Posts Tagged ‘bernanke’
Dean Baker gets an excellent catch in what, upon first glance, I thought to be rather solid Washington Post article. Quality from the Post is such a rare beast that I think you’ll forgive me for the mistake. It’s like a guy who gets excited over a bigfoot sighting, but it just turns out to be some hairy guy.
As you probably know, President Obama has hundreds of positions left unfilled within his administration. This is partly due to his not getting around to them, but in large part also due to “Republican” obstructionism, wherein certain senators have placed holds on several key appointments, tossing them into the bureaucratic abyss.
The Post article purports to be about three major posts that Obama has yet to fill in the Federal Reserve and the candidates who may fill them. Now, I’m all for calling attention to Obama’s unfilled administrative positions. They’re a major bottleneck in the bureaucracy and are causing his administration to move sluggishly on matters that urgently need attention – ironically, Federal Reserve issues. It looks as though he’s finally going to bite the bullet and make these appointments during Congress’ recess, which he should have done all along.
So far, so good – it’s all newsworthy. But was it really necessary for The Post to inject yet another ode to Fed Chief Ben Bernanke in its already too-long article? We know how they feel about Bernanke – they’re all for him. If anyone doubts it, I invite you to visit their editorial page. On any given day I guarantee you’ll find some apology for Mr. Bernanke’s malfeasance from one of their establishment cheerleaders.
The phrase in question describes Mr. Bernanke as having “led efforts to make the Fed’s bank oversight more effective and focused on broad risks to the economy that arise out of banks’ decisions.”
Not only is that so vague as to be rendered meaningless, but it is also patently untrue. “More effective”? “Broad risks”? “Bank’s decisions”? How effective? What risks? Which decisions? These are mistakes one goes over in Reporting 101.
They’re sloppy mistakes, too – and they betray a complete vacuum where the writer’s knowledge of history should be. Aside for Lawrence Summers (current National Economic Adviser, who authored the bill that got us into this mess), Timothy Geithner (current Treasury Secretary, who was #3 at the Fed while the banks turned into casinos), and, of course, Alan Greenspan, Mr. Bernanke is the single biggest reason why 1/4 of the workforce is desperately seeking work.
He actively campaigned against oversight, was completely blind to the risks facing our economy (“The subprime mess is largely contained“), and, in fact, actively encouraged those risks by keeping interest rates at almost zero for three straight years after the dot-com bust. This is a matter of public record. A five minute Google search and articles from The Post itself were enough to reveal this.
What’s worrying is that The Post seems to be unaware of this – or if they are aware, put a willfully misleading clause in their “news” article. I can understand it when journalists lie in the Op-Ed pages; that is, after all, what they’re for. But to put a factually ignorant opinion in a serious news article betrays, I think, some very perverse ethics.
A startling statistic buried within an outstanding New Republic article:
As a result of the crisis and various government rescue efforts, the largest six banks in our economy now have total assets in excess of 63 percent of GDP (based on the latest available data). This is a significant increase from even 2006, when the same banks’ assets were around 55 percent of GDP, and a complete transformation compared with the situation in the United States just 15 years ago, when the six largest banks had combined assets of only around 17 percent of GDP. If the status quo persists, we are set up for another round of the boom-bailout-bust cycle that the head of financial stability at the Bank of England now terms a “doom loop.”
Good god. I knew that these banks were big, but I had no idea they were this big. The New Republic devotes the rest of its article to explaining why Obama’s bank regulations are (surprise!) a sham. But then, we should have already known that. When Treasury Secretary Geithner appeared on Newshour a few days ago, he baldly stated that these new regulatory rules “will not include breaking up the banks“. Forgive me, but what is the point of “regulation” if our banks are allowed to keep their “too big to fail” status and continue to engage in the same practices that brought down our economy in 2008? The so-called Volcker rules do nothing to stymie the relationship between Wall Street and Washington, they do nothing to prevent banks from over-leveraging (as they had during the run-up to the crisis), they allow the banks to retain their gargantuan size… so what were the Volcker rules supposed to do again? Oh yeah, it bans “proprietary trading”, somthing which only accounts for 5 percent of total bank revenue.
Meanwhile, President Obama is proposing yet another giveaway to the banks, this time in the form of $30 billion in loans at below-market interest rates. If I sell you something about below-market value, then I’m giving you a gift. That’s what these “loans” are. The Washington Post attempts to bury the issue in the middle of the piece, and refers to the subsidy as going to “community banks”, without noting that most of these “community banks” have long since been bought up by our banking behemoths.
