It’s been interesting watching Bernanke get more shrill with each post FOMC meeting news conference. First, he points out that the right wing meme about the unemployment being structural is wrong headed. He talks about why it’s important to respond to cyclical unemployment. This is something congress has being ignoring while doing important things like passing bills to ensure that trust in imaginary friends is printed on money.
“We believe that a good bit of the unemployment were are seeing is what economists would call cyclical unemployment, that is unemployment arising because of inadequate demand in the economy. If that is the case, then monetary policy by lowering interest rates, making financial conditions more accommodative, should stimulate demand, stimulate spending and over a period of time that should help bring cyclical unemployment down. It’s also possible that some of the increase in unemployment reflects so-called structural factors, mismatches between worker skills and job opportunities, loss of skills, geographical location, etc. If that’s the case then monetary policy is much less effective because only other kinds of labor market policies can make progress against that type of unemployment. But again I do think that a considerable part of the unemployment that we are seeing is cyclical. Final comment, cyclical unemployment left untreated, so to speak, for a long time can become structural unemployment as people lose skills, they lose attachment to the labor force.”
He also asked for a little help from congress. Bernanke basically tired to ask for stimulus without using the word since the Congress has branded it anathema.
“With respect to the current economy we are currently continuing our accommodative monetary policy. We are trying to do our best to support economic growth and job creation. It would be helpful if we could get assistance from some other parts of the government to work with us to help create more jobs. But certainly we are doing our part to create more jobs, more opportunities in America.”
Sorry, Ben, the “other parts of government” are just to busy to help the economy work. They prefer to posture and preen. Bernanke has amped up the volume as pointed out at Political Animal. Kevin Drum thinks that the next presser will be when Bernanke says “Will you guys stop griping about the damn budget, get off your butts, and build a few effin bridges instead? Jesus.”
Good Morning! We are approaching the 48th anniversary of the March on Washington for Jobs and Freedom (remember those?) and Martin Luther King’s “I have a dream” speech. Perhaps it is fitting that the ceremony to be held tomorrow to commemorate the anniversary has been postponed indefinitely. After all, King’s dream of ending poverty in American has certainly been postponed indefinitely. Ironically, we now have a “Black President” who as different from Dr. King as night from day. Oh, if only King were here today to speak truth to this sorry excuse for a President!
A reminder from the Center for American Progress: Dr. King’s Legacy Relevant in Today’s Budget Battles
In the 1960s, Americans had a government that refused to deliver basic human rights to its people. Over time, after battles in the courts and the political arena, laws such as the Civil Rights Act of 1964 and the Equal Employment Opportunity Act of 1972 were passed. But despite these great accomplishments the fight continued because many Americans of all racial backgrounds were still living below the poverty line.
So in 1967, Dr. King and the Southern Christian Leadership Conference decided to organize and lead the Poor People’s Campaign to combat poverty. The goal was to push Congress to create an “Economic Bill of Rights” that would establish how the federal government would address and solve the country’s poverty issues. It called for full employment, affordable housing, reasonable living wages, and equitable education opportunities for the poor. Momentum built up around the country, but unfortunately the campaign ended early due to the tragic assassination of Dr. King and lack of organization to continue the efforts.
Cornel West had a very appropriate op-ed in the NYT a couple of days ago: Dr. King Weeps From His Grave Here is a relevant excerpt:
The age of Obama has fallen tragically short of fulfilling King’s prophetic legacy. Instead of articulating a radical democratic vision and fighting for homeowners, workers and poor people in the form of mortgage relief, jobs and investment in education, infrastructure and housing, the administration gave us bailouts for banks, record profits for Wall Street and giant budget cuts on the backs of the vulnerable.
As the talk show host Tavis Smiley and I have said in our national tour against poverty, the recent budget deal is only the latest phase of a 30-year, top-down, one-sided war against the poor and working people in the name of a morally bankrupt policy of deregulating markets, lowering taxes and cutting spending for those already socially neglected and economically abandoned. Our two main political parties, each beholden to big money, offer merely alternative versions of oligarchic rule.
The absence of a King-worthy narrative to reinvigorate poor and working people has enabled right-wing populists to seize the moment with credible claims about government corruption and ridiculous claims about tax cuts’ stimulating growth. This right-wing threat is a catastrophic response to King’s four catastrophes; its agenda would lead to hellish conditions for most Americans.
