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Competing Visions Of America’s Future

As the contours of the administration’s proposed financial reform legislation come into sharper focus, a pattern emerges. Is the purpose to correct deficiencies in financial markets or, like Obamacare, is the true goal to extend government control over yet another sector of the economy

As the contours of the administration’s proposed financial reform legislation come into sharper focus, a pattern emerges. Is the purpose to correct deficiencies in financial markets or, like Obamacare, is the true goal to extend government control over yet another sector of the economy? The Dodd dud is remarkable for ignoring the root of the problem that triggered the meltdown: Fannie and Freddie, the GSEs that ignited the fire that burned down the financial house in the first place. This shouldn’t surprise anyone, since the aforementioned Christopher J. Dodd, chairman of the Senate Banking Committee, received more campaign contributions from employees and PACs of Fannie and Freddie ($165,000) than any other politician. (The second-largest recipient was a then-junior senator from Illinois who is now in the second year of a new job in Washington.)

Despite the claims that these reforms will curtail excesses of large financial institutions, the $50 billion reserve fund, to be managed by the Federal Deposit Insurance Corporation, favors big institutions over smaller competitors. Far from treating all players even-handedly, such reform provides a sizeable competitive advantage to the same institutions that got us further into the hole we are still trying to climb out of. This only makes sense if the true aim is to get large institutions to agree to implement government policies of control in exchange for protection from future failure. Is this the type of partnership with government we want?

In his recently published book The Battle, the American Enterprise Institute’s president, Arthur C. Brooks, a former business and government professor at Syracuse University, argues that the country faces a pivotal moment in its history: Does it recover its traditional belief in free enterprise and personal liberty or does it embrace European-style statism, grounded in expanding bureaucracies, increasing income redistribution and government-controlled corporations? This is not a dispute over marginal tax rates. The stakes are bigger. “The unprecedented economic crisis has introduced panic to our nation. Panic distorts our values and has given the minority who oppose free enterprise a pretext to introduce sweeping change,” he writes.

Historian and former California State University classics professor Victor Davis Hanson recently asked, “At a time when Europe is discovering that its democratic socialism does not work, why in the world is the United States doing its best to copy it?” Why indeed.

This struggle over competing visions of our future has nothing to do with being a Democrat or a Republican. The latter’s complaints over Obama’s overspending may be legitimate, but more than a little hypocritical. It was Bush who signed the dubious TARP into law and bailed out GM and Chrysler. Further, John McCain had no credible explanation for the crisis, so Obama’s narrative that it was all Wall Street’s fault—while ignoring regulatory failure and Congress’s enablers of Fannie and Freddie— became the default explanation. The proponents of statism are not evil; they are simply dead wrong about what’s best for the country.

The question is: What will business leaders, the presumed stewards of free enterprise, do? Should CEOs openly take a principled position in favor of the economic system from which they have benefited or will they do nothing, content with becoming just another rent-seeking corporation? To paraphrase a World War I recruiting poster, how will you respond when your children ask, “What did you do in the cultural war, Daddy?”

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