Officials from the Federal Reserve Bank are touring the country—very quietly, it turns out—to gauge populist opinion of its handling of the current financial crisis and to garner support to increase its regulatory power to become the sole financial regulator in the country. I attended one such event in Des Moines, Iowa, which was hosted by Iowa Citizens for Community Improvement (CCI). This group has been around for several decades and is aligned with a national organization called National Peoples’ Action (NPA). NPA claims to have been instrumental in passing the Community Reinvestment Act in the 1970s, which extorted banks to make loans to those with less than stellar credit records and to make mortgages on properties in blighted areas. Both CCI and NPA are proud of their achievements and see no linkage between their lobbying efforts to force banks to make marginal loans and the resulting sub-prime lending crisis.
Several hundred people—my estimate is at least five hundred—crowded into a Des Moines church and sat for two and a half hours while CCI and NPA officials berated the hapless consumer affairs representatives from the Federal Reserve Bank’s Board of Governors in Washington, D.C. and consumer affairs representatives from the Federal Reserve Bank of Chicago, the local Fed office for Des Moines. About a dozen people were paraded before the Fed panel, telling their tale of financial woe. In this day of the tell-all reality show, no one seems embarrassed to confess his personal financial ineptitude in front of hundreds of people and the recording cameras. And sorry tales these were. And like all tell-all reality shows, no one took personal responsibility for his actions, which was just fine with CCI and NPA.
The Link Between Personal Irresponsibility and Big Government
A Ms. Kathleen Keest, currently of the Center for Responsible Lending and a CCI board member from its founding in the 1970s, listed four supposed fallacies that prevent the common man from getting his fair share of society’s goodies: the acceptance of personal responsibility, the desire for personal choice, concern over unintended consequences, and the free market. According to Ms. Keest, all four are false gods. It is impossible for man to take personal responsibility for something as complex and important as borrowing money; personal financial planning is too complex to allow the common man to exercise his free choice; the concern over the unintended consequences of government action should be dismissed out of hand; and, the free market is the cause of all our problems in the first place.
Now, consider how wonderfully Ms. Keest’s analysis dovetails into the Fed’s desire to increase its power. True, the poor punching bags from the Fed’s consumer affairs offices had a rather nasty day being yelled at for over two hours, but the benefit is that Ms. Keest and the other professional busybodies actually called for INCREASING THE FED’S POWERS! Undergoing hours of tongue-lashings is worth the price of obtaining even more power and bigger budgets.
Of course most of those in attendance at this meeting did not understand that the Fed itself is the underlying cause of our problems. Speaker after speaker laid the blame squarely on the shoulders of the lenders, who forced their money upon an unsuspecting public, all the while knowing that the public could not repay the loans. The logic of this argument is so ridiculous that I will not take the time to refute it. But let me at least point out that all the many regulatory agencies also failed to detect the crime of irresponsible lending at its inception. Now everyone’s hindsight vision is 20/20.
Despite the fact that few in the audience understood that massive money expansion, which led to massive credit expansion, was at the heart of the current crisis, there is one thing that everyone understood perfectly clearly; that is, that the Fed has enormous power to transfer wealth. Speaker after speaker stated this fact as the reason for inviting the Fed to the meeting—they all want the Fed to shower its benevolence upon themselves and not others. The common mantra was that it is time for the Fed to help Main Street and not Wall Street. The Fed bailed out Wall Street and now all the big banks are paying big executive bonuses with their bailout money. It’s time for the same thing to happen on Main Street. Exactly what this means was not made clear, and I believe it was left unclear on purpose, so as not to alienate potential allies in calls for more money creation and more government economic intervention.
The Slippery Slope to Tyranny
This travesty of a supposed public meeting to gain the peoples’ input perfectly illustrates the kind of society to which we are plunging headlong. It has taken the demagogues a hundred years to realize that control of the money supply is control of people. Therefore, special interest groups like CCI and NPA do not focus their efforts on the peoples’ representatives. They lobby for increasing the power of government agencies who then can be browbeaten into doing their bidding. One of the most frightening moments of the meeting occurred when a George Goehl, executive director of NPA, whipped the crowd into a frenzy by showing a short video of NPA demonstrating in front of Fed Chairman Bernanke’s Washington, D.C. home. The demonstrators eventually obtained a promise from Bernanke’s Secret Service bodyguards that they would deliver a list of demands to the Fed chairman. Then Mr. Goehl told the audience that just hours before the meeting we were attending he had exacted a promise from the Fed consumer affairs representatives that Fed representatives would meet several times a year with CCI and NPA representatives. The audience cheered wildly and Mr. Goehl basked in the adulation.
So, welcome to the future, where public policy will be made by non-elected bureaucrats who make deals with special interest groups who intimidate public officials in their private homes. Do our bidding and we will support your efforts to obtain greater power and prestige for yourselves. Of course, you must give us what we want and not what other special interest groups want. Like the Bolshevik revolution in Russia, the most radical groups will work cooperatively with other special interest groups, such as farmers and small businessmen, to form a coalition with greater lobbying power. But such coalitions are temporary. The most radical groups will take over, just as the most radical and charismatic members will take over the surviving pressure group. This is consistent with Friedrich Hayek’s explanation of why the worst rise to the top in politics—only the most amoral individuals lacking all concern for the rights of others are willing to persecute their fellow man in the name of some supposedly greater societal good.
But, of course, there is no greater societal good that justifies the use of power and coercion to control the lives of the many for the benefit of the few. Ms. Keest and Mr. Goehl struck me as of the type who always rise when a foolish people are willing to give control over their lives to self-designated masters in the hope of trading freedom for security. It is only just that such a people lose both their freedom and their security.