King weeps from his grave. He never confused substance with symbolism. He never conflated a flesh and blood sacrifice with a stone and mortar edifice. We rightly celebrate his substance and sacrifice because he loved us all so deeply. Let us not remain satisfied with symbolism because we too often fear the challenge he embraced. Our greatest writer, Herman Melville, who spent his life in love with America even as he was our most fierce critic of the myth of American exceptionalism, noted, “Truth uncompromisingly told will always have its ragged edges; hence the conclusion of such a narration is apt to be less finished than an architectural finial.”
King’s response to our crisis can be put in one word: revolution. A revolution in our priorities, a re-evaluation of our values, a reinvigoration of our public life and a fundamental transformation of our way of thinking and living that promotes a transfer of power from oligarchs and plutocrats to everyday people and ordinary citizens.
Yes we need a revolution. We desperately need to revise our priorities and values and to end the transfer of wealth and power from the people to the oligarchs. Who will lead that revolution? We have never been more in need of strong, honest, caring leaders and yet we have a complete vacuum of leadership. What is to become of our country?
Of course Hurricane Irene is the more immediate focus and the object of the media sharks’ feeding frenzy for today. Nothing so pedestrian as putting people back to work or ending poverty could interest them. Interestingly, big media seems to be ignoring the fact that the hurricane has weakened significantly and that the eye has collapsed, meaning that there is unlikely to be any more intensification of the storm. I suppose it could still do quite a bit of damage along the coastline, but as a Bostonian I’ve seen so many of these huge storms fail to live up to the hype that I’m skeptical of this one. I hope I’m right this time.
Jeff Masters at Weather Underground yesterday:
Satellite data and measurements from the Hurricane Hunters show that Irene is weakening. A 9:21 am EDT center fix by an Air Force Reserve aircraft found that Irene’s eyewall had collapsed, and the central pressure had risen to 946 mb from a low of 942 mb this morning. The highest winds measured at their flight level of 10,000 feet were 125 mph, which would normally support classifying Irene as a Category 3 hurricane with 115 mph winds. However, these winds were not mixing down to the surface in the way we typically see with hurricanes, and the strongest surface winds seen by the aircraft with their SFMR instrument were just 90 mph in the storm’s northeast eyewall. Assuming the aircraft missed sampling the strongest winds of the hurricane, it’s a good guess that Irene is a mid-strength Category 2 hurricane with 100 mph winds. Satellite imagery shows a distinctly lopsided appearance to Irene’s cloud pattern, with not much heavy thunderstorm activity on the southwest side. This is due to moderate wind shear of 10 – 20 knots due to upper-level winds out of the southwest. This shear is disrupting Irene’s circulation and has cut off upper-level outflow along the south side of the hurricane. No eye is visible in satellite loops, but the storm’s size is certainly impressive. Long range radar out of Wlimington, North Carolina, shows that the outermost spiral bands from Irene are now beginning to come ashore along the South Carolina/North Carolina border. Winds at buoy 41004 100 miles offshore from Charleston, SC increased to 36 mph as of 10 am, with significant wave heights of 18 feet.
And from last night: “Irene continues to weaken.”
Satellite data and measurements from the Hurricane Hunters show that Irene continues to weaken. A 1:32 pm EDT center fix by an Air Force Reserve aircraft found that Irene’s eyewall is still gone, and the central pressure had risen to 951 mb from a low of 942 mb this morning. The winds measured in Irene near the surface support classifying it as a strong Category 1 hurricane or weak Category 2. Satellite imagery shows a distinctly lopsided appearance to Irene’s cloud pattern, with not much heavy thunderstorm activity on the southwest side. This is due to moderate southwesterly wind shear of 10 – 20 knots. This shear is disrupting Irene’s circulation and has cut off upper-level outflow along the south side of the hurricane. No eye is visible in satellite loops, but the storm’s size is certainly impressive. Long range radar out of Wilmington, North Carolina, shows that the outermost spiral bands from Irene have moved ashore over North Carolina. Winds at buoy 41004 100 miles offshore from Charleston, SC increased to 47 mph, gusting to 60 mph at 3 pm EDT, with significant wave heights of 25 feet.
New York City has ordered 250,000 people to evacuate from coastal areas.
