Former Rep. Mel Watt, D-N.C., failed his procedural confirmation vote today to head the Federal Housing Finance Agency, which oversees the government housing entities Fannie Mae and Freddie Mac. His defeat — so far — is a victory not just for fiscal integrity, but for privacy and transparency as well.
As a congressman, Watt egged on the reckless policies of Fannie Mae and Freddie Mac that got us into the mortgage crisis from which the economy is still recovering. But just as bad, he was on the wrong side of both liberals and conservative reformers on two crucial issues. Watt was a co-sponsor and vocal supporter of the Stop Online Piracy Act (SOPA), which collapsed in 2012 after a transpartisan coalition made the public aware of its threat to privacy and innovation. And Watt was the chief Democratic opponent of a bipartisan proposal to audit the Federal Reserve and helped gut the provision from what would become the Dodd-Frank “financial reform” law of 2010.
On Fannie and Freddie, as reporter Charles Johnson detailed at The Daily Caller, Watt “teamed up with Freddie Mac and Fannie Mae [and some banks]to announce Pathways to Homeownership, a pilot initiative designed to give home loans to welfare recipients” with minimal down payments. A press release from Watt said the loans would require “as little as $1,000 of the down payment to come from their own funds.”
Then, as Johnson pointed out, “In 2007, a full year after the real estate market peaked and began to plummet under the weight of millions of mortgage defaults, Watt and Frank co-sponsored a bill forcing Fannie and Freddie to meet even higher quotas for affordable lending and investing in an “Affordable Housing Fund” for inner city communities.”
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Iain Murray and I have a piece in today’s American Spectator breaking down the new paper we co-wrote with John Berlau about questions we would like Janet Yellen to answer, whether in her confirmation hearing or elsewhere. The main point is transparency:
Transparency is essential for a public body that takes trillion dollar decisions. We need to know what she feels about the possibility of auditing the Fed. Indeed, Senator Rand Paul has already announced that he will place a hold on her nomination until he sees some progress with his Federal Reserve Transparency Act bill — something that Senate Majority Leader Reid used to support. If and when Professor Yellen does come before a confirmation hearing, Senators need to make her views on these questions transparent to the nation too.
Read the whole thing here. The full paper is here.
Have a listen here.
George Mason University law professor and Mercatus Center senior scholar Todd Zywicki discusses his paper, “The Consumer Financial Protection Bureau: Savior or Menace?” His thesis is that this “independent agency inside another independent agency, presided over by a single director who is insulated from presidential removal,” which is also immune to Congress’ power of the purse, is a return to a Nixon-era approach to agency structure. He gives several recommendations for improving actual consumer protection.
The Regulatory Flexibility Act directs federal agencies to assess the effects of their rules on small businesses.
How’s that going?
A new book Where the Jobs Are: Entrepreneurship and the Soul of the American Economy, finds that most job creation comes from start-ups; they’re usually small. But business formation has declined.
On Wednesday the 18th, the House of Representatives Committee on Small Business, chaired by Rep. Sam Graves (R-M0.), will mark up H.R. 2542, the Regulatory Flexibility Improvements Act of 2013. It was introduced by Rep. Spencer Bachus (R-Ala.).
The original “Reg Flex” Act has been around a long time, since 1980, and has been amended since then.
It requires that agencies, in their semiannual regulatory Unified Agendas “describ[e] regulatory actions they are developing that may have a significant economic impact on a substantial number of small entities.”
The year-end 2012 Unified Agenda of federal regulations didn’t appear until the Friday before Christmas. It revealed an uptick in this category of rules.
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Have a listen here.
Every year, the Office of Management and Budget (OMB) releases a report on the costs and benefits of the previous year’s new regulations. This year’s report was just released. Vice President for Policy Wayne Crews points out that the report ignores three quarters of all agencies and includes the costs of fewer than one half of one percent of last year’s regulations. Even so, the reported costs are double the previous year’s.
In today’s Investor’s Business Daily, Wayne Crews and I point out that the higher deficits go, the more tempting it becomes for Congress to resort to unfunded mandates:
For example,instead of funding a new federal job training program from federal coffers, Congress could mandate that all firms above a certain size provide such training at their own expense.
The first option appears on the federal budget; the second does not. For politicians, it’s the perfect scheme. The government can spend — or, rather, force others to spend — as much as it wants without adding to the deficit.
Fortunately, a bill recently introduced by Rep. Virginia Foxx would help prevent this problem:
She has just re-introduced the Unfunded Mandates Information and Transparency Act to improve UMRA. It would require all agencies, not just some of them, to conduct UMRA analysis. And it would require these for all new final rules, not just some.
Foxx’s proposed reform would not curtail Congress’ power to regulate; it only requires increased disclosure as to how that power is exercised.
More needs to be done to end the abuse of unfunded mandates. But first, we need more transparency so the public can find out just how bad the problem is.
Read the whole thing here.
The U.S. isn’t the only place in need of some regulatory housecleaning. Nor is it the only place that has some good ideas for doing so. Over at The Daily Caller, Christian Rice and I take a look at a successful model in the UK: the Red Tape Challenge:
Every few weeks, the British government publishes regulations on a government website focusing on a specific area of the economy. The public then submits comments as to which regulations in that sector are unnecessary or overly burdensome. People can also recommend ways to improve the rules or even eliminate them entirely.