I don’t really know what else to say here. The banks own Congress; they own the House; they own Obama (check out his campaign donors) – there doesn’t seem to be any way out of this. I think some mobs with torches and pitchforks would not go amiss at this point.
Bloomberg has a good article today about how our favorite Fed Chief, Mr. Bernanke, is trying to allay calls for a Fed audit by offering more “transparency”. Let’s see what he has in mind:
The Fed will support legislation to let government auditors probe six temporary programs created to combat the financial crisis such as the Primary Dealer Credit Facility, Bernanke said yesterday in House testimony. While he would support the delayed release of names of firms getting aid from those programs, he said banks borrowing through the longstanding discount window must be allowed to remain anonymous.
Bernanke’s move toward greater openness may not dissuade lawmakers who want the Fed to disclose more information about the Fed’s lending and policy decisions. Lawmakers are responding to public anger over the Fed’s role in the $182.3 billion bailout of American International Group Inc.
“He is definitely trying to defuse the Ron Paul issue,” said Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., which oversees $37.4 billion in assets. “The best he can do at the moment is to play more offense than defense.”
Does he really expect us to buy this bullshit? If that’s what he calls “transparency”, I’ve got some water from the Ganges to sell him. The whole point of this Fed audit is to see what they did with the money we don’t know about. Specifically, we’d like to know about money that was lent under the table to the European union to prevent it from collapsing. And George Washington, over at ZeroHedge, tips us off to $12 Billion in Federal Reserve dollars (cash money, yo) that mysteriously went to Iraq during 2003-2004. Whom did they send it to? Why? These are the questions an audit is supposed to answer.
Releasing hand-picked data from 6 controversial Fed programs tells us nothing. The flimsy excuse Bernanke gives us for why he shouldn’t be audited is that it would have a “bad effect on markets”, and give the impression that Fed policy is subject to “political pressure”. Hey, idiot! I think that “impression” has already been effectively created. You remember reducing the benchmark lending rate to zero, and then keeping it that way for two years? Yeah, that was pretty much political. And what were the bailouts, then? Oh, yeah, political. Man, this is such a convenient excuse – any time someone suggests oversight, all you have to do is say the word “political” and poof! Oversight vanishes.
The Fed needs a full, meaningful audit if we’re going to get any semblance of economic balance back. These days of unlimited money must end.
Here we go again, with another round of pass-the-buck victim blaming, this time from none other than our favorite NYT columnist, David Brooks. The point of his column, I guess, is that we’re all unemployed because we couldn’t adapt to the “changing economic environment” fast enough. Why is it changing? Stop asking silly questions! All you need to know is that unemployment is nearly 20% and it’s all your fault. David Brooks is sorry, but he wishes you had “adapted” faster to “shifting demands”. If you had, you wouldn’t be “paying the price”.
This recession has exposed America’s social weak spots. For decades, men have adapted poorly to the shifting demands of the service economy. Now they are paying the price. For decades, the working-class social fabric has been fraying. Now the working class is in danger of descending into underclass-style dysfunction. For decades, young people have been living in a loose, under-institutionalized world. Now they are moving back home in droves.
Man, this guy would probably blame a rape-victim for dressing “inappropriately” or “not adapting to a fast-changing daylight regime”. So convenient, isn’t it? We’re all unemployed, but guess what? We only have ourselves to blame.
Oh, but what about those short-sighted economists who failed to see a $15 trillion bubble? You know – the ones who, as late as 2007, were on record saying “The subprime mess is contained“? The ones who currently run our economic establishment? Don’t they deserve some blame, Mr. Brooks? Nah.
Speaking of which, wouldn’t you say, Mr. Brooks, that financial journalists, such as yourself, also had a hand in the current unemployment? After all, they shouted the slogan “buy, buy, buy!” long after it became clear that the Dow was terribly overvalued. They systematically refused to report the grave and serious conversations going on in the halls of Wall Street, even though they knew what was going on.
Or how about this? All those “journalists” who advocated that we cut social spending, and let “the free market” take care of everyone (like *cough* some columnists I know) – you don’t think they deserve some blame for the situation our unemployed workers find themselves in?
Nah, it’s much easier to just blame the workers. So let this be a lesson to you, all ye without steady employment! David Brooks cares about your plight, and wishes it were better! Now get a job, you bums!