New York City officials issued what they called an unprecedented order on Friday for the evacuation of about 250,000 residents of low-lying areas at the city’s edges — from the expensive apartments in Battery Park City to the roller coaster in Coney Island to the dilapidated boardwalk in the Rockaways — warning that Hurricane Irene was such a threat that people living there simply had to get out.
Officials made what they said was another first-of-its kind decision, announcing plans to shut down the city’s entire transit system on Saturday — all 468 subway stations and 840 miles of tracks, and the rest of nation’s largest mass transit network: thousands of buses in the city, as well as the buses and commuter trains that reach from Midtown Manhattan to the suburbs.
Underscoring what Mayor Michael R. Bloomberg and other officials said was the seriousness of the threat, President Obama approved a request from Gov. Andrew M. Cuomo of New York to declare a federal emergency in the state while the hurricane was still several hundred miles away, churning toward the Carolinas. The city was part of a hurricane warning that took in hundreds of miles of coastline, from Sandy Hook, N.J., to Sagamore Beach, Mass.
From what I’ve heard, the Jersey Shore may get hit worse than NYC, but who knows? I know we have a few commenters from NJ, so I hope they will keep us updated on the situation there. In Boston, they are getting warnings about the storm surges for people along the coast and the Cape and islands.
BOSTON — As Hurricane Irene began to batter the Carolina Coast on Friday afternoon, a hurricane warning was issued for Cape Cod, Martha’s Vineyard, New York City and coastal Connecticut.
A tropical storm warning was issued for the North and South shores, and a tropical storm watch was issued for areas of southern New England further inland….
Massachusetts Gov. Deval Patrick declared a state of emergency ahead of the storm. He said he is particularly concerned because Irene will likely take a path through central Massachusetts, with fierce, damage-causing winds and storm surges on the eastern, coastal side of the state, and at least 10 inches of heavy rain leading to flooding to the west.
Here’s a little comic relief. Some ESPN guy (a former golfer) got in trouble for mocking President Obama on Twitter (has the First Amendment been repealed or what?)
ESPN is coming down on Paul Azinger for mocking President Obama on Twitter. The golf analyst tweeted Thursday the commander in chief plays more golf than he does — and that Azinger has created more jobs this month than Obama has.
On Friday ESPN ‘reminded” Azinger his venture into political punditry violates the company’s updated social network policy for on-air talent and reporters.
“Paul’s tweet was not consistent with our social media policy, and he has been reminded that political commentary is best left to those in that field,” spokesman Andy Hall told Game On! in a statement.
ESPN’s Hall would not comment on whether Azinger, who won the 1993 PGA Championship, will be fired, suspended or punished in some way. “We handle that internally,” he said.
In economics news, Ben Bernanke gave his eagerly anticipated speech yesterday, and basically said that the politicians have screwed up the economy and he hopes they won’t completely sink it with their insanely stupid policies based on Reagan era fantasies. If you’re interested, here are a few links to reactions to Bernanke’s speech.
Derek Thompson at The Atlantic: Bernanke: The Debt Ceiling Debate Nearly Broke the Recovery
Andrew Leonard at Salon: Bernanke Declines to Commit Treason
Jenine Aversa at Bloomberg: Bernanke Scholar Advises Bernanke Fed Chief to Be Bold on Monetary Policy
Those are my reading recommendations for today. What are you reading and blogging about?
There is no doubt that we have had a major world wide financial collapse drastically affecting many innocent people in terms of livelihood and life long savings. It is fair to say that if the regulators had done their job, the country would have not had the hard landing that was experienced in 2008. The 2010 Financial Reform Bill kicked the can down to the Regulators for implementation and the bankers still have influence. This article takes a look at who the regulators were and how they did or did not do their job. The Obama people in the regulator domain are identified along with examples of Bush regulator failures. Hopefully this will give insight into what is being done to preclude another crisis
The financial industry has a gaggle of regulators, each with its politically protected turf.
From Wikopedia: Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system.
Regulation is an unnecessarily a complex subject. It is important to understand that in some cases financial entities can choose their regulator. Some regulators were much more lenient and in many cases banks switched to them, hence the term Regulatory Arbitrage. The following are the major Federal regulators: FED, SEC, OCC, OTS, FDIC, CFTC and FINRA described below. Except for the FED, most of these organizations have direct or indirect ties to the Treasury organization.
