January 12, 2026 4:26PM # When Politics Replaces Policy: The Case for Reviving Limited Government By [Norbert J. Michel](https://www.cato.org/people/norbert-michel) --- SHARE Listen to this article Generated with [ ElevenLabs](https://elevenlabs.io/) AI technology. Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech) AudioNative Player... ![dont tread don me](/sites/cato.org/files/styles/pubs_2x/public/2026-01/don%27t%20tread%20on%20me%20flag%20.jpg?itok=sABGd61d) For the last century, the federal government has provided many good reasons why America so badly needs to revive the idea of a limited government. But the past few days of financial policy announcements alone show just how dire the situation is. Don’t stress. If you need info on any of these topics, my Cato colleagues—[Nick Anthony](https://www.cato.org/people/nicholas-anthony), [Jai Kedia](https://www.cato.org/people/jai-kedia), and [Solveig Singleton](https://www.cato.org/people/solveig-singleton)—and I have your back. Here’s a quick rundown on the recent flurry. **Threatened the Fed with a Criminal Investigation** Continuously pressuring the Fed for looser monetary policy has been a staple of this administration, and it’s already tried to use the [courts](https://www.bbc.com/news/articles/c0ezqr7l774o) to boot Fed Governor Lisa Cook. Now, the Department of Justice has [subpoenaed](https://apnews.com/article/federal-reserve-trump-subpoena-bf4fc6c690fa248fbc531bc9bc7f1758) the Fed and is threatening it with a criminal indictment over Chair Jerome Powell’s Senate testimony on the Fed’s building renovations. Powell has consistently said that he will not let political pressure [influence](https://x.com/federalreserve/status/2010510130970849338) how he does his job, and he will not back down because of threats. Powell deserves all the credit in the world for standing up to this kind of pressure. Ultimately, though, Congress [needs to](https://www.cato.org/multimedia/cato-podcast/political-pressure-monetary) [step in](https://www.cato.org/multimedia/cato-video/check-fed-why-politically-motivated-monetary-policy-dangerous) to ensure that future Fed decisions are more immune to the whims of politicians and that monetary policy is more transparent than it is now. **Revived Price Controls** President Trump has [reversed](https://x.com/EconWithNick/status/2010369002967576893) his policy stance on price [controls](https://x.com/SolveigSinglet/status/2010047207953838341) and is now [calling](https://x.com/KobeissiLetter/status/2009801036710699474) for a one-year cap of 10 percent on credit card interest rates. It’s difficult to see how this policy could be implemented administratively, but Senator Roger Marshall (R‑KS) has already [jumped](https://x.com/RogerMarshallMD/status/2009824425248706684) in to say he’ll be leading the legislative effort to “rein in greedy credit card companies.” Like other price controls, this one is a [bad idea](https://www.cato.org/blog/senator-hawleys-rate-caps-where-populism-meets-policy). Really bad. It will result in less credit for more people than if we just let people charge the rates that work for them. The federal government should not be in the business of telling lenders (of any kind) what they can charge, just as they shouldn’t be trying to [set other](https://www.cato.org/commentary/politics-price-controls) prices. **Banning Private Equity and Increasing Mortgage Securities Purchases** It’s no secret that my colleagues and I have not been fans of federal housing policy, especially when it comes to Fannie Mae and Freddie Mac. The companies should have been shuttered in 2008, not kept alive with hundreds of [billions](https://www.cato.org/briefing-paper/gse-experiment-has-failed-congress-should-end-it) in taxpayer funds. Now, the administration wants to manipulate interest rates and home prices by having Fannie and Freddie [purchase](https://www.nationalmortgagenews.com/news/trumps-mbs-buying-plan-sparks-rally-long-term-doubts) [another](https://finance.yahoo.com/news/trumps-200-billion-peoples-qe-114700695.