Who was it who said, "crack-brained meddling by the authorities" can
"aggravate an existing crisis"? Ronald Reagan? Milton Friedman? Adam
Smith? Not even close. It was Karl Marx. Unlike most leftists today,
Marx studied economics.

Is the current financial crisis going to lead to crack-brained
meddling or to some rational actions? Predicting what politicians are
going to do is risky business. We will have to wait and see.

Saints are no more common on Capitol Hill than they are on Wall
Street. We can only hope that the political "solution" does not turn
out to be worse than the problem.

There are times when government intervention can make things better.
But that is no guarantee that it won't make things worse. As they say,
"the devil is in the details"-- and we don't know the details yet.

Probably most members of Congress don't know the details yet-- and
many may still not know the details when the time comes for them to
vote on this bailout.

Taking an optimistic view, this biggest bailout of all time may stop
the problems in financial markets from spreading into the general
economy-- which is currently nothing like the disaster area that the
media portray it to be.

Ninety percent of the people on this planet would exchange their
economic situation for ours in a minute. The media love hype, and have
been dying to use the word "recession" all year but nothing has
happened that meets the definition of a recession.

The American economy is growing, not declining. Our unemployment rate
is up to 6 percent but there are countries that would be delighted to
get their unemployment rate down to 6 percent. Our inflation rate is
up a little but many countries would love to get their inflation rate
down to where ours is.

Why then is there such a mess in the financial markets? Much of that
mess is due to the very people we are now turning to for solutions--
members of Congress.

Past Congresses created the hybrid financial institutions known as
Fannie Mae and Freddie Mac, private institutions with government
backing and political influence. About half of the mortgages in this
country are backed by these two institutions.

Such institutions-- exempt from laws that apply to other financial
institutions and backed by the implicit promise of government support
with the taxpayers' money-- are an open invitation to risky behavior.
When these risks blew up in their faces, Fannie Mae and Freddie Mac
were taken over by the government, costing the taxpayers billions of
dollars.

For years the Wall Street Journal has been warning that Fannie Mae and
Freddie Mac were taking reckless chances but liberal Democrats
especially have pooh-poohed the dangers.

Back in 2002, the Wall Street Journal said: "The time for the
political system to focus on Fannie and Fred isn't when we have a
housing crisis; by then it will be too late." The hybrid public-and-
private nature of these financial giants amounts to "privatizing
profit and socializing risk," since taxpayers get stuck with the tab
when high-risk finances don't work out.

Similar concerns were expressed in 2003 by N. Gregory Mankiw, then
Chairman of the Council of Economic Advisers to President Bush. But
liberal Democratic Congressman Barney Frank criticized Professor
Mankiw, citing "concern for housing" as his reason for supporting
Fannie Mae. Barney Frank said that fears about the riskiness of Fannie
Mae were "overblown."

Maxine Waters and other members of the Congressional Black Caucus have
also been among the liberal Democrats defending Fannie Mae. Just last
year, Senator Charles Schumer advocated legislation to allow Fannie
Mae and Freddie Mac to increase their already huge role in the
mortgage market. Republican Congressman Mike Oxley has also defended
these hybrid financial giants.

Both Fannie Mae and Freddie Mac have been generous in their
contributions to politicians' political campaigns, so it is perhaps
not surprising that politicians have been generous to them.

This is certainly part of "the mess in Washington" that Barack Obama
talks about. But don't expect him to clean it up. Franklin Raines, who
made mega-millions for himself while mismanaging Fannie Mae into a
financial disaster, is one of Obama's advisers.

http://townhall.com/Columnists/ThomasSowell/
http://www.tsowell.com/