FED – Federal Reserve System
From Wikopedia: Its duties today, according to official Federal Reserve documentation, are to conduct the nation’s monetary policy, supervise and regulate banking institutions, maintain the stability of the financial system and provide financial services to depository institutions, the U.S. government, and foreign official institutions.Current chairman is Ben Bernanke, the former chairman was Alan Greenspan. Much more on Mr Greenspan later.
SEC – Securities and Exchange Commission
From Wikopedia: It holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation’s stock and options exchanges, and other electronic securities markets in the United States. Mary Schapiro is the current Chair. Predesessors were; Christopher Cox – 2005-2009, William H. Donaldson – 2003-2005, Harvey Pitt – 2001-03
OCC – Office of Comptroller of the Currency
From Wikopedia: US federal agency established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States. Current Acting Chairman is John Walsh. Previous Chairman were John C. Dugan – (2005 – 2010) John D. Hawke, Jr. – (1998–2004)
OTS – Office of Thrift Supervision ( recently folded into OCC)
From Wikopedia: United States federal agency under the Department of the Treasury. It was created in 1989 as a renamed version of another federal agency (that was faulted for its role in the Savings and loan crisis). Like other US federal bank regulators, it is paid by the banks it regulates. The OTS was initially seen as an aggressive regulator, but was later lax. Declining revenues and staff led the OTS to market itself to companies as a lax regulator in order to get revenue.
FDIC – Federal Deposit Insurance Corporation
From Wikopedia: United States government corporation created by the Glass-Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. The FDIC insures deposits at 7,895 institutions. The FDIC also examines and supervises certain financial institutions for safety and soundness, performs certain consumer-protection functions, and manages banks in receiverships (failed banks).
Sheila Bair is the current chairman of the FDIC and is viewed as a serious regulator with the right incentives for all concerned.
CFTC – Commodity Futures Trading Commission
From Wikopedia: The stated mission of the CFTC is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets.
CFTC is considered to be the primary regulator for Credit Default Swaps in the Dodd Frank regulation scheme.
FINRA – Financial Industry Regulatory Authority
From Wikopedia: In the United States, the Financial Industry Regulatory Authority, Inc., or FINRA, is a private corporation that acts as a self-regulatory organization (SRO). FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD). Though sometimes mistaken for a government agency, it is a non-governmental organization that performs financial regulation of member brokerage firms and exchange markets.
Previously run by Mary Shapiro, FINRA has been critisized as being a ineffective regulator. Most notable was their (and SEC) allowing Bernie Madow to continue for 10 years to operate despite being warned by a whistle blower. When testifying before congress, the whistle blower (Harry Markopolos) said SEC was incompetent, FINRA was corrupt.
It must be said that Financial Regulation in the United States is done by committee of political bureauocrats. It is important to be aware of the fact that many of them are funded by fee’s assessed to the agencies they regulate. So opportunity for Regulatory Capture and Regulatory Arbitrage is prevalent in these agencies. The clear example is Office of Thrift Supervision bowing to their clients. The opposite example is that of Sheila Bair who tries to do the right thing for her clients despite critisizm.
I went to Memorandum today to see what was up with the votes on the DADT repeal, the Tax Giveaways to Billionaires Act, and the START treaty. It’s one of the first places I go in the day because it usually groups the day’s relevant economic and political topics and it covers blog reactions from all sides of the political spectrum. I just wanted to know when the votes would be. What I saw was a bunch of headlines that lead to the thought you see above. I don’t even know where to start with this conglomeration of links, but they all seem connected to my hypothesis above.
It’s not that all of us outside the Beltway don’t recognize that there’s very few real people with functional brains in Congress. The proof for that is right there in the middle of the Memorandum page too.
From Gallup Polls:
Thirteen percent approve of the way Congress is handling its job
That headline is coupled with this one from WAPO: Washington Post-ABC poll: Public is not yet sold on GOP
From The Hill: DeMint will force readings of START Treaty and omnibus bill
For some reason, the 2000 pages of the Tax Bonuses for Billionaires plan isn’t germane to discussions of deficits and national security but the START treaty and the ominibus spending bill are fodder for ideological temper tantrums.
