Transcripts

"Commentary"-A Look At The Big Picture

SUZANNE PRATT: Tonight's commentator says when it comes to economic recovery, the markets may be self- correcting. He's Douglas Holtz-Eakin president of DHE Consulting and former director of the Congressional Budget office.

DOUGLAS HOLTZ-EAKIN, PRESIDENT, DHE CONSULTING: Am I the only one who is a little confused by financial market reform and economic recovery? It is really easy to lose perspective in the middle of a meltdown and severe recession. Losing over 300,000 jobs a month is greeted happily, because it is not losing over 600,000. Chrysler's bankruptcy is a triumph because it is short, never mind the taxpayer financing and pain on creditors, workers and suppliers. And a few banks paying back the government is touted as the end of financial distress. A few months ago there was a consensus that there was no sustained economic recovery until financial markets were fixed. Three key ingredients would be needed: Number one, fix the mortgage market. No housing market recovery, no economic recovery; number two, get toxic assets off bank balance sheets. Weak banks don't lend; and three, reform had to radically consolidate and simplify market regulators. A funny thing happened on the way to reform. There has been no widespread reworking of mortgages. Housing values continue to decline and there still is no vision for the future of the mortgage giants Fannie Mae and Freddie Mac, who remain wards of the state. The Treasury announced and now has quietly shelved a plan to remove toxic assets from bank balance sheets. The administration plan for radical consolidation? Kill off one agency, the Office of Thrift Supervision and replace it with a new one, the Consumer Financial Protection Agency. Simplification? Give the Fed authority to take over market-threatening institutions, as long as it asks a Treasury committee first and then hands the job off to the FDIC to finish. Maybe there is a lesson here. Markets work pretty well, even when damaged, perhaps even better than our government. I'm Doug Holtz-Eakin.