Posts tagged with 'Sen. Bernie Sanders'
Weekly Audit: Stop Wall Street’s Economic Rampage
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By Zach Carter, TMC Blogger
Over the past year, Wall Street’s excess has helped push the unemployment rate to epic levels and created millions of foreclosures. Yet the rules of the financial road remain unchanged. As 2009 draws to a close, it’s astonishing that so little progress towards financial reform has been made.
President Obama, Congress and federal regulators have not been tough enough on the nation’s financial elite. As Monika Bauerlein and Clara Jeffery emphasize for Mother Jones, the government has committed about $14 trillion in bailout funds to save the banking system without demanding much of anything in return. Goldman Sachs and other big banks are now planning to pay giant bonuses that come straight from taxpayer giveaways rather than invest that money in socially constructive banking.
“Bankers aren’t being rewarded for pulling the economy out of the doldrums,” Bauerlein and Jeffery write. “Nope, they’re simply skimming from the trillions we’ve shoveled at them.”
The major banks are even spending our bailout money to lobby against reform. When President Obama called a meeting for leaders of the nation’s largest banks to scold them for their lobbying, the heads of Morgan Stanley, Goldman Sachs and Citigroup didn’t even bother to show up, as Matthew Rothschild describes in a podcast for The Progressive.
It’s easy to see why the bank execs are so indifferent, Rothschild argues, even to the president. Now that almost all of these banks have repaid the loans they received under the Troubled Asset Relief Program (TARP), Obama has no negotiating leverage and the bankers know it. Even though it represents just a tiny fraction of the $14 trillion bailout, TARP was the only program that attached any strings to that money. Prior to those TARP repayments, Obama could have demanded that banks do more lending to help the economy, work harder to keep troubled borrowers in their homes—or face executive compensation restrictions or other penalties.
And many of the same regulators who helped bring about today’s economic disaster are still in power. As Sen. Bernie Sanders (I-VT) explains for Brave New Films (video below), Federal Reserve Chairman Ben Bernanke blew just about every major policy decision he faced in the years leading up to the crisis. Bernanke, who was recently named person of the year by Time magazine, failed to rein in reckless mortgage speculation, predatory lending or excessive compensation packages. Nevertheless, President Obama has appointed him to another term.
“This recession was precipitated by the greed, recklessness and illegal behavior on Wall Street,” Sanders says. “One of the key responsibilities of the Fed is to maintain the safety and soundness of our financial institutions … The Fed was asleep at the wheel, Bernanke did not do the job.”
Sanders notes that even Bernanke’s financial clean-up operations have been deeply flawed. Bernanke has helped make today’s too-big-to-fail banks even bigger. If we want to stop the lobbying and policy deference that politicians grant to Wall Street, we have to break up the biggest banks into smaller firms that do not endanger the economy if they fail.
Bernanke is not the only holdover from the Bush administration that wields significant economic power under Obama. As I note in a piece for The Nation, John Dugan, the top bank regulator appointed by President George W. Bush, remains in office today, despite failing to ensure the financial health of our largest banks and actively working to undermine consumer protection.
Campaign contributions from the bank lobby will not be enough to counter the voter outrage that President Obama and members of Congress are facing, nor should they. If our leaders want a serious shot at re-election, they need to recognize the need for significant change on Wall Street. That means breaking up the big banks and setting economic policy that helps all of our citizens, not just financiers.
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Weekly Audit: Four More Years of Bailout Ben
By Zach Carter, TMC MediaWire Blogger
After Ben Bernanke allowed an $8 trillion housing bubble to ravage the global economy and nearly destroy the U.S. financial system, President Barack Obama has decided he deserves another term as Chairman of the Federal Reserve. (The UpTake has video of Obama’s announcement here.) As the Fed Chair, Bernanke has more economic power than any other person on the planet. By heading the committee that sets interest rates, he can control the economy’s rate of growth or contraction; as head regulator of the largest banks, Bernanke has more influence over the rules of the economic game than anyone else.
Why is the Bernanke reappointment a mistake? Matthew Rothschild of The Progressive turns to Sen. Bernie Sanders, an independent democratic socialist from Vermont. Put simply, Bernanke is completely culpable for allowing an economic crisis to foment.
“Like the rest of the Bush administration, he was asleep at the wheel during this period and did nothing to move our financial system onto safer grounds,” Sanders said.
Corporate media generally neglects to mention Bernanke’s role at the Fed prior to 2008, and instead credits him with stopping a second Great Depression. It’s true that the Fed has done everything possible to keep Wall Street from imploding, but Bernanke also repeatedly insisted that the subprime mortgage crisis would be “contained” as late as 2007 and made no plans for a situation that might prove worse than his rosy forecasts.
