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As a software engineer, I have long worked with notions like single points of failure, separate address spaces and sandboxes that, when properly implemented, protect users of the same (or interconnected) hardware from accidental or intentional bad behavior. It is an axiom among programmers that the fastest way to FUBAR* is to use a computer.
At the founding of the United States, protection from unintended consequences was built in through the concepts of federalism, state sovereignty and enumerated powers.
State sovereignty allows each state to test drive different policies, and limits the consequences if a policy runs off the road.
Broad individual liberty from government coercion hobbles the ability of that government to cripple individual daily activities, and limits injury if particular coercion proves destructive.
In the political life of the United States, it should be an axiom among citizens and their representatives that the fastest way to FUBAR is for the federal government to preempt state and individual powers.
I believe this as a citizen and active Tea Partier.
So I was left banging my head against my desktop on being reminded that a Republican administration preempted state anti-predatory lending laws:
In February 2004, the Bush White House, working through the Office of the Comptroller of the Currency (OCC) officially preempted national banks from state laws regulating mortgage credit, including state anti-predatory lending laws. (This was far broader than the 1996 regulatory preemption by the Office of Thrift Supervision (OTS) applied to federally chartered S&Ls).
The Bush White House claimed that banks should “only be subject to federal laws regulating mortgage credit.”
Preempting state anti-predatory lending laws led to a single point of failure in protecting against individual consumers being preyed on knowingly.
It shoved lenders into a single sandbox, where the consequent bad behavior spread unbounded. All-too-enthusiastically bundled impossible mortgages were sold on the basis that, statistically, aggregate risk from individual failure was overwhelmed by sheer number of loans.
Lenders and bundlers and buyers of loan bundles forgot (or willfully overlooked) that the rosy aggregate risk outlook depended on the profile of loans containing enough good loans to outweigh the bad loans. Bad loans cannot be made into good loans through sheer numbers, even at the prodding of the federal government and the Community Redevelopment Act. Mortgage-holders cannot come up with enough money to make their monthly payment through wishful thinking and pure hearts. The cash has to flow.
Late last year, the cash stopped flowing.
The federal government and financial industry played a game of musical chairs that assumed that most players would find a seat when the music stopped and that the handful left standing could be quietly shoved under the rug.
The players paid no attention to the termites eating the legs out from under the chairs.
The music stopped. The fat cats muscled their way to the chairs — and the chairs collapsed, depositing the fat cats on their ashcans with stunned looks of disbelief.
We’re still sweeping up the splintered furniture and nursing broken bones.
Some of the injured fat cats should have never received artificial life support.
Ongoing artificial life support should be ended.
Pull the plug.
And cut the federal government down to size.
* FUBAR: F^cked Up Beyond All Recognition, an acronym borrowed from the military; see: SNAFU.
Tags: Federal government of the United States, Federalism, Office of the Currency Comptroller, office of thrift supervision, Politics, Predatory lending, White House
