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Fed Appointees, Expect an Inquisition
It may not be possible to get someone who could see an $8tn housing bubble before its collapse wrecked the economy as a member of the Fed's board of governors. However, before the Senate approves these picks it should make sure the new appointees can at least recognise the housing bubble and its significance after the fact.
Dean Baker: "We have to end a system in which those at the top are never held accountable for the harm they inflict on the rest of society." (US Federal Reserve in Washington, DC. AFP/File/Karen Bleier) Specifically, the Senate should insist that the nominees give their account of the run-up to the crisis and explain where the Fed make mistakes and what they would do differently with the benefit of hindsight. This line of questioning is especially important in the case of Janet Yellen, President Obama's nominee as vice-chair of the board of the governors.
Yellen's fingerprints are already on this crisis, having served as a Fed governor in the 90s and more recently as a president of the San Francisco Federal Bank. Yellen is on record as explicitly saying that the Fed lacks the ability to recognise asset bubbles like the housing bubble. She argued further that it lacks the tools to effectively rein in an asset bubble. And, she argued that cleaning up after the collapse of the bubble is no big deal. In terms of economic analysis, she hit a grand slam in getting it absolutely as wrong as possible.
Presumably, Yellen has changed her views of what the Fed can and should do about asset bubbles. The banking committee should give Yellen the opportunity to go on record explaining her new position and how the events of the last three years have led her to change her mind on these issues. Of course, if she still adheres to her earlier position, then she clearly is not an appropriate person to be vice-chair of the Fed.
The other Fed picks should be given this opportunity as well. It is not too much to ask that appointees to the Fed's top policymaking body have a clear understanding of the biggest monetary policy blunder in more than 70 years.
This line of questioning can be refreshing because there still has been remarkably little public acknowledgement of the fact that the country is suffering because of a combination of unbelievably inept economic policy and Wall Street greed. There is probably little that can be done to change the latter – the financial sector is all about making money – but we can in principle do something about the quality of economic policymaking.
The country lost an opportunity to make a big first step toward improving the quality of economic policymaking when the Senate approved Ben Bernanke for a second term as Fed chairman. Having sat as Fed governor since 2002 and as Fed chairman since 2006, no one other than Alan Greenspan bears more responsibility for the current economic crisis than Ben Bernanke. Yet, in spite of the trail of disaster – job loss, foreclosures, devastated retirement accounts – caused by his policy mistakes, Bernanke was rewarded with another four-year term as chairman. This fact is pretty hard to justify.
The new Fed appointees need to be reminded (as we all do) that tens of millions of people are out of work or underemployed today, not because they are too lazy to work or lack the necessary skills and experience. They are out of work because the people who manage the economy could not do their job right. None of the people in policy positions lost their jobs because of this failure.
We have to end a system in which those at the top are never held accountable for the harm they inflict on the rest of society. At the very least, the new Fed picks better have a story as to what they think went wrong and how these mistakes could have been prevented. If they can't provide an answer to this question, then they are in the wrong line of work.
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30 Comments so far
Show AllGood luck
Rose, In just two words that the best summary I've seen in days.
We should hold those at the top accountable for the harm they shall inflict on the rest of society pre-emptively. Hang them first and then appoint them....
And Yada, Yada, Yada.
Hang the bastards - and bitches, too.
I worked hard for my House. I earned it - all $120,000. Now, it is worthless. I can't even sell it for $40,000. Who are these people?!?
Who are these people?
They're the same bloodsucking leeches that are gearing-up to steal your 401K and other private pension plans to supplement the bankrupt FDIC that guarantees savings (I believe) up to $250,000. per customer when their bank fails.
They're the same bloodsucking leeches that are gearing-up to encourage and allow Money Market Funds to use more of our money to purchase U.S. Treasuries that many sovereign investors are dumping while the US increases its debt to unsustainable levels.
They're the same blooksucking leeches that are intent on destroying the remainder of the Middle Class and any assets they might have left.
Gail: Exactly the way I see it.
Good post!
VVV, When Obama said, "Yes We Can!" the WE he had in mind wasn't the WE reading these posts or the WE losing our homes and all we've worked for! "Si Se Puede, my ass!"
"We should...", "We have to...".
Easy to agree, hard to get done.
It probably takes a revolution. No one knows what kind yet.
GRAND SCHEME OF THINGS
Now if the helpless on death row deserve to die, then a banker if by
his actions should cause those among the homeless to freeze and die,
surely it must be “Eye for eye and tooth for tooth.”
But, are you not a little curious to see what this life is all about,
what the madding crowd will do next when its either
sincere contrition or expire in a convulsion?
There are no John Browns in this society, only McVeys and Stacks, the kind that take the wrong people's eyes and teeth. There is no justice system, only an arbitrary legal system.