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAGAyLwzzaKR5T787n19aXVp-VPmQWPmdYNUdde79UMkwmJ14ME681T1L3a8pZt683Vwqt7Desk4budREd92g25F7vOFKMIkTQHD9KEtBtYB16frYRVLrW6D_BBOPbwwK0Nn4V2Zt7WE4y9qPocll2mkuQy_qLWEnynHmS5b8xvY3) $200 billion in mortgage-backed securities (MBS). And, of course, the companies are both still under [government](https://x.com/NickTimiraos/status/2009406313688633408) conservatorship. So, there’s no real end in sight, and, if anything, it’s the opposite: even more government involvement and backing. But that’s not all. The administration is also calling for some kind of ban on institutional investors’ ability to purchase single-family homes. As I [testified](https://www.cato.org/testimony/how-private-equity-landlords-are-changing-housing-market) in the Senate back in 2021, this kind of ban makes no sense if policymakers want more abundant and affordable homes. The federal government should [get out](https://www.cato.org/sites/cato.org/files/2025-01/Sound-Financial-Policy-Recommendaitons-for-the-119th-Congress.pdf) of the housing finance business. This purely [political](https://x.com/norbertjmichel/status/2009246370389958861) play will do little more than keep people from investing in homes, which is the opposite of what policymakers should be doing. (It’s likely that Congress (or individual states) will have to pass a law for this sort of ban, but that shouldn’t provide much comfort given some of the [proposals](https://www.merkley.senate.gov/senator-merkley-representative-smith-launch-renewed-effort-to-kick-hedge-funds-out-of-americas-housing-market/) and [promises](https://www.moreno.senate.gov/press-releases/moreno-to-introduce-bill-codifying-president-trumps-ban-on-institutional-investors-from-buying-single-family-homes/) already out there.) **Increased Financial Surveillance** There’s a bunch here. The administration has proposed increasing financial surveillance by lowering reporting [thresholds](https://x.com/L0laL33tz/status/2009655520617988431) and proposed blocking anyone [receiving](https://apnews.com/article/treasury-bessent-minnesota-somalia-fraud-0e1536f770cff273e44008100b29c4ca) [public](https://x.com/EconWithNick/status/2009637281884442983) assistance from transferring money overseas. And all this comes just about one year after the administration started [targeting](https://www.cato.org/news-releases/treasury-secretarys-remittance-crackdown-raises-financial-surveillance-concerns) [transactions](https://x.com/EconWithNick/status/2009629802970652804) of as little as $200. All these issues revolve around the Bank Secrecy Act, a 1970 law that was [passed](https://www.cato.org/policy-analysis/revising-bank-secrecy-act-protect-privacy-deter-criminals) long before the digital financial world was really a thing. It runs [roughshod](https://www.cato.org/events/financial-privacy-under-fire-protecting-restoring-americans-rights) over Americans’ Fourth Amendment rights and now serves as the foundation for a massive financial [surveillance](https://x.com/CatoInstitute/status/2009718130294034781) regime. The law is [ineffective](https://x.com/EconWithNick/status/2009777557034676293) as a crime-fighting tool, and it is long past the time for Congress to restore Americans’ constitutional rights regarding their financial information. **Additional Resources** Yes, that’s quite the opposite of a limited government. Don’t worry, though, the [CMFA folks](https://www.cato.org/center-monetary-financial-alternatives) have all the details you might need. We’ll have more coming, of course, but here are a few extra items for anyone who wants more. [Recent Events Highlight Need for Objective Monetary Policy](https://www.cato.org/blog/recent-fed-developments-highlight-need-objective-monetary-policy) [Politically Driven Rate Cuts Will Erode Trust in the US Economy](https://www.cato.org/blog/politically-driven-monetary-policy-will-erode-trust-us-economy) [What Powell Needs to Do Now to Fend off Trump and Keep the Fed Independent](https://www.cato.org/commentary/what-powell-needs-do-now-fend-trump-keep-fed-independent) [Sanders and Hawley Are Wrong on Rate Caps](https://www.cato.org/blog/sanders-hawley-have-it-wrong-rate-caps) [Responding to Trump’s Credit Card Restriction Proposal](https://www.cato.org/blog/responding-trumps-credit-card-restriction-proposal) [Trump’s Latest: Credit Card Interest Rate Caps](https://www.cato.org/commentary/trumps-latest-credit-card-interest-rate-caps) [55 Years of Financial Surveillance](https://www.cato.org/commentary/55-years-financial-surveillance) [$200 Surveillance Raised to $1,000 Is Still Wrong](https://www.cato.org/blog/200-surveillance-raised-1000-still-wrong) [How a $200 Check Can Put You on a Government Watch List](https://www.cato.org/commentary/how-200-check-can-put-you-government-watch-list) [Trump Treasury Expands Financial Surveillance](https://www.cato.org/blog/trump-treasury-expands-financial-surveillance) ##### Related Tags [Banking and Finance](https://www.cato.org/banking-finance), [Monetary Policy](https://www.cato.org/monetary-policy), [Regulation](https://www.cato.org/regulatory-studies) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).