Update: Dean Baker agrees.
“We’ve got strong financial institutions . . . Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”
– Hank Paulson, Treasury Secretary, March 16, 2008
“We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses, both small and large, and the very health of our economy,”
– Hank Paulson, Treasury Secretary, September 23, 2008
The Dark Bernanke has already been reconfirmed in his role as wealth-distributor-in-chief, so I guess this post is somewhat moot, but I really wanted to draw attention to this cheerleading article by Tom Friedman last week, wherein he vigorously – in fact, insultingly – agitates for Bernanke’s reconfirmation as Fed Chief.
The article is entitled, absurdly, “Adults Only, Please“, and I guess his premise is that only petulant, whining children could possibly oppose the bailout king. Mature, thoughtful adults apparently reward and worship abject failure.
He starts with a bizarre doctor analogy:
We’re like a patient that just got out of intensive care and is sitting up in bed for the first time when, suddenly, all the doctors and nurses at bedside start bickering. One of them throws a stethoscope across the room; someone else threatens to unplug all the monitors unless the hospital bills are paid by noon; and all the while the patient is thinking: “Are you people crazy? I am just starting to recover. Do you realize how easily I could relapse? Aren’t there any adults here?”
See? The economy is the patient, and the bickering doctors are all those feckless politicians. And..uh.. I guess the “adult” would be Bernanke, as he says later in the article. But I think this analogy is missing something. It would be far more accurate if you had Bernanke there as a doctor, but willfully refusing to interpret your symptoms (hemorrhages, coughing up blood, etc.) as anything but signs of the utmost health.
Does anyone remember in 2005 when Bernanke declared “There is no housing bubble!“? Or what about in 2007 when he casually remarked that the “Subprime mess has been contained? Or in early 2008 when he said, “I don’t anticipate any serious problems… the danger seems to have waned…”? The stock market crashed three months after he said this. So which is it, Friedman? Is Bernanke a liar or an idiot? At any rate, if he were a real doctor, and the economy his patient, then we can be sure Mr. Bernanke would have been sued for gross negligence and malpractice.
As Friedman says:
And, finally, don’t forget both the Democratic and Republican senators who have decided to get a quick populist boost by turning one of the few adults we have left — Federal Reserve Chairman Ben Bernanke — into a piñata. No, Mr. Bernanke is not blameless for the 2008 crisis. But since then he has helped steer the country back from the brink and kept us out of a depression. He absolutely deserves reappointment.
It’s so easy to slide over Bernanke’s role in all of this by casually remarking, “Well he’s not blameless, but…” This line of reasoning completely misses the point. As Fed Chief, it’s Bernake’s job to study data, identify perturbations, and warn against upcoming bubbles. What, was his head in the sand the entire time? He failed miserably in his primary role! It’s also his job to secure full employment, something which he certainly hasn’t done. 25% underemployment is not full employment, but considering that Bernanke apparently lives in some kind of Bizzaro-universe, I suppose he’s convinced himself it is.
As Dean Baker says, real adults hold each other accountable for miserable job performance. Children write one-sided op-eds bereft of research or perspective, clearly designed to promote a corporate-centric worldview. Remember, Goldman didn’t exactly object to Bernanke’s confirmation.
One year into his prophesied presidency, Mr. Obama addressed the nation on the issues he thinks plague it the most. The speech was 5 parts economy, two parts health care, one part budget, and a few throwaway references to “national security” and Haiti thrown in as well (for spice). Unsurprisingly, the speech was a hit with the mainstream commentariat. The inimitable Joe Klein seemed to think this was “Obama at his best“; Yglesias, of course, thought it was “just great”; and Greg Sargent praised its “mix of charm and good humor”. As we all know, the main things our belaguered republic lacks at this juncture are “charm” (and/or) “good humor”.
I guess nobody took notes on what Mr. Obama said, as the reactions I’ve seen are based on qualitative nonsense (“How did he look? Was he friendly? Did he get the Republicans’ goat?”) A shame, because a close reading of the text of the speech reveals evasions, inconsistencies, and, at times, willful manipulation of data. Let’s dive in, shall we?
As Mr. Obama said early on, “It begins with the economy”.
Our most urgent task upon taking office was to shore up the same banks that helped cause this crisis. It was not easy to do. And if there’s one thing that has unified Democrats and Republicans, and everybody in between, it’s that we all hated the bank bailout. I hated it — (applause.) I hated it. You hated it. It was about as popular as a root canal. (Laughter.)
