The Absurd Report

Growing concern about the nation’s economy has opened the door to a dramatic new regime of financial oversight, a taxpayer bailout of a major investment bank and government intervention in the home mortgage market.

It’s enough to make a fiscal conservative sick.

But the most depressing truth for Republicans who built their political reputations while repeating the mantra of Ronald Reagan — “government is not the solution to our problem; government is the problem” — is that much of the push for new government regulations is coming from their own party.

“It’s disconcerting to see the end of deregulation, more so because it’s coming from our own administration,” said Rep. Scott Garrett (R-N.J.), a member of the Republican Study Committee, a panel of about 100 House conservatives. “As conservatives, we need to get our Republican, conservative brand back. … I can tell you we’re not going to get that brand back by embracing Democratic economic regulations.”

For fiscal conservatives such as Garrett, the proposed overhaul of investment banking regulations announced by Treasury Secretary Henry Paulson on Monday, coupled with the $30 billion Fed loan to help save Bear Stearns, amounts to a rejection of the ideology that swept them into office.

While many in Congress — including some Republicans — see a need to address voters’ concerns about economic issues, the fiscal conservatives prefer to see the market left free to work its will. But with housing bills gaining momentum in both chambers of Congress, the once dominant brand of fiscal conservatism is being pushed further to the fringe.

“I think these are unprecedented moves,” Rep. Tom Feeney (R-Fla.) said of the federal rescue of Bear Stearns. “The notion that we’re going to have more intervention in hedge funds is troubling. … Republicans are not monolithic. … Unfortunately, we don’t have any articulate spokespeople for that vision of the future.”

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Paulson’s Plans

Bank Reform: Treasury Secretary Henry Paulson has proposed sweeping new financial reforms that would in many ways be an improvement over the dysfunctional system we now have. But we do have some concerns.

Surveying the wreckage of America’s financial industry, Paulson wants to reshape the entire regulatory system and give sweeping new powers to the Federal Reserve.

We’re not against new thinking when it comes to financial regulation. Quite frankly, since 1960 there has been at least one major financial crisis each decade that has exposed glaring weaknesses in our postwar financial regulations.

Still, the idea that the government can simply wave a wand and everything will be better is naive. Usually it’s government itself that causes the problem — and then blames industry for it. That’s certainly true with the subprime crisis.

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nation’s economy, taxpayer bailout of a major investment bank, home mortgage market, Ronald Reagan, government regulations, Treasury Secretary Henry Paulson on Monday, Bear Stearns, Federal Reserve   

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