In the midst of attempting to take copious financial regulatory measures, officials in Washington might be forgetting something very key: regulating themselves. The Wall Street Journal today has one of those articles that I really hate to read. It provides a discouraging update to the news that Countrywide -- formerly the largest U.S. mortgage company -- had a special VIP club, in which some public officials enjoyed benefits not provided to average Americans. This serves as the perfect example of why we should be worried about the too cozy relationship between finance and Washington. But it gets worse.
The WSJ reports:
The discovery that Countrywide Financial Corp. recorded phone conversations with borrowers in a controversial mortgage program that included public officials -- and that those recordings have been destroyed -- has prompted new congressional calls for more information about the program.
Rep. Darrell Issa of California, the ranking Republican on the House Oversight and Government Reform Committee, is trying to subpoena the remaining records of Countrywide's VIP loan program. So far, the committee's chairman, New York Democratic Rep. Edolphus Towns, has turned down that request.
Of course, one of those VIPs was none other than Sen. Christopher Dodd (D-CT), chairman of the Senate Banking Committee. How is there any reasonable basis for the House Oversight and Government Reform Committee to ignore this program? Isn't looking into such problems exactly the kind of thing it should be doing?
There were many causes of the financial crisis. One major cause was regulatory measures being insufficient or unenforced. Another important one was credit being too easy. The government plays a part in both of those aspects of the market. Couldn't it matter if officials were a little too sympathetic to making sure mortgage companies had all the advantages they needed to overheat the market?
As a result, I'd suggest another important regulatory goal: better transparency between the financial industry and Washington officials. Bureaucrat or Congressman, staffer or speechwriter, any influential public official should have virtually no privacy when it comes to their financial affairs. Government oversight should be able to demand full records of any deals, whether investments, real estate or business. This goes far beyond the question of whether public officials ought to receive special perks. It speaks to the fact that such fringe benefits can directly or indirectly affect the market, and ultimately, the American people.