Contrition? Not with this self indulgent bunch.
My guess is that they will expire with a whimper, one at a time.
Karl Marx predicted that self destruction would be the end result of capitalism with the system eventually consuming itself, its workers and its environment. I think this is what that end looks like.
"I think this is what the end looks like".
The oligarchs haven't completed the entire swindle yet; but when they do, it's going to look a whole lot worse and millions more will be suffering as a result.
Here's the conundrum I see...
Once the oligarchs finish he entire swindle...what they've gained won't be worth the paper it's all printed on.
The oligarchs are not preparing for the coming end of culture any better than the masses are. I see them everyday and the only thought that passes through my mind is; "This one, too, shall die..."
Well, of course we're all going to die at some point, but do you really believe that these oligarchs haven't already designed and set-up their secure escape plans? Are you kidding? As far as culture goes, they have essentially created their own perverted culture that they seem very comfortable with. These a$$holes don't give a $hit about anything but power and money. And with both, they will thrive!
"During the 2008 elections Wall Street provided candidates with $155 million in campaign funds, roughly $88 million to Democrats, and $67 million to Republicans. In the year after the election Wall Street firms and executives handed out $42 million to lawmakers, most of it to the members of House and Senate banking committees, and House and Senate leaders." We won't even talk about how much was handed out over the past 20 years.
"As our societies collapse in on themselves, the governments will protect the banks and multinationals. When the people go out into the streets, as they invariably do and will, the government will not come to their aid, but will come with police and military forces to crush the protests and oppress the people. The social foundations will collapse with the economy, and the state will clamp down to prevent the people from constructing a new one." - Andrew Gavin Marshall
Paper money is a whore; it's nothing but an abomination that transfers wealth from the many to the few, and the super-wealthy are well aware of this. But while the ponzi-scheme continues, the central banks are buying gold instead of selling it....and will continue to do so until they have acquired most of it from the suckers who are selling it to them for the paper money that is losing its purchasing power and will eventually lose its complete value.
Inflation is defined as "the increase in the quantity of money and debt within an economy." And while Washington defines interest on credit card debt as “consumer spending” and adds it to GDP; and while Washington does NOT include food or energy to arrive at a true inflation rate; and while Washington manipulates unemployment figures, it becomes clear that the collapse is being delayed and not averted.
Nothing has changed except the level of debt the country is quickly accumulating. They can't run the printing presses forever without totally destroying the monetary system.
Obama pushing with his front,back,aides,appointee's and congress this contry and peoples harder and harder down into the pit of nothingness for the have-nots and with an audience of haves watching our demise.Tony
Oh, please!
Elsewhere, I skimmed an article (not worth linking) touting Senator Dodd's latest reform proposal. Only someone from another planet, or otherwise unfamiliar with the status quo, could get excited about Dodd's alleged bold and heroic stance.
Having amassed a tidy fortune during his long career in Organized Crime, Dodd is now planning his transition to an even more lucrative career with the private-sector allies he pretended to keep in check. Yet this credulous "insider" would have the public believe that lame-duck Dodd will now righteously take his prospective employers to task.
Likewise, Baker here relies on the hackneyed scenario of Elected Misrepresentatives not only conducting a righteous "inquisition" of Fed appointees, but implies that complacent and complicit appointees may be rejected if they prove unable to give a good accounting of their professional conduct.
Arrant nonsense.
Regardless of how probing and unrelenting the inquisitors are, and despite the rave reviews their performance gets from pundits published here and elsewhere, the appointments are a done deal-- like Bernanke being appointed to another term.
If any of the appointees are particularly unacceptable to Republicans, or some inconvenient peccadillo like unpaid taxes or undocumented alien domestic help surfaces, an appointee may withdraw discreetly and be replaced by an equivalent.
But regardless of how fast and intense the music is, and how lame the appointees' tapdancing, there's simply no way that they're going to be rejected on their merits, or lack thereof. Who's Baker kidding?
Dean Baker is OK with me generally, but it's baffling and exasperating when he reverts to such naïve and idealistic expectations. Surely he knows that to the extent that rational, responsible politics EVER existed, it was blown away during Amerika's post 9/11/01 trip Through the Looking Glass. "Advise and consent" is a vestigial shuck to pacify good-government rubes.
This is the kind of normative crap one expects from Paul Krugman.
[edited to correct spelling error]
why is baker complaining about who's getting nominated? shouldn't he be explaining why the federal reserve shouldn't exist?
Ron Paul doesn't impress me much, but he and Baker are right about the Federal Reserve, it shouldn't exist.
What does Ron Paul have to do with it? Although I'm always forced to say, I may not agree with everything the man believes, he is principled and consistant as opposed to these repub idiots that just use the libertarian language when it suites them politically.
