Sunday, December 13, 2009

If Ben Bernanke Has To Depend On A Vote From Bernie Sanders To Save His Job, He Better Start Working On The Unemployment Situation... Yesterday


Bernie Sanders went to the same high school as Ken and I (Horndog High). Maybe there was something in the drinking fountains but he sure seems to be on the same page we're on a lot more than any other member of the Senate--- including two other senators who went there, ex-Senator Norm Coleman and New York's senior senator, Chuck Schumer, each of whom was known to have always brought bottled seltzer water to school and never drink from a fountain. At the bottom of this post is a successful attempt by Sanders to educate Stephen Colbert's audience about why Ben Bernanke doesn't deserve to be re-confirmed as Fed chairman, based solely on what a terrible job he's done so far.
What Justice demands-- what egalitarianism demands-- is you cannot have a situation where so few have so much, where the CEOs on Wall Street are making hundreds of millions of dollars a year, often engaged in reckless, if not illegal, behavior while the average worker has lost his job because it's gone to China-- or has seen a significant decline in wages...

That 'invisible hand of the market,' through deregulation of Wall Street has led those large financial institutions into a situation where they were peddling worthless securities and drove this country into the financial crisis that we're in right now, which resulted not only in a seven-hundred billion dollar bailout but trillions of dollars of taxpayers' money going to zero-interest loans for the Fed... Some of us, do not necessarily believe that Wall Street is America. Poverty has grown. More and more people are losing their health insurance and their pensions and if you think Bernanke is saving America, you're a little bit confused... Wall Street, in my humble opinion is not America. We've got to stand up for the middle class and working families, not for the big money interests.

He must get mighty lonely in the House of Lords! The Finance/Insurance/Real Estate lobby has rewarded John McCain's unstinting service on their behalf with over $33 million dollars in direct "donations" over the year. Other shameless Wall Street shills, from Joe Lieberman ($10,052,824), Arlen Specter ($6,360,585), Miss McConnell ($5,178,003) and Lamar Alexander ($4,895,125) to Max Baucus ($4,757,318), Kay Bailey Hutchison ($4,686,688), John Cornyn ($4,470,392) and Evan Bayh ($4,351,250) have been on the Wall Street gravy train for their entire political careers. This year alone Wall Street is throwing life lines to endangered lackeys who are in trouble with the voters back home for ignoring their interests to placate the banksters, like the aforementioned Specter ($552,175) and Bayh ($365,520), and four of the Senate's worst-ever K-Street whores, always for sale Blanche Lincoln ($515,000), Johnny Isakson ($338,300), David "Diapers" Vitter ($302,841) and Richard Burr ($281,397). Bernie Sanders, on the other hand, has raised $7,800 from these interests, not from CEOs and PACs and lobbyists but from tellers and clerks pooling small donations. Over the course of his entire career, Sanders has taken in less money from this toxic sector than any other current members of the Senate with the exceptions of Herb Kohl, a millionaire who, like him, does not accept dirty money, and Roland Burris an appointed caretaker senator who hasn't raised contributions. All 97 other members of the Senate have taken in far more bankster bucks than Sanders. Which is why we hear that kind of refreshing talk from him instead of, say, John McCain or Miss McConnell, who have never-- not once in either man's long, turgid career-- stood up for the interests of working families over the interests of Wall Street predators.

Even Bernanke admits the Fed was asleep at the wheel and that that contributed to the market's collapse. Thursday Paul Krugman gave him a report card and this morning the Washington Post jumped into the game. Krugman sees him as an impediment to bringing down unemployment-- and at a time when the Fed should be working on creating policies that result in at least 300,000 new jobs per month over the next 5 years.
I don’t mean to absolve the Obama administration of all responsibility. Clearly, the administration proposed a stimulus package that was too small to begin with and was whittled down further by “centrists” in the Senate. And the measures President Obama proposed earlier this week, while they would create a significant number of additional jobs, fall far short of what the economy needs.

But while economic analysis says that we should have a large second stimulus, the political reality is that the president-- faced with total obstruction from Republicans, while receiving only lukewarm support from some in his own party-- probably can’t get enough votes in Congress to do more than tinker at the edges of the employment problem.

The Fed, however, can do more.

Mr. Bernanke has received a great deal of credit, and rightly so, for his use of unorthodox strategies to contain the damage after Lehman Brothers failed. But both the Fed’s actions, as measured by its expansion of credit, and Mr. Bernanke’s words suggest that the urgency of late 2008 and early 2009 has given way to a curious mix of complacency and fatalism-- a sense that the Fed has done enough now that the financial system has stepped back from the brink, even though its own forecasts predict that unemployment will remain punishingly high for at least the next three years.

