Denial Ain't Just a River in Egypt

Anyone who has been following the actions on Capitol Hill regarding the $700 billion bailout knows the substantial role Congressman Barney Frank, Chairman of the House Financial Services Committee, has played in trying to get a bailout package approved by the House. Over the years, Rep. Frank (D-MA) has been a key proponent of the government's continued protection of the state-created mortgage giants, Fannie Mae and Freddie Mac, despite the looming evidence that such institutions are unstable and represent seriously misguided attempts to regulate and monitor the housing mortgage industry. One can't help but find it ironic that the Congressman with quite possibly the most blood on his hands -- with respect to the Fannie/Freddie mess -- is one of the leading champions for this wildly unprecedented (and unconstitutional, mind you) bailout package.

However, Rep. Frank managed to circumvent any share of the blame in the massive collapse of the two government-sponsored entities (GSEs) earlier this year. In 2003, while a ranking member of the Committee he now chairs, Rep. Frank shrugged off proposals to reform the two giants by saying, with the utmost certainty, that:

“These two entities Fannie Mae and Freddie Mac are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

As we can now see, Mr. Frank's assessment was entirely incorrect; yet he avoids taking any share of the blame for not foreseeing this crisis and has told the Boston Herald that:

“in 2003, nobody that I knew of foresaw the crisis of subprime lending, and that is what caused this problem.”

However, Rep. Frank does know one person who foresaw this crisis back in 2003. His name is Rep. Ron Paul, and he has been making a case against the two GSEs for most of his Congressional career. The very same month in 2003 that Rep. Frank denied the potential financial crisis, Dr. Paul was speaking before Congress predicting the exact sort of failures we see now.

As the only elected official I know of who invokes the works of the Austrian school of economics on a daily basis, Dr. Paul has long served as the only voice of consistent economic reason in a federal government full of political opportunists, trigger-happy regulators, and shortsighted economic populists. Although you won't hear the mainstream media talking about it, this year's financial crises have undoubtedly validated the theories of the Austrian school of economics. The great intellectual giant, Ludwig von Mises -- as well as his successors like Roger Garrison -- have long warned the public about the consequences of market interventionism and the credit-pumping, dollar-devaluing actions of the Federal Reserve.

Unfortunately, we won't see the Austrian business cycle theory having a more prominent influence among policymakers any time soon, as the livelihood of most politicians often depends on perpetuating the fallacy that more economic regulation is an absolute necessity.