Once a tragedy or crisis starts getting serious media attention, politicians routinely respond with the same “solution.” Whether it is a bridge collapse in Minnesota, a train collision in California or a national financial crisis, they hold hearings, point fingers at everyone but themselves and demand immediate fixes, showing what effective public guardians they are.
Unfortunately, their behavior proves what ineffective public guardians they are, because their oversight, paraded about after the crisis arises, is too little, too late.
If politician’s were performing their oversight responsibilities, they would not need hearings to tell them what happened under their noses and why or to discover what is being or could be done. More importantly, problems wouldn’t have become sudden, surprise crises, because we would have been warned and they would have done something to address them beforehand.
Almost every area of American life is overseen by federal and/or state regulatory agencies, as well as by congressional and/or legislative oversight committees. The problem is that they often do their job badly. But they normally evade blame because voters pay little attention.
When voters are inattentive, politicians’ reap little reward for effective oversight on their behalf. In response, their monitoring turns into more fiction than fact. So neither voters nor politicians watch the bureaucracy, which responds as you would expect — advancing their own and their patrons’ interests, at the expense of the public.
Then tragedies or crises grab people’s emotions and their attention. Suddenly they want to know what happened and why and be assured that things are being fixed. That surge in scrutiny raises the payoff to politicians appearing to be on top of things and providing solutions, but the public’s lack of accurate understanding allows that image to be portrayed even when it is false. And a big part of that process is to immediately redirect blame elsewhere, usually toward people’s supposed “greed” in markets (note how often “market failure” is asserted as an explanation), to keep inquiring minds from looking under their supposedly white hats.
There is a great deal of evidence that is consistent with these oversight oversights but not with effective monitoring, even if we only look at Fannie Mae and Freddie Mac.
While politicians treat each crisis as a one-time surprise, where a one-time response takes the issue off the headlines, there are actually repeated crises. If effective political monitoring went beyond a crisis, that would not be the case. One need only remember the 2003 and 2004 accounting scandals at Fannie and Freddie for an illustration.
Effective monitoring would not offer routine assurance right up to when problems erupt into crises. But the Office of Federal Housing Enterprise, whose 200 employees’ only job is overseeing Fannie and Freddie, issued a report described as offering “only clean sailing” just months ago.
Effective monitoring would also eliminate the stark contrast between active foot dragging by supposed overseers when issues are off the public radar and their strident demand for instant solutions when they hit the public radar. For instance, Congressional Democrats are now leading the finger-pointing at the collapse of Fannie and Freddie as examples of market failures, even though they were actually heavily subsidized government sponsored enterprises. But in 2005, they kept from a Republican reform bill, that would have kept Fannie and Freddie from stimulating and accumulating the Alt-A and subprime loans that triggered the financial distress, from coming to a vote. Killing real reform and blaming others for the results that follow is political hypocrisy, not oversight.
Political oversight failures extend far beyond the financial system crisis, but they are clearly demonstrated by it. Beyond assigning blame, it is important since we are supposed to trust the government’s bailout on the basis of a “new and improved” degree of monitoring. But if history is a guide, politicians’ stated oversight guarantees are no more trustworthy than the stated income loans everyone wants to get rid of.