The departments that administer these regulations then collect these Red Tape Challenge comments and use them to develop specific regulatory policy proposals.
There are a few more steps after that. The point is that adding public participation to a sector where there is currently almost none has worked out quite well. Read the whole thing here.
Why not Moody’s? Why not Fitch? Of all the questions raised about the U.S. government’s strange case against Standard & Poor’s—a lawsuit that actually asserts that some of the nation’s largest banks were S&P’s “victims,” and that the credit rating firm somehow fooled these banks about products the banks actually created—the lack of similar actions against S&P competitors still rings the most alarm bells.
S&P, Fitch and Moody’s all gave AAA rating to many packages of subprime mortgages that imploded. But of those three, only S&P downgraded the U.S. government from its decades-old AAA credit rating.
Floyd Abrams, the attorney representing S&P’s parent company McGraw-Hill in the litigation and a veteran First Amendment lawyer (and yes, the First Amendment is a strong concern here, as I will get to in a second), has said that the government ramped up its investigation of S&P shortly after the downgrade in 2011. “Is it true that after the downgrade the intensity of this investigation significantly increased? Yea,” Floyd Abrams, S&P’s lead attorney, told CNBC in an interview last week. “We don’t know why.”
The Justice Department’s civil suit against S&P looks even more suspicious when paired with the action a few weeks ago by another arm of the government against a small, upstart credit ratings firm that also had the temerity to downgrade the U.S. In late January, the Securities and Exchange Commission (SEC) stripped rating agency Egan-Jones of its accreditation as a “nationally recognized statistical rating organization” (NRSRO) in rating the creditworthiness of government or asset-backed securities. This was the first time the SEC had ever stripped a rating agency of its NRSRO status, an action that effectively bars financial institutions from relying on the rating agency to meet capital requirements.
Ironically, Egan-Jones’ rating had been widely praised as an alternative to that of the “Big 3″ of Moody’s, Fitch and S&P. Receiving its funding through investor subscriptions, rather than payment of the entities being rated, it avoided the conflicts of interest that “Big 3″ critics say led to inflated ratings for mortgage securities. The firm also turned out to be prescient in its early downgrades of Bear Stearns and Lehman Brothers, the first institutions to implode in the mortgage crisis.
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Lord Acton’s beard absolutely knows that power corrupts
In the ongoing debate over the Senate’s Cybersecurity Act of 2012 (S. 3414), one major point of contention is whether the bill adequately safeguards individuals’ private data from governmental abuses. While CEI praised recent changes to the bill’s information sharing provisions, we remain seriously concerned about the bill’s implications for privacy competition and trust in cloud computing.
Next week, the Senate is expected to vote on a flurry of amendments to S. 3414, some of which are available here. One smart proposal, spearheaded by Sen. Daniel Akaka, would amend the Cybersecurity Act and several existing laws to better ensure the federal government doesn’t abuse the information it acquires and maintains about private individuals.
Among other positive changes, Sen. Akaka’s amendment would deter the federal government from willfully abusing private data and require the government to notify persons whose data is breached.
Deter Government From Willfully Abusing Private Data – The amendment would amend the Privacy Act of 1974 to ensure that individuals who suffer actual harms due to certain willful or intentional privacy violations by government can obtain meaningful recourse. This statutory change would address a gaping hole in the Privacy Act created by the Supreme Court’s recent opinion in FAA v. Cooper, 132 S. Ct. 1441 (2012), which held that victims of certain privacy violations by government cannot recover damages caused by mental and emotional distress—even where victims can prove they suffered severe mental anguish.
In Cooper, the Social Security Administration violated the Privacy Act by disclosing the HIV-positive status of Stan Cooper to the FAA and Department of Transportation. Even though the trial court concluded the SSA willfully violated Cooper’s privacy, the Supreme Court held that he couldn’t recover proven emotional damages. The Court reasoned that because waivers of sovereign immunity must be made explicitly by Congress, the reference to “actual damages” in the Privacy Act should be construed narrowly and, therefore, only encompasses pecuniary losses.
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So it turns out that Penn State has covered up wrongdoing by one of its employees to avoid bad publicity.
But I’m not talking about the appalling behavior uncovered this week by the Freeh report. No, I’m referring to another cover up and whitewash that occurred there two years ago, before we learned how rotten and corrupt the culture at the university was. But now that we know how bad it was, perhaps it’s time that we revisit the Michael Mann affair, particularly given how much we’ve also learned about his and others’ hockey-stick deceptions since.
To review, when the emails and computer models were leaked from the Climate Research Unit at the University of East Anglia two and a half years ago, many of the luminaries of the “climate science” community were shown to have been behaving in a most unscientific manner. Among them were Michael Mann, Professor of Meteorology at Penn State, whom the emails revealed had been engaging in data manipulation to keep the blade on his famous hockey-stick graph, which had become an icon for those determined to reduce human carbon emissions by any means necessary.
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