As William Greider explains for The Nation, it’s a bit too soon to celebrate our economic salvation at Bernanke’s hands. Small banks are failing at an alarming rate, job losses remain heavy and households are being squeezed by plummeting property values and growing credit card debt.
Greider emphasizes that Bernanke repeatedly bailed out financial giants without demanding anything in return, which bodes poorly for any future economic crisis. Kenneth Lewis remains Bank of America’s CEO, even though the company has needed $45 billion in taxpayer funds to date, and high-level Fed officials think Lewis may be guilty of securities fraud. On the one bailout where the Fed did assume ownership of the company and discharge it’s top-level management, AIG, the deal was structured to funnel no-strings-attached money to other Wall Street companies. Goldman Sachs raked in $12.9 billion from the arrangement. It’s one thing to funnel money to financial firms in the name of economic necessity. It’s quite another to allow executives at those companies to be paid like princes and subsidize their shareholders.
As economist James K. Galbraith discusses in a piece for The Washington Monthly, it’s not clear if Bernanke and Co. actually saved the economy. Even if the financial system gets back to normal functioning, that stability has been purchased with massive taxpayer support. In order to do just about anything involving finance in the United States, a company now needs a very explicit government seal of approval to convince investors that they’re safe to do business with. Just ask Colonial Bank, which failed earlier this summer after being denied bailout funds under the Troubled Asset Relief Program.
But there has been secret support as well. Bernanke’s Fed committed over $2 trillion in emergency loans to keep the financial system from collapsing during the crisis, and has refused to tell the public who got the money, and on what terms. We don’t know who we saved, or at what the consequences of this massive bank support operation will be. Bernanke always believed that rescuing Wall Street would prevent major damage to the broader economy, but Galbraith questions whether the economy would be stronger if policymakers had focused more on direct aid to workers and homeowners, including an earlier, more robust economic stimulus package.
“Perhaps the right thing would have been less focus on saving banks, and much more on saving jobs, families, and homes.”
Writing for In These Times, Roger Bybee profiles a new group called Americans for Financial Reform, which is pushing for changes on Wall Street and fighting against business-as-usual at the Fed. The bank lobby is probably the most powerful interest group on Capitol Hill. Unfortunately, there hasn’t been a strong and consistent voice urging lawmakers to protect the entire economy, rather than the banks. The very structure of the Fed makes it more responsive to Wall Street interests than those of the general public. Private-sector banks like Citigroup and Bank of America are shareholders in each of the Fed’s regional branches, while private-sector bank executives sit on the board of directors at each branch. Since the boards get to name the regional presidents, private-sector bank CEOs are given major power to name their own regulators. Regional presidents also rotate through positions on the Fed’s monetary policy board, making decisions to set interest rates.
The Fed’s institutional structure, and its reliance on mainstream economists overly acquiescent to the financial sector has helped fuel the boom-and-bust bubble economy, as the Real News explains in this video piece:
In addition to the turmoil surrounding the Bernanke appointment, the recent budget deficit projections have been receiving a lot of attention lately. By throwing around a lot of big numbers that end in “trillion,” deficit hawks have created the impression of crisis where none exists. The government will have a $1.6 trillion shortfall this year, equal to about 11% of the U.S. economy. That’s the highest such number since the U.S. economy started to soar in the years after World War II, high enough to mobilize CNBC pundits to warn of financial apocalypse and a bankrupt U.S. government.
But as Robert Reich notes for Salon, it’s not really worth getting too worked up over the current deficit projections. In a recession, countries want to run a deficit: the government needs to fill hole created by the drop-off in private-sector economic activity. If the U.S. doesn’t run a big deficit, it will shed millions of additional jobs. And the country is nowhere near losing control of its currency. The federal debt stands at about 54% of our economic output right now, and is projected to reach 68% by 2019. But Reich notes that in 1945, the number was far higher: 120%. This number shrank dramatically over the next few years, not because of draconian cuts to government programs, but because the economy grew so much that the debt burden became less severe. We are nowhere near a crisis with the budget that compares to the current unemployment crisis, so pulling back spending right now doesn’t make much sense.
Bernanke has always argued that the Fed chair’s only duty is to control inflation. But managing the economy means not only attending to inflation, but making sure the true engine of economic growth—financially secure households—isn’t sacrificed to the short-term interests of a few Wall Street elites. Bernanke failed to block that economic predation early in his tenure as Fed Chairman. If Bernanke is going to be with us for another four years, President Obama needs to find other ways to restore our economic balance.
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