Dangerous Dithering

This post is from Peter J. Wallison of the American Enterprise Institute.

It is often said of Congress that it can’t act on anything important except in a crisis. What is seldom noticed is the corollary that Congress puts off acting until ordinary problems develop into crises. For years, Congress has had before it two serious problems—the gradual loss of U.S. preeminence in financial transactions and the inadequate regulation of Fannie Mae and Freddie Mac—and has done nothing about either. This gives rise to a suspicion that we face these crises because a dysfunctional Congress can’t act until a crisis actually occurs. The developing situation with Fannie Mae and Freddie Mac is a test of this proposition. If the Senate Banking Committee doesn’t act on the current GSE legislation, which would give their regulator receivership powers, the outcome will be a crisis in which the necessary congressional action will be devastating for the taxpayers.

These issues are addressed in a recently circulated AEI Financial Services Outlook entitled “Dangerous Dithering: Congressional Inaction Plants the Seeds of Crisis”. It is available here.

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