The failure of Wall Street investment firm MF Global, run by former Democratic governor and senator Jon Corzine, offers a teachable moment. At least that’s the assessment former Republican senator John Sununu presents in the latest TIME.
While Sununu highlights Corzine’s “hubris,” he says the MF Global case signals a larger problem as well.
Lost amid this economic activism is the principle that laws should clarify and facilitate the process for dealing with insolvencies but never pretend they can be avoided. To think otherwise constitutes a form of legislative arrogance, one that mirrors Corzine’s business arrogance. Too many lawmakers believe government can oversee, manage or invest with more insight and efficiency than the marketplace. That attitude not only contributed to MF Global’s failure, but it has also cost taxpayers billions though multiple policy misadventures.
The financial debacle of Fannie and Freddie is the work of legislators who believed they could provide subsidized borrowing for the mortgage giants and allow enormous levels of leverage but magically protect taxpayers from the housing market’s risks. The cost to date tops $170 billion. In much the same way, Solyndra was created by legislators who arrogantly believed the Department of Energy would make smarter alternative-energy investments than experienced venture-capital firms. And today the federal government is lending directly to students at or near record levels. Default rates are rising, and President Obama has proposed rules to allow public-service employees to walk away from their debts after just 10 years. Did someone say “moral hazard”?