DeMint: Government can't solve financial system's woes

As President Barack Obama took the podium on Monday to offer his plan to reform the financial system, Sen. Jim DeMint (R-S.C.) criticized the president's approach, claiming that government intervention is precisely what precipitated last year's meltdown.

"You can't solve a problem if you don't know what caused it, and so far the president and members of Congress have not recognized the role that government has played in the downfall," DeMint told Fox News, explaining the government was responsible for the collapse of both Fannie Mae and Freddie Mac.

"There is a role the government played that we haven't agreed to fix," DeMint added. "Certainly there are a number of things that we can do to make the financial industry work better, but, so far, the president has blamed this on capitalism and free markets, when in fact I think it's mostly the result of bad government policy."

DeMint offered his perspective just hours before the president told Wall Street investors and bankers that he anticipated an overhaul to the financial system to reach his desk before the year's end. The plan, as Obama detailed on Monday, would strengthen the Federal Reserve Board, offer more power to financial regulators and create new consumer protection bodies.

DeMint reaffirmed the president's rationale for reform, but the senator said he believed the government ought to take a much different, more hands off approach.

"I don't think we need any more centralized power," DeMint said. "We do need a good system, a regulatory system that is enforceable and understandable right now. But the [Securities and Exchange Commission] is so bureaucratic, so big, that I don't think they can even enforce their own rules. We've created a burdensome system that obviously doesn't work ... more regulation is not going to necessarily solve the problem, we just need smarter regulation."

"When the government owns or controls a large part of your economic activity, that is socialism," DeMint added. "We've got to stop these bailouts and government interventions."