(Psst Kyl: the Reason for the Season is Mithros’ the Bull God’s birthday. Read your Roman History. The reason for Sunday services is The Sun God. Read your Roman History. You were had a long time ago by Constantine and the Nicene Council. Read the historical records of the Council set up by Constantine to establish a Roman religion and get off your friggin, butt and do your job!)
Oh, speaking of mythology, try THIS one on for size from the NYTimes: G.O.P. Panelists Dissent on Cause of Crisis. I’m going to spend some time on this because it’s just the best example of what is wrong with POLITICIANS. Congress was completely duplicitous in the crisis and yet, all the want to do is blame Federal Regulators.
Democrats have emphasized factors like fraudulent practices by mortgage lenders and reckless risk-taking by Wall Street banks and other financial institutions, while Republicans have focused on poor oversight of Fannie Mae and Freddie Mac, the entities that supported the secondary market for mortgages, and decades of government efforts to encourage homeownership.
“While the housing bubble, the financial crisis, and the recession are surely interrelated events, we do not believe that the housing bubble was a sufficient condition for the financial crisis,” the document states. “The unprecedented number of subprime and other weak mortgages in this bubble set it and its effect apart from others in the past.”
Unbelievable. Yes, that happened. Yes, it was a problem. But what drove the demand for subprime and weak mortgages was the demand for those wacky unregulated credit derivatives. It was all part of the same pattern of negligence and wishful thinking. You can’t unlink the systemic problems and the symptoms. Fannie and Freddie got into those things and drowned, but it wasn’t exactly their idea to begin with. Congress should’ve stopped them from going there. But the driving factor was still the demand for credit derivatives. Every institution was churning those things out in this country and in others. The delusion is worse than I thought.
From Yves at Naked Capitalism:
This whole line of thinking is garbage, the financial policy equivalent of arguing that the sun revolves around the earth. Yes, the US and other countries provide overly generous subsidies to housing, and curtailing them over time would not be a bad idea. But that’s been our policy for decades. Calling that a major, let alone primary, cause of the crisis, is simply a highly coded “blame the poor” strategy, In reality, both the runup to the crisis and its aftermath were on of the greatest wealth transfers from the citizenry at large to a comparatively small group of rentiers in the history of man. (If you want to read the long form debunking of this thesis, go straight to Barry Ritholtz, a Republican who has shredded this brand of class warfare, or as he calls it, “one giant clusterfuck of imbecility,” repeatedly on his blog.)
The intent is pretty transparent: to discredit an effort at fact finding into the roots of the crisis, what was hoped to be a Pecora Commission, by making it appear partisan and launching an alternative narrative to muddy the waters. And the reason is clear. Even though FCIC is certain not to have the same effect that the Pecora Commission did, of discrediting major financial services industry figures and exposing various forms of chicanery, it appears that even lesser forms of criticism of the banksters must be sandbagged (the bizarre part of this drama is that at least some Democrats and very selectively, Republicans in office are willing to call out the predatory, extractive behavior of the large banks. But no one has the guts to buck an industry that is a major paymaster in a very serious way).
Experts agree that while Fannie and Freddie and the federal government’s push to encourage homeownership played a significant role in causing the crisis, actions by Wall Street magnified the fallout and caused a crisis that led to the Great Recession. Economists from the Federal Reserve, as well as bank regulators first appointed by Republicans, agree that the Community Reinvestment Act played virtually no role in causing the financial crisis.
But the Republicans’ report will largely focus on the role played by the federal government. It will note that a crisis was averted after the government bailed out Bear Stearns and facilitated its absorption by JPMorgan Chase, according to people familiar with the matter. The crisis roared back after the government allowed Lehman Brothers to fail, scaring nervous investors. A bigger and more protracted downturn was avoided when policy makers essentially bailed out the entire financial system.
Exactly. It’s never EVER been the Community Reinvestment Act and to even insert it into the report is odious and false. I never got how the CRA got connected to the Fannie/Freddie mess from the outset other than through political memes. I remember getting blog wacked by some from the left because I said Fannie and Freddie were part of the problem. I never ONCE mentioned the CRA; only that Frannie and Freddie did what all the financial instituions did except on a much larger scale. They packaged and sold poorly underwritten mortgages that were eventually going to make some one homeless sooner or later. Fannie and Freddie’s roll was complicit and huge only because of their size and importance in the mortgage market. They’d have never dreamed of doing what they did if it wasn’t for the fact they could package and sell the things–just like Countrywide and a bunch of other now defunct private entities–to stupid investors who were mislead by high ratings and the belief that due diligence was done on mortgage underwriting. The deal is that Congress could’ve stopped all of that–especially Fannie and Freddie–but they did nothing. They could’ve prevented the underwriting of many of those predator loans.
