In July 2009, Senator Robert Menendez, a Democrat from New Jersey, sent a letter to the Fed asking it to approve the fast acquisition of two banks owned in large part major contributors to the Menendez campaign, according to the Wall Street Journal. This kind of intervention is considered grossly inappropriate and appears to be a form of influence peddling.
William Black, a federal bank regulator during the savings-and-loan crisis two decades ago, and like Mr. Menendez a Democrat, called the senator’s letter "grotesquely inappropriate," given his ties to the two directors. Mr. Black, now a law professor at the University of Missouri-Kansas City, said the letter crossed an unofficial line by asking regulators to approve an application instead of simply asking that it be given consideration.
The problem here, as with the entire banking crisis, is not the result of too little government meddling, but of too much. For years, Congress has treated the banking system like its own play toy. The solution to this crisis is smaller government, not larger. This reduction in the government’s control of banking should begin with the privatization of Fannie and Freddie. And November’s election is the time to make that happen.
Tags: bank failures, banking, congress, corruption, Robert Menendez
Follow me on Twitter