The Business of Government Isn't Business

President Calvin Coolidge famously proclaimed that “the business of America is business.”

Unfortunately some people evidently misheard him. They thought he meant that government should get into business.

Please. Government does everything badly, including making war and legislating. Yet helpless and abject failure doesn’t seem to matter too much when government keeps to war and law enforcement.

The last thing that anyone should think of is getting government involved in business.

But when Sen. Charles Schumer (D-NY) thinks that he can help out the banking regulators, or when political careerists think they can run GSEs like Fannie Mae and Freddie Mac, then even the man on the street can see that something ain’t right.

It seemed like a dandy idea to set up a government agency back in the Great Depression to create a secondary market in mortgages with the Federal National Mortgage Assocation. And then in 1968 it seemed like a great way of reducing the budget deficit to spin Fannie Mae off as a quasi-public agency and create Freddie Mac and Ginnie Mae as competitors.

But when the teetering mortgage giants need a bailout to prevent global financial meltdown, then something has gone wrong.

That something is the very idea that a government-sponsored enterprise can ever be run in a businesslike fashion where the risks are properly understood and managed.

Look at it this way. Two recent Fannie Mae notables were James Johnson, an aide to Democrat Walter Mondale and now a Washington power broker, and Jamie Gorelick, Deputy Attorney General in the Democratic Clinton administration and creator of the famous wall that hindered the intelligence agencies from connecting the dots before 9/11. What in tarnation do pols like that understand about finance?

Now take a look at the obituary of Dennis Weatherstone, former head of JP Morgan Chase. Weatherstone was the son of a clerk who never went to college but rose to sit in the chair of the greatest banker of all time, J.P. Morgan.

“If you can’t understand it, don’t do it,” was one of Weatherstone’s maxims. When Morgan’s bright young men invented new trading instruments and deal structures, they were allowed three short attempts to explain them to him; if they failed, their projects did not proceed.

Can you imagine Jim Johnson or Jamie Gorelick saying that to some brilliant young man at Fannie Mae? Why, you have staffers to do that sort of work.

Government has no business in business. It should stick to wars and moral equivalents of wars. They can even be fun—for the politicians. But business is grunt work. Why don’t you Olympian gods leave it to ordinary mortals?