William Poole Again

The former St. Louis Fed chief has an op/ed in today's NY Times, "Too Big to Fail, or to Survive". With all the hysteria exhibited by pundits on this subject, Poole's is a voice of reason. He's no fan of Fannie and Freddie, and thinks the federal government should eventually get rid of them, but he also acknowledges that, at this point, a bailout was necessary. Poole is also rightly skeptical that the promised tighter regulation of the GSEs will prevent future problems. He writes,

Some believe that tighter regulation is the answer. I am skeptical of that because I know the extent to which the regulatory system is tied up in Fannie’s and Freddie’s political activities. I find it deeply troubling that Fannie and Freddie, essentially in receivership to the secretary of the Treasury today, continue to employ lobbyists and hand out campaign contributions to influence the legislative debate over their own futures. Fannie and Freddie paid out more than $170 million to lobbyists over the last decade — more than General Electric spent. Government departments cannot hire lobbyists or give money to campaigns — why should Fannie and Freddie, now wards of the government, be permitted to do so?

Those huge lobbying fees don't fully capture the political influence of the GSEs. Two politically well-connected former Fannie Mae CEOs come to mind, Franklin Raines, who was the head of President Clinton's Office of Management and Budget before returning to Fannie Mae as CEO, and James A. Johnson, the former Carter administration official and, until recently, the reported head of Barack Obama's running mate selection process.

Seven Questions for William Poole

The former St. Louis Fed president speaks with Foreign Policy about the GSEs, the credit crisis, and the economy, "Seven Questions: How Bad Will it Get?". Intro:

When William Poole warned in 2003 that Fannie Mae and Freddie Mac lacked the capital to weather a financial storm, his advice went unheeded. Five years later, the outspoken former president of the Federal Reserve Bank of St. Louis is far too polite to say “I told you so,” but he does have a message for the Fed: Wait too long to tackle inflation, and you’ll face an even worse recession in the years to come.

It's worth reading this brief interview in its entirety.