Fanny and Freddie prove that Democratic regulation is usually a good thing.
One of the things in the favor of Democrats this year is that, historically, the economy grows under their stewardship. This has been often cited and documented, especially on the Daily Kos and other liberal blogs, and is generally accepted as a fact. However, no one has fully determined why such expansions occur during Democratic authority, most likely because they are huge and complicated things with many causes.
However, I think that the Bush administration has made at least one of these reasons abundantly clear, and that reason is deregulation. Simply put, when Republicans are in power, they deregulate industry, and when Democrats are in power, they place new regulations. This corresponds with their political ideologies and core constituencies. Republicans tend to favor businesses and corporations, while Democrats tend to represent consumers and employees.
So why, if the Republicans are so pro-business, do bad business cycles and horrible economic disasters seem to occur purely under their authority? The economy collapsed under Reagan and again under the first President Bush, and the economy is collapsing again under George W. At first this seems illogical. If Republicans are pro-business, shouldn't businesses do better under their leadership?
The answer is that Republicans aren't truly pro-business, they are in fact pro-corporate. Corporations are always making demands, like any organization, and one of their most constant demands is that oversight and restrictions be removed. Corporations are driven to make money as much and as quickly as possible by their stockholders and executives, and as such they want as much freedom as possible to do anything they want for a quick buck. It is the government that stops them from being so aggressive, and they resent it, so they work with the Republican party in order to remove the laws that prevent them from conducting certain deals or doing certain kinds of business.
But the thing is that these rules do not hinder them simply because Democrats and lawmakers hate corporations, as is constantly espoused by the far-right and many corporate executives. These laws were put into place to ensure that corporations made money by serving the public interest. A bank could probably make a lot of money by conducting predatory lending processes, but such loans do not benefit society at large, and in the long run the bank would be driven into bankruptcy as it found itself in posession of outstanding loans that would never be paid. So we pass laws against such behavior.
But the Bush administration tore down such anti-predatory loan laws for major banks such as Countrywide, and now we are feeling the consequences. As this is written, Bush adminstration officials are debating a takeover of Freddie Mac and Fanny Mae, two semi-independent agencies who ensure that loans are properly packaged, secured and distributed, and that investors walk away with safe investments. How did this happen? Companies such as Countrywide asked for laws that protected them from their own bad behavior to be removed, and once they were, these same companies behaved irresponsibly. And in the end, it's corporate executives will walk away with millions, while the US taxpayer is forced to foot billions in bad loan insurance payouts. Not to mention the many thousands of lives that have been destroyed by such predatory lending, and the collapse of available credit as investors find that what they thought were valuable securities are, in fact, worthless.
If this isn't a lesson in the folly of deregulation, I don't know what is. While not every regulation is good, of course, forcing companies to work within rules so that they follow practices good for themselves and their customers is essential. Why do we advocate for laws to keep young people from drinking, driving, or owning firearms? Because we know that such persons may not always behave in their own long-term best interest, as well as the best interest of the society they live in. How ironic it is, that the same persons who argue that personal behavior should be so heavily regulated (in order to preserve societal morals) are the same persons who advocate that businesses should not be regulated. Do they not understand that corporations are run by men, and therefore are prone to the same faults and shortcomings as men?
We must work to break ourselves as a society from believing that regulation is inherently bad. It is a fundamentally wrong belief that we have adopted over the years because Republicans have simply repeated it like a mantra until we believed it is true. But it simply isn't. And the credit crisis and economic collapse we are now trudging through is blatant, obvious proof that only a fanatic can deny.