The most specific, persuasive case I’ve seen for more Fed action comes from Joseph Gagnon, a former Fed staffer now at the Peterson Institute for International Economics. Basing his analysis on the prior work of none other than Mr. Bernanke himself, in his previous incarnation as an economic researcher, Mr. Gagnon urges the Fed to expand credit by buying a further $2 trillion in assets. Such a program could do a lot to promote faster growth, while having hardly any downside.

So why isn’t the Fed doing it? Part of the answer may be political: Ideological opponents of government activism tend to be as critical of the Fed’s credit expansion as they are of the Obama administration’s fiscal stimulus. And this has probably made the Fed reluctant to use its powers to their fullest extent. Meanwhile, a significant number of Fed officials, especially at the regional banks, are obsessed with the fear of 1970s-style inflation, which they see lurking just around the bend even though there’s not a hint of it in the actual data.

But there’s also, I believe, a question of priorities. The Fed sprang into action when faced with the prospect of wrecked banks; it doesn’t seem equally concerned about the prospect of wrecked lives.

And that is what we’re talking about here. The kind of sustained high unemployment envisaged in the Fed’s own forecasts is a recipe for immense human suffering-- millions of families losing their savings and their homes, millions of young Americans never getting their working lives properly started because there are no jobs available when they graduate. If we don’t get unemployment down soon, we’ll be paying the price for a generation.

So it’s time for the Fed to lose that complacency, shrug off that fatalism and start lending a hand to job creation.

Is Bernanke the right man for the job? Watch Sanders' reaction on the clip when Colbert intimates as much. On both sides of the aisle, senators are opposing Bernanke-- from Sanders all the way across the spectrum to the fringe right inhabited by extremists like Jim DeMint and Jim Bunning (who pointed out that the Fed chairman ins "the definition of a moral hazard.") I have little doubt that the Establishment-- a bipartisan one-- will rally round the flag for one of their own this week. Although he ultimately spews out that claptrap that Bernanke saved the world and should be re-confirmed, economist Douglas Elliott of Brookings, outlines a powerful case for not giving him a second term:
The bubble. Bernanke was Fed Chairman as the bubble grew toward its most inflated point. He was in charge long enough to have taken action. It may not have made sense to raise interest rates, thereby slowing down the entire economy, in order to fight the asset bubbles – you find good economists on both sides of this issue. However, there were regulatory actions that could have been taken and a lot more use of the Fed’s ability to warn against dangers to the economy. Internally, contingency plans could have been developed that would have allowed quicker and more coherent action once the bubble burst.

Bank supervision. The Fed supervises the parent companies of all the major banks, as well as supervising many of the smaller banks directly. None of our nation’s regulatory bodies, including the Fed, covered themselves with glory regulating the banks during the bubble and in the early days of the crisis. It is probably unnecessary to cite the litany of mistakes made by the financial sector. Many of these mistakes were made at institutions at least partially regulated by the Fed. The Fed often did not recognize the problems and many times did not act as effectively or urgently as it should have even when it was aware of the troubles.

Consumer protection. Part of the Fed’s responsibility as a bank regulator was to protect consumers against products that were mismarketed or unreasonably risky. The Fed had authority to take action against some of the worst products and lenders associated with subprime mortgages, but did not do so in a timely manner.

The financial bailouts, particularly AIG. Much of the anger against the Fed relates to its central role in rescuing the financial system. The Fed provided financial support for the rescues of Bear Stearns and AIG, as well as providing guarantees for Bank of America and Citigroup. There are two levels to the accusations against the Fed. Those who feel that the rescues saved the bankers and other elites at the expense of the ordinary taxpayer are angry with the Fed for being an integral part of this. I personally do not fault the Fed for this, as I believe that we did indeed need to take strong action to aid the financial sector in order to avoid a far worse recession. At a more detailed level, mistakes were definitely made in the process of dealing with AIG and some of the other rescues and there are still other actions that appear reasonable to me but are viewed by others as mistaken.

Turf warfare. It has been sad to see the extent to which each of the country’s financial regulators has fought to preserve their power bases as the administration and Congress look to craft a sensible reform of our regulatory structure. The Fed under Bernanke appears to be guilty of this along with the others. It is possible that he and his colleagues have made their arguments solely out of a sincere desire for the public good, unsullied even by unconscious self-protection, but the nearly perfect alignment between their positions and the self-interest of the organization leads me not to believe this. If my fear is true, it is a less grievous sin than the other arguments against reconfirmation, but it ought to have some weight. We are in the equivalent of wartime and it is incumbent on those in positions of power to stay focused on the national interest.

Back to Bernie:

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Fed's Dead - Bernie Sanders
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