emergency authority.”
The authority, perhaps, to heighten the emergency: one might be forgiven for thinking that the easy availability of cheap credit was part of what got us all into this mess. Chairman Bernanke, however, insists that it is also the way out—and this time even the auto loans are sub-prime!
For Bernanke is a brilliant man; so are they all, all brilliant men.
And so they are, and some of their bets may yet pay dividends. But when unaccountable agencies wield this sort of power, we all lose. In the whirlwind of desperate mergers and acquisitions, it would be all too easy to lose sight of the biggest one of all: the steady merger of the legislative and executive branches and the rapid acquisition of the power of the purse by unelected officials.
Congress cannot, and should not, attempt to do the Fed’s job, but neither should it give one inch of its constitutional mandate. Unfortunately, when no one has the answers and everyone is looking to pass the blame, silently acquiescing to this encroachment by unelected entities may seem an almost elegant solution.
How long will it be until we yearn for the days when only Congress was entitled to raid the public till?