Regardless, Ellen Brown's Web of Debt is a must read regarding monetary policy!
Not very familiar with Monty Python, is he??
"No one expects the ... Inquisition !!"
Money and economists were invented to maintain and rationalize increasingly enormous resource disparities.
If these guys receive any more than nominal questions from grandstanding Republicans, that will be far out of character.
Surely the 0 administration checked with its sponsors to see who they wanted in which positions, and we have already seen that these same sponsors have already purchased the majority of Congress.
We need to work where we have purchase - outside the system and with the part with which we interface.
Here we go again: Dean Baker claims that the collapse of the housing bubble "wrecked the economy" but, just as in his last CD article, fails to tell us what caused the housing bubble.
Nice work if you can get it, but there is method to his sloth. Being a Keynesian, Baker thinks that deficit spending and inflation can cure all of capitalism's recessionary tendencies. Deficit spending and inflation are textbook examples of "easy money."
And the consensus of the financial press is that, in one shape or another--ranging from lending without proper standards and overly generous bond raters, from deficits imposed by the Bush wars/tax cuts to "derivatives" that claimed to banish risk so that leverage (debt-to-reserves) ratios could skyrocket--"easy money" was a prime mover behind the housing bubble, just as "easy money" was behind the stock bubble that preceded the housing bubble.
Dean Baker, the bourgeois reformist ("liberal"), therefore once again demonstrates that academic economists of the usual (right-wing) sort have no monopoly on intellectual dishonesty.
"We have to end a system in which those at the top are never held accountable for the harm they inflict on the rest of society."
This is called criminal prosecutions.
Read this:
"Well said, Dr Hudson! If investigators can prove that the Fed exchanged US treasuries for MBS securities and other toxic assets that they knew were worth less than the amount they provided via short-term loans,(repos) then it is reasonable to assume that the Bernanke's quantitative easing (QE) program operated under the same guidelines. That means, that the $1.25 trillion QE program--which was supposed to extend credit to consumers and businesses--was actually a scam designed to transfer a gigantic load of capital to the very people who gamed the system and precipitated the biggest financial meltdown since the Great Depression. Without question, that misallocation of capital has deepened the recession and sent unemployment skyrocketing. We need to get to the bottom of this."
http://www.counterpunch.org/
Yesterday, I read Mike Whitney's article on www.counterpunch.org -- he quoted Michael Hudson. If you haven't already read the article, it is quite revealing! For some reason, counterpunch publishes an unusual number of articles about the economy -- Dr. Hudson, Paul Craig Roberts, Pam Martens, Mike Whitney, et. al.
One thing you have to admire about the Chinese, somebody in government screws up, they get a trial and then they get executed. We should try that here.
You know I am still very interested in American politics. But I left Amerika 17 years ago in disgust. Then along came 9/11 and the Imperial Wars started some more, I came back last in 2002, three months after 9/11 for funeral of X wife/mother of one of my Kids.
Airport security was just getting romped up. I left a week later and have since promised myself that I will not return until America stops it wars, repeals the Patriot act. I live in Bali and Lombok Indonesia. My kids who were born in the USA, now live in Australia.
I feel very lucky that I was able to take several thousands in savings etc, house sales and found a way to get by here.
Many of you and some of my friends who didn't get Rich in the last 40 years are now not so lucky.
If you don't have a $100,000+ to leave the country you will have to find a way to survive in a very unfair dying Capitalistic system whereby you must be rich to have a life.
So my only suggestion is for the good hearted social democratic Progressives to move to areas like Vermont or Portland Oregon. Here it seems enough people understand what has happened to the Federal corrupt Government.
And then you can maybe succeed in some sort of autonomy from the Monster that controls the Media and law making process.
And my apology for sometimes joking about other peoples misery.
Perhaps I loved America to much and am now saddened by Amerika with the K.
"...If you don't have a $100,000+ to leave the country you will have to find a way to survive in a very unfair dying Capitalistic system whereby you must be rich to have a life..."
Spoken like a true weasle who made a stack and ran.
Let's stop ending our thinking in the 1980's and try to remember back another decade or so. Maybe the counterculture had it right, huh?
Fuck money. It's all just meaningless paper.
The answer may be to follow Dr. Tim and Tune In, Turn On, & Drop Out.
Investigate "Vonu"... living "out of sight, and out of mind".
If I ran things: Everyone would have provided: Food
Clean water
Shelter
health care
a $20,000 per year stipend
The people who did not know any better than to try to get rich could work as much as they liked, make as money as they liked, but at death, all their goods would revert to the state
Read Michael Lewis's book The Big Short. It's about a handful of economists who predicted the banking collapse and sold it short making millions. Why can't we have some smart money on the fed instead of all dumb money?