This Too Will Pass

Free Fall: The stock market is highly perceptive, and what it's perceiving now is that (1) the mediocre recovery of the last two years is stalling out and (2) our leaders in Washington haven't the vaguest idea of what to do about it.

A big part of this pathetic recovery has to be laid at government's doorstep. Our top elected and appointed officials try to blame it on everyone else, but it's their incompetence that has brought us low.

The weak 1.2% average GDP growth since the end of 2008 is a direct result of the financial crisis of 2007 and 2008. And this was itself directly caused by the explosion in subprime loans — a policy of lending to non-creditworthy borrowers that dates all the way back to 1995.

Congress, the White House and bank regulators told banks then they would have to make as many as half their loans to people who couldn't pay them back. If they didn't comply, they could be sued, or denied a branch expansion or even a merger with another bank.

Using Fannie Mae and Freddie Mac as financing fronts, the government basically took over the private mortgage market. By 2008, Fannie and Freddie owned or originated half of the $12 trillion in U.S. mortgages.

Those largely responsible — Rep. Barney Frank, former Sen. Chris Dodd and even President Obama — deny it. They can't see that government dictating how businesses should run to achieve social goals has never worked — and never will.

Think about it: Has government ever run anything well? Yet, after this debacle, they've done little to reverse course. Fannie and Freddie still exist. So does Too-Big-To-Fail. Stimulus is still with us, as our debt soars.

Small businesses that create most of our new jobs now labor under the weight of hundreds of new rules and regulations, and the looming costs of ObamaCare. In July alone, according to Wyoming Sen. John Barrasso, more than 600 new regulations came on line, adding $9.5 billion to businesses' annual cost.

Once out from under the burden that's been placed on them, America's innovators and entrepreneurs will again lead us out of this mess. But first we have to look to the political system that adjusts to and corrects for such problems.

Unfortunately, the most-needed adjustment won't come until November 2012 — but come it will.