The Fed’s Contribution to the Tea Party: A Good Thing

The American tea party movement of 2010 is all about a return to America’s founding principles of limited government combined with individual freedom and responsibility under God. Recent revelations about the Fed’s role in the 2007-2008 worldwide financial panic have only added to the ‘brushfires of freedom’ that are fueling the tea party movement. This is a good thing.

It was always just a matter of time before the truth of the 2007-2008 worldwide financial panic, and the ‘bazooka’ that Henry Paulson and Ben Bernanke concocted to avert or kill it, came out from under the veil of mystery and high-level intrigue that surrounded it. Though the whole truth is a long way from being fully exposed, what we already know is that the scale of the Fed’s intervention was mind-boggling, as were the enormous flows of money that could have been accompanied by only the slimmest of handshakes (there wasn’t time for much of anything else).

We have a certain sympathy for decision-makers facing genuinely unprecedented circumstances—they don’t have an instruction manual or history book prescribing the perfect proven remedy. They are winging it to a very large extent. We can only hope that in times of crisis that those in positions to make key decisions are guided by America’s highest and best principles.

We’re not prepared to accept that President Bush or Paulson or Bernanke made a bunch of ‘obviously’ bad or unprincipled decisions in light of the facts they believed were facing them. A deeply interconnected global financial marketplace was about to see trillions of paper value vanish through massive sub-prime mortgage defaults, and the risk of simultaneous and enormous commercial and consumer bank runs and general institutional paralysis all over the globe looked very real and imminent. The Bush/Paulson/Bernanke trio decided this could not be allowed to happen, and they went all-in with the full faith and credit of the US government—through TARP and the Fed’s operations—to tell the world’s financial institutions, speculators and big-time borrowers that there was no way a lightning-quick panic-driven, paralysis-and-collapse-inducing run on the world’s financial system would be allowed to take its course. They effectively said that America will make liquidity infinitely available it that’s what it takes to get fear and panic off the table. And with respect to that specific objective in their immediate time frame, they were successful. But how to reconcile and pay back an infinite amount of liquidity made available through unlimited lending would be left to another day.

We’re now living in ‘another day’, and it’s not at all clear that the cure will have been better than the disease or, in more accurate metaphorical terms, that the good guys killed off the real villain. Because the real villain in our view was and is and will continue to be liberalism’s government-as-god philosophy that created the sub-prime mortgage problem which precipitated the whole crisis. To the extent the Bush/Paulson/Bernanke troika was successful, it may have reinforced the notion in some minds that only big government can be god when god is needed—i.e., they may have fed the villain rather than killing it off.

We’ve noted before how liberalism’s core big government and government-as-god philosophy engineered and directed the sub-prime mess. Liberalism takes a look at poor people who don’t have a home, has great sympathy with their plight (and congratulates itself on feeling this great sympathy), and then goes to work to use the strong arm of human government to correct this injustice. But all of this views men and women as part of the undifferentiated masses; it ignores or denies the reality of life as individual, and responsibility and accountability as individual; it also sees the provision of material things—a mortgage and a house—as the solution to what are essentially spiritual challenges.

Progress in life requires work and the development of character, and it is possible to discern evidence of hard work and character development (or lack of it) in any individual life. A current condition of financial poverty is not by itself proof of anything about an individual. Yet liberalism’s sub-prime lending concept considered poverty proof of progress in life, which is a non-sequitur if there ever was one. The result was a determination to treat the poor as universally creditworthy, which is stupid on its face, and is actually unjust to the many individuals who may start life in a condition of financial poverty but through hard work and character development would rise above it (as countless others have throughout history). They would earn a mortgage loan approval, and advance another step in demonstrating their individual strength as compared to others who did not work as hard or hold as closely to ideals of character.

Big government almost inevitably interferes with the rules of individual progress, responsibility and accountability. Those rules were already set by the Creator. Amerca’s founders knew this, which is why their view of what the government ought to be involved with, and what it ought not to be involved with, was decidedly slanted toward limited government. The founders were right then; they are still right now; and the American tea party movement knows it.

A constitutionally limited government would never have injected itself into the home lending market in the first place; but liberalism’s big government-as-god would do so—and in the process induce the crisis that led to yet another big government-as-god intervention to prevent that very crisis from destroying liberalism’s entire structure of lies.

Revelations about the Fed have just made all of this even clearer; they are serving to recruit even more Americans to the tea party cause. This is a good thing.

Paul Gable

December 3, 2010