The buck stops on your desk

Outrage is everywhere, but what should we really be outraged about? Excellent piece by Steve Chapman this morning in the Tribune. Read it all, but I particularly liked this bit:

Banks getting federal money have likewise been subjected to a frenzy of finger-wagging. Politicians were shocked when Northern Trust hosted a client event featuring the band Earth, Wind and Fire. House Banking Committee Chairman Barney Frank and 17 other Democrats demanded that it "immediately return to the federal government the equivalent of what Northern Trust frittered away on these lavish events."

But Northern Trust didn't ask for federal help—it was conscripted into the bailout. It happens to be managing its money well enough to be making a profit and repaying the taxpayers.

And did anyone notice that after Earth, Wind and Fire did the Northern Trust gig, it performed at a White House dinner? Why is it OK for President Barack Obama to host "lavish events" that are financed by taxpayers but outrageous for a bank to use mostly private funds to entertain valued customers?

In hearings yesterday, Illinois Rep. Judy Biggert (R-13th) elicited this:

"If the taxpayers hadn't loaned AIG any money, would the executives who received the bonuses have received them?"

Replied Liddy: "Probably not. . . . I think the company would have spiraled into bankruptcy. . . . the basic contracts would have been voided."

Let's remember the limits of government--and its culpability-- as the crisis developed. From yesterday's show trial, uh Congressional hearing, we had some rare substance and honesty. Powerline:

One of the most significant exchanges, in my view, was with Scott Polakoff, Acting Director of the Office of Thrift Supervision. Part of the mythology that the Democrats are trying to create out of the financial crisis is that it is due to a lack of regulation (or, better yet, "deregulation"). In fact, the industries involved are heavily regulated, and I'm not aware of any instances where a lack of regulation, as opposed to a failure of regulation, is to blame for a significant aspect of the crisis. In general, what happened was that regulators and businessmen made the same mistake: they failed to foresee the decline in real estate values and, perhaps more important, failed to understand fully the consequences that would flow from such a decline. That is the context in which Polakoff's testimony was revealing:

HENSARLING: I believe I heard in an earlier answer to one of the questions, I believe I heard you say that OTS in 2004 should have stopped the book of business that I think you were alluding to to CDS and the AIG securities lending commitments. Did I understand you correctly?

POLAKOFF: Yes, sir.

HENSARLING: So if you said you should have stopped it in 2004, that implies you could have stopped it in 2004. Is that correct?

POLAKOFF: Yes, sir.

HENSARLING: So there were not limits on your power. Perhaps, there were limits on your knowledge or insight, but there was not limits on your power to stop what you cite, as I believe AIG's liquidity -- I'm reading from your testimony -- was the result of AIG's business lines. So you did have the power to stop those business lines. Is that correct?

POLAKOFF: Yes, sir. ***

HENSARLING: Again, it appears, if this is correct, it was not a lack of supervisory authority that caused you not to take action with respect to these two lines. Is that correct?

POLAKOFF: Yes, sir.

HENSARLING: And I think I also heard you say in your testimony that you did not have [in]sufficient manpower and expertise. Is that correct?

POLAKOFF: Yes, sir.

HENSARLING: So, again, in retrospect, it wasn't the lack of authority. It wasn't the lack of resources. It wasn't the lack of expertise. You just flat made a mistake. Is that a correct assessment?

POLAKOFF: In 2004, we failed to assess how bad the mortgage economy, the real estate economy would become in 2008. Yes, sir.

Do we really want to put our faith in government to this extent? All our eggs in one basket? Double or nothing? We need an exit strategy. Accountability in the private sector is enforced by the bottom line, or at least it used to be, before we had all these government bailouts.

Accountability in the government? Good luck with that. Especially with the Dems running it all now, you know Congress will want to raise taxes-- and this after they passed giant pork bills that will cost us TRILLIONS and create few jobs, despite their rosy promises. The new $3.6 TRILLION budget the president has proposed is more of the same and would trap us in crushing debt for generations.

They're too big too fail, and they want to take over huge vital chunks of the economy?

What about the little guy? You know, the one who's paying for all of this?

Enough. Back off Barney Frank. Back off Sen. Schumer.

Let these firms go bankrupt in an orderly manner, let them sell off the assets they can to repay the taxpayer, the $170 billion they owe, not these bonuses--and cut themselves down to size so they're not too big to fail the next time.

And stop demonizing individual citizens--I don't care what they are supposed to have done--if they've committed crimes, fine, prove it in a court of law--don't demagogue public opinion.

Remember--that's how a big part of this started. Attorney General Eliot Spitzer was looking to make a name for himself to get elected governor of New York. Who did he demonize? AIG. After their board buckled to his pressure and forced out their chairman--for charges that were later dropped due to lack of substance apparently--that was when AIG embarked on all this risky activity--with the active encouragement and oversight of our government.

I am sick of this hypocrisy and bungling. How about you?

Sit down at the table Mr. President. Go back to Washington and roll up your sleeves, please. The buck stops on your desk.

--Michael Ramirez editorial cartoon, Investor's Business Daily

More: Jonah Goldberg, The Corner, your money or your life.