Couple that with this travesty via the Birmingham News and AL.com.
Bachus, in an interview Wednesday night, said he brings a “main street” perspective to the committee, as opposed to Wall Street.
“In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks,” he said.
In his quiet campaign for the chairmanship, Bachus promoted an agenda to end taxpayer subsidies for mortgage giants Fannie Mae and Freddie Mac, repeal those parts of the Wall Street reforms that he thinks still leave the door open for taxpayer bailouts of financial institutions or their creditors, and increase oversight of President Barack Obama’s administration.
Then, we have Congressman Out-of-touch-with-reality Ron Paul who will be in charge of the subcommittee in Congress that deals with the FED. This is another example of putting some one in charge of oversight that want’s to just plain abolish the reality. He’ll be so stuck in ideologue land that oversight will just go by the way side. It’s like putting a Flat Earther in charge of NASA.
In a move that may seem to some like putting the fox in charge of the hen house, Rep. Ron Paul (R-Texas) has been named to head the House subcommittee that oversees the Federal Reserve.
Paul, 75, is a longtime critic of the central bank and, as Bloomberg pointed out, has even written a book called “End the Fed.” He will lead the domestic monetary policy subcommittee of the House Financial Services panel.
In announcing Paul’s appointment Thursday, chairman-elect Spencer Bachus (R-Ala.) said the Texan would add to the team that “crafted the first comprehensive financial reform bill to put an end to the bailouts, wind down the taxpayer funding of Fannie Mae and Freddie Mac, and enforce a strong audit of the Federal Reserve.”
Paul told Bloomberg last week he plans to call for hearings on U.S. monetary policy and will continue to press for a full accounting of the Fed’s functions. In the past, Paul has introduced legislation to abolish the central bank.
There are a lot of people realizing that Congress is not acting in the interest of the American people. The American Interest journal has a series of articles–including an important one on Income Inequality by Tyler Cowen–on inequality and democracy. The front page of the Magazine–featured and linked to on the right–asks the most relevant question I can think of today. “Are Plutocrats Drowning our Republic?” A subsidiary question could well be “Why is every one in Congress intent on helping them do it?”
Congress did not get the message from this election. Here’s a clue from another link at that AI site. They just seem intent and recreating the same scenarios and the same problems over and over and over again.
Many Americans are still furious that their government helped the rich and politically connected few while leaving the rest hung out to dry. The government bailed out Wall Street financiers who live in the top tenth of the top hundredth of the income distribution. Meanwhile, almost one quarter of families with mortgages remains stuck with negative equity in their homes.
Let’s return to that bit on the Republicans on the crisis panel. I’ll borrow some analysis from Paul Krugman in his blog thread: ‘Invincible Ignorance’.
So Republican members of the Financial Crisis Inquiry Commission are going to issue their own report, placing primary blame on the government — because it’s always the government’s fault.
And according to reporting at the Huffington Post,
all four Republicans voted in favor of banning the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.
Yep. It was all Fannie and Freddie, which somehow managed to cause housing bubbles in Ireland, Iceland, Latvia, and Spain as well as the United States; and the repo market had nothing to do with it.
And bear in mind that this wasn’t one Republican; it was all of them.
We consistently get people in congress that appear to live in a reality of their own making. They ignore science. They ignore history. They ignore economics. They ignore nearly everything to push partisan power, curry favor with the donor and the bonus class, and spin tails to deluded followers that have no basis in fact, evidence, or theory. They even run campaigns based on denying scientific theories that are well prove–like evolution–and promoting failed hypothesis–like all of Reaganomics–even when the majority of people who would know try to give them the facts.
What is it about our political process that seems to put policy in the hands of complete whack jobs and unemployable lawyers? My one dash at the Nebraska Unicameral convinced me that only pathological narcissists and liars and ideologues capable of denying reality can get through the process. Those folks are surrounded and supported by equally pathological narcissists, liars, and ideologues and they’re all bought up by a plutocracy that pays to play.
