Until now, government’s mostly deleterious effect on investment holdings has been largely ignored by investment advisors, to the peril of their clients. Data suggests that government’s impact goes much deeper than mere interest rate manipulation and Fed jawboning – items that garner the lion’s share of media attention.
We believe the effects of Congressional action and deliberation have a significant and predictably negative impact on investment performance. We believe that Congressional "cures" are almost always worse than the disease, and that Congressmen have little understanding or appreciation for the unintended adverse consequences of their legislation.
The failures of Fannie Mae and Freddie Mac, along with subsequent efforts to bail out the institutions that depended on a sound market for mortgages, are one example of such damage. While Congress has been quick to blame deregulation and Wall Street greed, there is little acknowledgement of the role they themselves played in expanding these institutions, changing their missions, soliciting campaign contributions from them, and protecting them from meaningful oversight when they were found cooking their books and perpetuating fraud on investors. Fannie Mae and Freddie Mac, unfortunately, are only two of many examples of Congress' power to damage markets. For more examples, look at this website, where from time to time we will add examples of Congressional harm. We believe Congressional impact will worsen until Americans unite to successfully demand smaller, less intrusive government, and lose tolerance for government’s perpetual assault on industry.
Unfortunately this doesn’t seem to be the current trend.
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