Congressman Calls for AG Investigations of Financial Crisis Culprits

Here is the first part of an e-mail I receive from Rep. Joe Sestak:

With Congressional hearings underway to examine the root causes and effects of the turmoil in our economy, Congressman Joe Sestak continued his proactive effort to return accountability to financial institutions by sending a letter to United States Attorney General Michael Mukasey. The correspondence sent by members of Congress to the head of the Department of Justice asks him to "conduct an appropriate and thorough investigation into any and all financial institutions, corporations, and individuals that are suspect of criminal action relating to our current economic crisis."

"With the removal of necessary regulations from the financial industry, greed and selfishness of a small number of wealthy people affected millions of hardworking, law-abiding Americans," said Congressman Sestak. "A thorough examination is required to ensure that we restore the proper oversight and transparency to Wall Street and that we punish to the fullest extent possible the people who have forced the government to intervene with hundreds of billions of dollars to protect low and middle-income Americans."

Of course, there is nothing in his letter about the role of the Federal Reserve or the Federal govt in creating the crisis or making in worse. Not that it will do any good, but here is how I responded to Sestak:

Rep. Sestak,

Your efforts to address the financial crisis could not be more misguided. Dumping credit into the marketplace will not turn the financial markets around. It's not a credit crisis, it's a capital shortage. There are no savings to lend anymore. Saving is encouraged by increasing interest rates and lowering taxes.

Credit given to bailed-out banks will do little to alleviate this situation, since it's still just credit. An overextension of credit is what caused this crisis to begin with. Extending more credit is only going to make it worse in the long run by devaluing each of the dollars that Americans hold.

As far as finding culprits for this mess, the first place to look is the Federal Reserve, who lowered interest rates to 1% and pumped vast amounts of money into the marketplace, inflating home prices and creating the housing bubble. We are now trying to prop up prices at levels that the market says they should not be. Why have we lost faith in the market, feeling instead that we can fix this crisis by central planning? The first order of business should be to conduct an audit of the Federal Reserve.

Also, Federal laws encouraged and practically mandated that mortgages be awarded to unqualified buyers. Those laws need to be addressed. To be sure, fraud was committed in many of these companies. Yet somehow you saw fit to award these same companies with a bailout of billions of dollars. If you are going to throw money out there, why not give it to healthy well-run banks instead of investing in fradulent and bankrupt institutions? The actions by Congress this year have been infuriating and absurd. It's hard to recognize our county anymore.

Please take the time to read up on free market economics. I would suggest something by Murray Rothbard to start. On second thought, your first read should be the U.S. Constitution. Let me know when you find the clause that permits the Federal government to invest in private corporations.