You Need To Identify A Problem Correctly In Order To Solve It

Yesterday Investor’s Business Daily posted an article about the slow economic growth  we are experiencing in America.

The article explains:

Republicans, eager to hit the ground running if a Republican president is elected in November, have crafted a plan to fix what the current president broke: the banking system. By replacing the failed Dodd-Frank financial reform with something that works, they’ll go a long way toward fixing our ailing economy.

Dodd-Frank, the massive, 2,300-page law passed in 2010 after the 2008 financial crisis and global market meltdown, was intended to punish Wall Street for its excesses, which supposedly had caused the crisis in the first place. Instead, it ended up putting a wet blanket over the entire financial industry and the economy.

In 2008 YouTube posted a video entitled, “Burning Down The House.” I am embedding the video here in case you have not seen it:

 

The video explains that the meltdown in the housing market was not caused by greedy banks–it was caused by Congressmen who accepted benefits from people they were supposed to be overseeing. Please watch the video if you have not seen it.

The article at Investor’s Business Daily sums up the solution to the sluggish economy:

So what is the Republicans’ plan? It’s pretty simple.

It would end too-big-to-fail by creating a new kind of bankruptcy for very large banks having more than $50 billion in assets, instead of bailouts. Government loan guarantees would go away. In order to be competitive, larger banks would have to raise more capital — meaning, they would be risking their money, not taxpayers’, when they make loans.

Yes, it would tighten punishments and boost fines for fraud, insider trading and other financial violations. But it would also neuter the Consumer Financial Protection Bureau, which has turned into an oppressive, inefficient regulator of the entire consumer financial market.

Hensarling gets it. He understands that the left’s entire reason for imposing stiff regulations over banking is about control — not about preventing another meltdown.

“The ultimate goal of the left is to turn our large, money-center banks into the functional equivalent of utilities so that Washington can politically allocate credit,” Hensarling said.

The stakes of this reform are enormous. Indeed, many economists believe that the main reason for the economy’s growth path shifting downward, from 3% before 2008 to less than 2% currently, is Dodd-Frank.

Peter Wallison, who sat on the national commission that investigated the 2008 crisis, noted in a report last year that Dodd Frank’s heavy regulatory costs and restrictive lending standards on small banks had “reduced the ability of these banks to finance small businesses, particularly the startup businesses which are the engine of employment and economic growth.”

A report last year by the American Action Forum estimated that Dodd Frank could cost the economy nearly $1 trillion in GDP over 10 years. Reforming Dodd-Frank, it seems, would be a big shot in the arm for the economy.

The voters will decide in November if they want prosperity.