We are so F’d. I am so frightened for and disheartened about the future of this country. How is it that Congress can get such low approval numbers but go right back to ruining the country in the same manner post-elections? Both parties have their on unique style that achieves the same end. What can we do to stop this? It has to be the gerrymandered districts and the money. But, how can we change the laws when the foxes are in charge of all the hen houses?
The Senate on Wednesday approved a sweeping tax package negotiated by the White House and congressional Republicans, and House leaders – who were looking to amend the measure in a way that would satisfy liberals without unraveling the deal altogether – said a House vote could follow as soon as Thursday.
The Senate passed the package by a vote of 81 to 19.
Before senators began debating the $858 billion package in late morning, President Obama urged lawmakers in both houses to pass it “as swiftly as possible.” He called the plan “an essential ingredient in spurring economic growth over the short run.”
Speaking before a meeting with business leaders, Obama said: “I am absolutely convinced that this tax cut plan, while not perfect, will help grow our economy and create jobs in the private sector.” He acknowledged that lawmakers of both parties object to different aspects of the plan but said, “That’s the nature of compromise.” He added that “we can’t afford to let it fall victim to either delay or defeat.”
In other news: Obama announces his Faith Based VooDoo economics initiative based on advice from the ghost of Ronald Reagan … We are still so F’d.
that is all.
While I stuck the announcement into the morning links, you had to know that I’d front page this announcement some time today. So you also probably knew that I breathed a quiet sigh of relief last night when I found out we were not getting La La Summers for Fed Chief. President Obama has decided to re-appoint Fed Chairman Ben Bernanke to another term.
I awakened this morning to the bleating of the bloggies on this move. Of course, I have this tendency to look at folks’ credentials before I decide to take their opinions seriously. It also helps to know their political agendas and frames. Chairman Bernanke has probably had the most challenging time at that job since Paul Volcker took over the Fed helm back in the days of rampant inflation and Carter malaise. So many blogs have come to criticize Bernanke, but I’m just glad we’re not here to bury him. He may not be perfect, but he’s a damn sight better than just about everything else out there. Ben Bernanke is an economist’s economist.
Wall Street and academic economists in recent weeks showed enthusiasm for giving Mr. Bernanke a second term, and some administration insiders felt similarly even though Mr. Bernanke was appointed by — and served in the White House of — President George W. Bush. Appointing a Democrat such as Janet Yellen, president of the Federal Reserve Bank of San Francisco, or Alan Blinder, former Fed vice chairman — both former advisers to President Bill Clinton — would have been popular with many Democrats. But a move by Mr. Obama to install his own person at the Fed might have have rattled markets and unsettled the foreign investors.
Phil Izza at the WSJ has a pretty good line up of comments from both political and financial folks on the Bernanke appointment. Some of the performance the financial markets today(so far, all up) could be linked to the decision as the Fed Chair heads up the Federal Open Market Committee and sets its agenda. It is a rare FOMC that will go against the recommendations of their chair when setting monetary policy(primarily levels of interest rates, exchange rates, and bond offerings) although there is usually a healthy amount of debate and exchange or so I’ve heard since the meetings are top secret.
- I think it’s good news for the Federal Reserve. It’s good news for the country. It’s a great choice. Chairman Bernanke has done a terrific job in bringing openness to the Fed. He has been bold and creative in dealing with the financial crisis… It was not clear to most people that the crisis was going to be as broad-based, and that the excesses in the financial markets and in lending were as broadly based as they turned out to be. Even at the start, he was willing to consider all options to deal with what appeared to be more a liquidity than a solvency crisis. As it began to become more clear that it was a crisis of solvency and leverage and a classic credit crunch, he didn’t flinch in bringing enormous creativity to bear in mitigating the problem –Richard Berner, Morgan Stanley
- Having a new chairman come in at this late date would put the Fed engineered solution to both the recovery and the exit strategy at risk. The Federal Reserve made a hasty exit from easy money stimulus in the 1930s and we know how that worked out… Mistakes have been made at many regulatory institutions during this crisis, but all the Fed’s mistakes would have been made by any man according to the prudent man rule. Bernanke is a true prudent man who calls them as he sees them, and knows the ins and outs of policymaking… If he can pull off this recovery that still needs nurturing, he could well go down as one of the greatest Fed Chairmen in history. –Christopher Rupkey, an economist with Bank of Tokyo-Mitsubishi
I’ve been Fed watching again. That’s something of both an occupational hazard and a weirdish hobby for me. Usually, Fed chairs stay off the lecture circuit until they retire and write their biographies. Ben Bernanke, however, is not your usual Fed Chair and these are not usual times. I think you may recall that part of his observations with being in charge of monetary policy when there’s no room drop interest rates (ZIRP) has to do with communicating future Fed actions to a nervous public. This continues.
