Recently, I have been doing some reading on risk management related to public policy. Not too surprising given my recent posts that provide evidence that government control does not mean zero risk, but often higher risk.
One piece that I read yesterday related to government insurance for new loans by Fannie Mae and Freddie Mac.
I used to work on the same street as Freddie Mac’s sprawling campus. During the spring, I made a perceptual observation about Freddie Mac’s capacity for risk management.
In light of “serious” new advocacy for the federal government to back loans by these housing government sponsored enterprises after they are privatized, I offer the following two year old letter that I sent to Freddie Mac’s officer responsible for risk management:
As you are the Chief Enterprise Risk Officer for Freddie Mac, I write to advise you of a symptom of significant risk to your organization and the public investment in housing GSEs.
April showers have brought a curious bloom of orange and white to Jones Branch Drive. Perhaps you recognize them as the Freddie Mac loaner umbrellas that the company provides to employees walking between buildings on your sprawling campus.
Now here is the point: If your employees can not be counted on to check the weather report in the morning and bring an umbrella to work as needed, how can they effectively manage risk for the company?
By not holding employees responsible for the short term risk of today’s predictable and widely known rain, Freddie Mac handicaps their capacity to plan for the complex and long term risks associated with your business.
These umbrellas are symptoms of a flaw in your corporate culture related to risk management and employee responsibility. I urge you to end the umbrella loaner program with a loud and precise message about the responsibility of each employee for risk management.
Sincerely,
Your Neighbor
When I was last on Jones Branch Drive last summer, this was still an issue.
Having set the context, let’s get back to Mellon establishing Republican doctrine on taxation. As noted by historian Burton W. Folsom, Jr., Mellon had the idea that cutting tax rates would actually increase revenue to the government. Increasing revenue was a critical issue for the Treasury Secretary as war bonds were coming due for repayment. Mellon’s Plan had three points related to taxes: (1) the top tax rates should be lowered, (2) taxes on lower income earners should be reduced, and (3) the ‘death tax’ rate should be reduced. Does this sound familiar 90 years later?
Today, many citizens are accurately complaining that only the rich are paying federal income taxes while we are approaching a point in which less than half the electorate pays the federal income taxes commanded by their representatives in Congress. However, that is and has been the Republican plan. As biographer Robert Sobel reported, the tax cutting President Calvin Coolidge’s ultimate plan was that only those with high incomes were to have to pay federal income taxes.
Selfish Citizenship 