Opinion
Representative Mel Watt testifies before the Senate Banking, Housing and Urban Affairs Committee confirmation hearing to be the regulator of mortgage finance firms Fannie Mae and Freddie Mac on Capitol Hill in Washington June 27, 2013. REUTERS/Yuri Gripas Representative Mel Watt testifies before the Senate Banking, Housing and Urban Affairs Committee confirmation hearing to be the regulator of mortgage finance firms Fannie Mae and Freddie Mac on Capitol Hill in Washington June 27, 2013. REUTERS/Yuri Gripas  

Labor Day Quandry: What The Fannie/Freddie Mess Says About Our Freedoms Slowly Slipping Away

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Ken Blackwell
Former Ohio Secretary of State
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      Ken Blackwell

      Ken Blackwell, a former U.S. ambassador to the U.N. Commission on Human Rights, is a member of the Becket Fund for Religious Liberty's board, a senior fellow at the Family Research Council, and Ohio's former secretary of state.

As Americans break for Labor Day and celebrate their hard work and the freedom to provide a life for their families, let’s hope they don’t spoil the holiday by pausing to consider whether government today is making their lives easier or more difficult.

To wit, the 2014 Index of Economic Freedom, published by the Wall Street Journal and the Heritage Foundation, which ranks countries based on four main factors – rule of law, limited government, regulatory efficiency, open markets – has the U.S. headed in the wrong direction. “The U.S. is the only country,” the survey states, “to have recorded a loss of economic freedom each of the past seven years.”

Say what you will about ordinary Americans, but as they in toil to put food on the table and provide, most “cling” to the idea that the highest aim of our leaders is to leave a legacy of greater freedom for their children, not less. Americans don’t believe in a monarchy, and they actually believe everyone should live by the same set of rules, not one set of rules for them and another set for the political class when circumstances or political arguments fail.

Needless to say, many Americans are outraged to see laws being re-written midstream, whether it’s in health care, taxes, or in government grants to political cronies. They would be discouraged to learn of the secret 2012 decision by the Treasury Department to confiscate the profits of the mortgage guarantors Fannie Mae and Freddie Mac. That decision, which thumbed its nose at transparency, flaunted basic rule of law and property rights, and burrows the government deeper into the mortgage market, moves our country in the opposite direction of where it should be headed.

Ordinary Americans understand that our system of freedom, bolstered by strong foundation of contract enforcement, property rights and rule of law works better than any other system in the world, but they also know those liberties cannot be taken for granted.

Working families, through their personal accounts, pension funds – including those managed on behalf of public employees – and retirement plans hold sizable investments in Fannie Mae and Freddie Mac. These large funds also often employ private professional money managers to make choices and take risks on their behalf, and through those managers ordinary Americans are invested in a broad swath of the economy, including Fannie and Freddie.

During the financial crisis, the U.S. government, after years of policies that promoted their excesses, chose to move the mortgage packaging giants into conservatorship to manage the entities on behalf of their investors. In doing so, they agreed to a 10 percent dividend, a figure reminiscent of White House confidant Warren Buffett’s deal with Goldman Sachs when it was running into trouble in 2008.

That was the deal, and it sent signals to the market at that time, including to foreign investors.  Some investors held on as they had for years, some sold, some came in with new capital. But the Treasury Department then secretly changed the rules and started taking 100 percent, leaving those who stuck with their investment – or committed new capital to the market at a time when it was needed – with nothing.

The Wall Street Journal/Heritage study confirms the slow erosion of freedoms, however imperceptible to the modern liberal eye, that occurs bit-by-bit, with each instance of a grab for greater government power, crony capitalism, lack of transparency, and evidence of disdain for private property rights and rule of law. Whether it’s the NSA’s eavesdropping, the IRS’s political targeting, the EPA’s seemingly endless regulations, or the literal taking of money due investors in Fannie and Freddie, people sense their freedoms are slowly slipping away.

As Americans celebrate Labor Day and eventually head to the polls in November, we would do well to evaluate what our politicians believe about our standing in the world, how actions defending our freedoms relate to that, and how we should best display the courage of our convictions.

Ken Blackwell, a director of the Coalition for Mortgage Security, is a former Treasurer for the State of Ohio and former mayor of Cincinnati.