Statement before the US House of Representatives on HR 3221 July 24, 2008

Madam Speaker,

For several years, followers of the Austrian school of economics have warned that unless Congress moved to end the implicit government guarantee of Fannie Mae and Freddie Mac, and took other steps to disengage the US Government from the housing market, America would face a crisis in housing.

This crisis would force Congress to choose between authorizing a taxpayer bailout of Fannie and Freddie, and other measures increasing government’s involvement in housing, or restoring a free-market in housing by ending government support for Fannie and Freddie and repealing all laws that interfere in housing. The bursting of the housing bubble, and the recent near-collapse in investor support for Fannie and Freddie has proven my fellow Austrians correct.

Unfortunately, but not surprisingly, instead of ending the prior interventions in the housing market that are responsible for the current crisis, Congress is increasing the level of government intervention in the housing market. This is the equivalent of giving a drug addict another fix, which will only make the necessary withdrawal more painful.

The provision giving the Treasury Secretary a blank check to purchase Fannie and Freddie stock not only makes the implicit government guarantee of Fannie and Freddie explicit, it represents another unconstitutional delegation of Congress’ Constitutional authority to control the allocation of taxpayer dollars. While the Treasury Secretary has to file a report with Congress, the lack of any effective standards for the expenditure of funds makes it impossible for Congress to perform effective oversight on Treasury’s expenditures.

HR 3221 also takes another troubling step toward the creation of surveillance state by creating a Nationwide Mortgage Licensing System and Registry. This federal database will contain personal information about anyone wishing to work as a “loan originator.”

“Loan originator” is defined broadly as anyone who “takes a residential loan application; and offers or negotiates terms of a residential mortgage loan for compensation or gain.” According to some analysts, this definition is so broad as to cover part-time clerks and real estate agents who receive even minimal compensation from “originators.” Additionally, this database forced on industry will be funded by fees paid to the federal banking agencies, yet another costly burden to the American taxpayers.

Among the information that will be collected from loan originators for inclusion in the federal database are fingerprints. Madam Speaker, giving the federal government the power to force Americans who wish to work in real estate to submit their fingerprints to a federal database opens the door to numerous abuses of privacy and civil liberties and establishes a dangerous precedent. Fingerprint databases and background checks have been no deterrent to espionage and fraud among governmental agencies, and will likewise fail to prevent fraud in the real estate market.

I am amazed to see some members who are usually outspoken advocates of civil liberties and defenders of the Fourth Amendment support this new threat to privacy.

Finally, HR 3221 increases the federal debt limit by $800 billion. We are told that CBO has scored this bill at a cost of $25 billion, but this debt limit increase belies that. The Federal Reserve has already propped up the housing and financial markets to the tune of over $300 billion, and this raising of the debt limit indicates that the cost of this newest bailout will likely be even more costly.

I am dismayed that my colleagues have not learned the lessons of the Patriot Act and Sarbanes-Oxley. Massive bills passed in knee-jerk reaction to crisis events will always be poorly written, burdensome and expensive to taxpayers, and destructive of liberty.

Ron Paul is a republican member of Congress from Texas.

When looking at the constitutionality of government programs, it’s not necessary to be a law student, or an “expert” of any kind.  The founding fathers wrote the Constitution in plain English – so that ordinary people would be able to understand the law…that governs the government.

First, we need to understand just what the federal government is authorized to do.  John Munchmeyer put it quite well:

Article I, Section 8 of the Constitution specifically lists or enumerates the powers of the federal government.  They include a military, federal courts, etc.  The 10th Amendment clearly says that unless a function is specifically listed in the Constitution, it is left to the states or the people.  The founders set up a system where there was competition among the states for the best ideas.

On any given topic, some states would perform well, some would pass imprudent laws, and some would stay out of it completely (which is my particular favorite option).  But there was competition, and competition breeds excellence.

Yes, you would have a couple bad apples, but these would soon reform under the pressure of that competition.  It is better than focusing all of the power in Washington and having one huge rotten apple.  The top-down, centralized government model is a failure, just like it was in the former Soviet Union.

The guiding principle under which the founders drew up the Constitution was this little thing called “positive grant.”

What this means is quite simple. The federal government is authorized to exercise only those powers which are positively granted to it by the Constitution. If a power is specifically listed in the Constitution, the federal government can do it. And, vice versa.

This principle was so important to the founding fathers that they codified it in law as the 10th Amendment:

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Simple, right? Well, you’d think so, but it’s in the nature of government – and politicians – to ignore any rules that limit their power. And that’s why we see both the 10th Amendment, and the entire Constitution, becoming more and more irrelevant in political discussions in Washington D.C.

In short, the 10th Amendment specifically limits the federal government to just those powers and functions named in the Constitution. And the 9th Amendment makes it clear that the people also have many other rights the government must respect, extending far beyond those actually named in the Bill of Rights:

“The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”

A quick glance at most federal legislation would make virtually any honest person see that almost everything the federal government does is in direct violation of the Constitution.

This holds quite true for Freddie and Fannie – and for taking your money to keep these failing organizations in business.

Steve Austin chimes in as well:

I know this is going to be a shock to some, but the Federal Gov’t under the Constitution has absolutely no reason or excuse to involve itself in housing for the poor or to help people who got themselves into troubled mortgage loans.

They may have a tort, they certainly merit our concern, and perhaps the several states may wish to help them out depending of the gullibility of their citizenry and the political weakness of their legislatures, but, NO – there is no room for such as Title 8, Fannie Mae, Freddie Mac, or any of the literally dozens of housing program piglets suckling off the sow known as the U.S. Treasury. Not in this universe.

Any leader evn talking positively about this intervention would be a stranger to the Founding Fathers.

So, while many would argue that jobs will be saved, or that it’s “essential” to the economy – it doesn’t really matter if those positions are right or wrong.

Under the system of government that the founders enshrined in the US Constitution – the very existence of Freddie Mac and Fannie Mae (as anything other than a purely private business) is a violation of the Constitution.

Thus, taking more of your money to pay for its failures a far more in line with something that would’ve fit far better in a government under Joe Stalin than that of Jefferson, Washington and the rest.