Bernanke was in Kansas City over the weekend speaking to normal people and Jim Lehr of the PBS program News Hour. There were several things from this exchange worth mentioning. The first is a response to the meme circulating around the libertarian circuit that there is no accountability between the FED and any one in Washington. That is untrue for several reasons. First, because the majority of appointments (including the Fed Chair) to the FOMC are made by POTUS and approved by the Senate. Second, the Fed Chair makes biannual trips to the Hill to speak with both houses of Congress and take questions. Third, they publish their internal records as well as their research continually. It’s a matter of public record. The only thing Congress doesn’t get to see is the rationale behind monetary policy which is perfectly in keeping with the idea of independence supported overwhelmingly by evidence and theory. They have to the right to see the Fed balance sheet and items now. What they do not have is the right to ‘audit’ monetary policy. Something that would be a disaster.
“The Federal Reserve, in collaboration with the giant banks, has created the greatest financial crisis the world has ever seen,” Representative Ron Paul, Republican of Texas, said at a House hearing last week in which Mr. Bernanke testified about the state of the economy.
Republican lawmakers portray the Fed as the embodiment of heavy-handed big government, and have called for scaling back the central bank’s regulatory powers. But liberal Democrats, like Representative Dennis J. Kucinich of Ohio, have accused the Federal Reserve of caving in to demands by banks for huge bailouts, for failing to protect consumers against dangerous financial products and for being too secretive about its emergency rescue programs.
More than 250 lawmakers have signed a bill sponsored by Mr. Paul that would allow the Government Accountability Office to “audit” the Fed’s decisions on monetary policy — a move that Fed officials see as a direct threat to their political independence in carrying out their central mission of setting interest rates.
A lot of the complaints at the appearance came from the audience who basically aired Kucinich’s view that the Fed appeared all too willing to bail out the reckless big guys while letting the little guys go belly under. Bernanke did not shy away from the questions at all.
When a small-business owner asked Mr. Bernanke why the Fed helped rescue big banks while “short-changing” small companies, Mr. Bernanke answered that he had decided to “hold my nose” because he was afraid the entire financial system would collapse.
“I’m as disgusted by it as you are,” he told the audience of 190 people. “Nothing made me more angry than having to intervene, particularly in a few cases where companies took wild bets.”
He used a most interesting metaphor when explaining why he had to hold his nose and bail out the gamblers. He basically said, if an elephant falls it crushes the grass beneath it. Wow, a zen moment from a Fed Chair. Who’d have thought that was possible? He also said that the main reason he did it was because he didn’t not want to be the Fed Chair at the time of the second Great Depression. I’d say that was succinct enough.
A blueprint of the Obama administration plan to extend Federal Reserve Role in the markets was released last night. I have to agree with Felix Salmon at Reuters about the increased density of DC alphabet soup. If you want to wade through 85 pages of sleep inducing regulatory policy, knock yourself out here. Frankly, this sort’ve stuff is my job and I had to run for another cup of coffee. Then again, you can rely on some of the folks that get paid to suffer through that kind of torture, like Salmon.
Do you know a FHC from a BCBS? If not, you’re going to have a hard time wading through the government’s white paper on financial reform, which is full of such things. (An FHC is a financial holding company; the BCBS is the Basel Committee on Banking Supervision. The link is to the WaPo leak of the paper, there might be minor changes in the final document.) This, for instance, is a real sentence from the paper:
The United States will work to implement the updated ICRG peer review process and work with partners in the FATF to address jurisdictions not complying with international AML/CFT standards.
But never fear! Your tireless blogger has waded through all 85 pages, and I’m pretty sure I’ve got the gist of it at this point.
In a nutshell: If you thought this was going to make the current horribly-complicated system of financial regulation less complicated, think again.