FannieMae controls about US$2.6 trillion in mortgage-backed securities. The government-created institution was set up to provide low-income loans. The top 20 FannieMae employees each make more than US$1 million a year; in the last five years, almost US$250 million in bonuses was distributed. With these kinds of numbers, how can the institution be on the brink of insolvency?
According to Larry Lessig’s Netroots Nation keynote, it’s because of long-standing structural problems that have gone ignored. According to Rep. Richard Baker (R-Louisiana), the ignoring bit comes “because the entities had enormous political allies and were always able to squash any reform effort that might look like it would go somewhere.”
FannieMae has spent US$900,000 on campaign contributions this year. That’s right, Lessig says. “A government-created entity lobbying government.” The result is what Lessig calls “crony capitalism: socialized risk, privatized benefits.”
It’s suddenly less perplexing that the approval rate of the US Congress is currently nine percent.
Trust, Lessig points out, is built by keeping money out of the equation. “Money,” he says, “poisons trust.”
A compelling example of money poisoning trust can be found in Senator Hilary Clinton (D-New York). First introduced during the administration of Bill Clinton, the Bankruptcy Abuse Prevention and Consumer Protection Act would make it virtually impossible for citizens to discharge consumer debt through bankruptcy. President Clinton was initially in favor of it. Hilary Clinton, then first lady, is generally credited with single-handedly defeating what she called “that awful bill.” But, like any crappy horror film monster, this one just wouldn’t die. It returned as just as crappy a sequel in 2001. But now Hilary Clinton was a US senator and had received US$140,000 in campaign contributions from credit card companies and financial institutions. Predictably she voted for “that awful bill.” Twice. “Money,” Lessig says, “changes outcomes.”
Or consider the warrantless wiretapping legislation with the telco immunity cherry on top. In March, the US House of Representatives rejected the proposed legislation. In June, the same US House passed it. What happened? According to Lessig, MAPLight was able to follow the money and learned that the 94 Democrat representatives that flipped their votes received twice the money in telco campaign contributions as those representatives that didn’t.
These are the same problems that faced the country in 1785 when the founders realized the level of corruption in government.
The solution, according to Lessig, is Change Congress. It begins with a four-plank initial resolution for both citizens and politicians to signal their intent for true reform and to reestablish trust.
- Only individuals
- Ban earmarks
- Increase transparency
- Support public finance of public elections
The next step is to map where elected officials are, personally, in respect to the four planks.
The third step is to fund the reform using the basic concept of Emily’s List.
Time to get cracking. Where are you and your representatives in respect to the four planks?
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