So I supported the last administration’s efforts to create the financial rescue program. And when we took that program over, we made it more transparent and more accountable. And as a result, the markets are now stabilized, and we’ve recovered most of the money we spent on the banks. (Applause.) Most but not all.
To recover the rest, I’ve proposed a fee on the biggest banks. (Applause.) Now, I know Wall Street isn’t keen on this idea. But if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need. (Applause.)
Did you really hate it so much, Mr. Obama? I mean, the largest contributors to your campaign were financial institutions, and they certainly didn’t hate it. And your Treasury Secretary, Timothy Geithner, was practically appointed by Goldman Sachs, and went on to distribute trillions of untraceable dollars to unknown banks. He certainly didn’t hate it. Especially when your read about how Geithner willfully colluded with AIG to defraud the taxpayers of billions, it just seems like you’re making up all this populist “oh I hated it but it had to be done” nonsense ex post facto.
You’re well aware that the largest banks consider your so-called “bank fee” a joke, and that the $90 billion you plan to extract from them doesn’t cover 1/100th of the total money their malfeasance lost our economy. Also, paying back the government was stipulated in the TARP to begin with. When the banks accepted the money back in September ’08, they did so with the knowledge that they’d eventually have to pay it back. So all this “fee” does is force the banks to uphold the contract they already signed.
Moreover, you are well aware what $90 Billion won’t even cover the current outstanding bank debt. As Propublica reports, the net outstanding in the TARP program is $316 Billion. Not $90 Billion.
Concerning the “Recovery Act”:
The plan that has made all of this possible, from the tax cuts to the jobs, is the Recovery Act. (Applause.) That’s right -– the Recovery Act, also known as the stimulus bill. (Applause.) Economists on the left and the right say this bill has helped save jobs and avert disaster. But you don’t have to take their word for it.
Talk to the small business in Phoenix that will triple its workforce because of the Recovery Act.Talk to the window manufacturer in Philadelphia who said he used to be skeptical about the Recovery Act, until he had to add two more work shifts just because of the business it created. Talk to the single teacher raising two kids who was told by her principal in the last week of school that because of the Recovery Act, she wouldn’t be laid off after all.
Or you can talk to this guy, who got a $24 million stimulus award after numerous accusations of bribery. Or you could talk to this crumbling school district unable to access its stimulus funds for “bureaucratic red tape”. Or, again, these six companies, currently under criminal investigation, who nevertheless received $30 million from your free money giveaway. As Mr. Obama says in his speech,
There are stories like this all across America.
But what about clean energy? Well, he’s glad you asked:
But to create more of these clean energy jobs, we need more production, more efficiency, more incentives. And that means building a new generation of safe, clean nuclear power plants in this country. (Applause.) It means making tough decisions about opening new offshore areas for oil and gas development. (Applause.) It means continued investment in advanced biofuels and clean coal technologies. (Applause.) And, yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America. (Applause.)
You clearly aren’t a scientist, Mr. Obama, because those suggestions don’t make a lick of sense. As I’m sure you’re aware, no nuclear plant has ever been built on time or on budget. Ever. “Breeder Reactors” are still an experimental technology, and there is no safe way to dispose of the waste current reactors produce. What should we do with “zombie reactors” – those crumbling ’70s-era nuclear plants we can’t find the budget to inspect? They constantly break down, and constitute a major public health risk. Shouldn’t we do something about those, first? Oh yeah, “Spending Freeze”. Well, I guess we can do like the French and just dump our N-waste in Russia.
As for “Clean Coal”, your colleague Al Gore called that a “lie” months ago. There is no such thing as clean coal. You know it and I know it. But, as you and the coal lobby so fervently hope, the American public doesn’t know it. And let’s not even mention the world food crisis your vaunted “advanced biofuels” had a hand in creating. Or the massive deforestation now going on in Brazil and Indonesia to meet our “advanced biofuels” demand. That technology is wasteful, inefficient, and impracticable. Europe would have to use 70% of its landmass exclusively for biofuel crops in order to meet its energy demands. America doesn’t even have enough landmass to grow enough biofuels to meet its demands. And never mind that the distillation of biofuels requires orders of magnitude more energy than we get from them.
We move on to Health Care:
After nearly a century of trying — Democratic administrations, Republican administrations — we are closer than ever to bringing more security to the lives of so many Americans. The approach we’ve taken would protect every American from the worst practices of the insurance industry. It would give small businesses and uninsured Americans a chance to choose an affordable health care plan in a competitive market. It would require every insurance plan to cover preventive care.
It would also require every American to purchase health insurance, whether they want it or not (indeed, whether or not they can afford it) – but that’s not a popular aspect of the bill, so we better not mention that. In fact, given your recent defeat in Massachusetts, it’s probably better we move on altogether.
So now let’s talk about… the deficit!
Starting in 2011, we are prepared to freeze government spending for three years. (Applause.) Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t. And if I have to enforce this discipline by veto, I will. (Applause.)
So your plan is to cut everything but the three biggest contributors to the deficit? How is that a good idea? And is “national security” really something we “need” at this point? You are aware, I’m sure, that we spend on the order of $1 trillion per year prosecuting our misbegotten murder rampages in Iraq, Afghanistan, Pakistan, Yemen, Somalia, and whomever else wish to inflict misery upon.This spending benefits no one, and it demonstrably makes us less safe. You think that might be something we would “cut” if we were trying to save money. I really can’t stress this point enough. We spend the equivalent of South Korea’s GDP murdering Arabs. This is completely baffling to me. Would a “cash-strapped family” really refuse to “sacrifice” its largest and most wasteful expenditure that also happens to actively harm it?
But it’s not just a “deficit of dollars” – it’s also a deficit of… trust. Getting that trust surplus back is what Mr. Obama came to Washington, apparently, to do.
That’s what I came to Washington to do. That’s why -– for the first time in history –- my administration posts on our White House visitors online. That’s why we’ve excluded lobbyists from policymaking jobs, or seats on federal boards and commissions.
But we can’t stop there. It’s time to require lobbyists to disclose each contact they make on behalf of a client with my administration or with Congress. It’s time to put strict limits on the contributions that lobbyists give to candidates for federal office.
Actually, that bolded statement turned out not to be true. When you said “we have excluded lobbyists”, you might have added, “except for the ones I personally approve of.” You know you’ve given waivers to several former lobbyists to work for your administration. Why lie about it? Oh yeah, you’re doing the populist thing. But it kind of detracts from the whole “honesty” message if you have to lie while you’re making it.
So then while he’s on a roll, Mr. Obama attacks the Supreme Court bribery decision, even though the idea that “campaign donations are free speech” was a major reason why he got elected.
With all due deference to separation of powers, last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests –- including foreign corporations –- to spend without limit in our elections. (Applause.) I don’t think American elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities. (Applause.) They should be decided by the American people.
Is this some kind of joke? You raised $680,000,000 in the most expensive presidential campaign ever. You took money from every major financial institution, including some of the biggest beneficiaries of the Geithner-Bernanke giveaway. I’m really at a loss for words here.
Finally we come to the part about terrorism. I think he’s almost done.
Since the day I took office, we’ve renewed our focus on the terrorists who threaten our nation. We’ve made substantial investments in our homeland security and disrupted plots that threatened to take American lives. We are filling unacceptable gaps revealed by the failed Christmas attack, with better airline security and swifter action on our intelligence. We’ve prohibited torture and strengthened partnerships from the Pacific to South Asia to the Arabian Peninsula. And in the last year, hundreds of al Qaeda’s fighters and affiliates, including many senior leaders, have been captured or killed — far more than in 2008.
No you haven’t. Well, maybe you have, but – wink! – we’ll never know, right? The “black site” at Bagram air base is expanding; Guantanamo hasn’t closed; you believe in extra-legal kidnapping and assassinations (even of American citizens!) And given that you refuse to prosecute Bush-era torturers, even though their actions constitute high crime under the Geneva Conventions, the Nuremberg Code, and our own World War II legal precedent, it’s hard to believe you’re really against torture. Oh, and by the way, I know of a massive plot to take American lives. In fact, it’s killed more than 5,000 Americans already, almost twice as many as 9/11 did. Do you know what it is?
Aaaaand that about does it. A few more references to the “heroic” American response to Haiti (our decidedly ‘un-heroic’ IMF loansharking, of course, went unmentioned), a throwaway reference to some random lady who says “we are tough, we are American”, one last “God Bless America!”, and we’re clear! Another logically inconsistent, factually dubious, rabble-rousing excuse of abuse that managed to tell us nothing. Congratulations, Mr. Obama.