If you only have a hammer, every problem looks like a nail.
And so it is with Ben Bernanke, Timothy Geithner, Henry Paulson, the entire East Coast financial establishment, innumerable Ivy League economists including Paul Krugman, and people who really should know better, like the media, Congress and the President.
Truly mindless fuzz continues to flow out of Washington, accepted as gospel by both its inhabitants and the media. For example, there’s the idea that the worldwide financial crisis can only be solved by the same institutions and people that created it; that the banking sector needs lots and lots of additional money and political support to solve problems that trillions of dollars so far have not; that months of nonexistent positive results means only that we haven’t handed financiers sufficient loot; that the failure to bail out Lehman’s is what caused this whole mess; that reinvigorating casino capitalism is the way out of the dilemma; that public outrage shows that the rest of us just don’t get it.
Worse than senseless, the nonsense that passes for conventional wisdom in the corridor between New York and Washington, D.C., is worrisome on a number of levels.
As the International Monetary Fund and Timothy Geithner, an IMF director in a recent past life, can attest, rioting and revolution can be created in virtually any country as they were deliberately, again and again, in Asia and Latin America. All it takes is ethically questionable economic policies designed to shift wealth upward and impoverish the nation’s population. Citizens are shut out of the decision making process.
Geithner is an experienced pro at abetting economic conditions that not only give windfalls to the wealthy but also cause chaos in the streets. The fact that he is well aware of the potential impact of his plans must be one reason for his careful opacity when discussing his – I mean, Treasury’s –agenda.
Geithner, in collusion with Bernanke, wants to resurrect the casino sinkhole that has come close to hollowing out the world economy. They want to repackage mortgage backed securities and other toxic garbage and sell it to investors through the TALF program, with the American taxpayer guaranteeing investors success.
No one could make this up.
Someone in charge should finally be getting the message that was roundly ignored when Geithner’s tax larceny came to light during his confirmation hearing: He is the wrong man for any public job.
Ben Bernanke’s interview last Sunday on 60 Minutes was an object lesson in the deadly tunnel vision and groupthink at the top of the policy-making food chain. He insisted that the way to get the economy moving again was to give Wall Street financiers and bankers more funding to stimulate the credit market. He seemed functionally unaware that trillions of tax payer dollars have failed to resuscitate anything but the bank accounts of CEOs and big investors–both national and international.
Bernanke advertises himself as a student of the Great Depression and has concluded that that entire episode would have been a nonstarter if the government had immediately bailed out the banks. Sound familiar? Does it make any sense?
In 1930, the creation of the FDIC was still almost 4 years away. Savers had no reason to believe that their money, a symbol of their security and their future, would be safe in a crisis, and indeed it was not. Had the FDIC been in existence guaranteeing deposits in 1929, there would have been no destabilizing runs on banks and the crisis of confidence that started the devastation may never have occurred.
Bailing out depositors is in no way related to bailing out banks.
As long as deposits are insured, banks are fungible- which is proven every day as U.S. banks go under and are seamlessly absorbed by the FDIC, deposits, debts and all, consumers usually none the wiser.
As Chairman of the Federal Reserve, Bernanke had access years ago to methods that could have reined in an out of control financial sector. He used none of them. In his words, “Mistakes were made.” Apparently, no one is responsible.
He also failed to acknowledge that countries like Germany, which have refrained from looting their taxpayers to bail out the wealthy (much to Paul Krugman’s consternation ), have citizens who are doing better than we are because of their social safety net. I could find no mention of any tent city for the homeless in Germany. There is a growing number of them in the U.S.
Bernanke’s hollow attempts at populism – his declared anger at AIG for their misuse of tax money; his insistence that he is Main Street and not Wall Street – only underscored the impotence of the Federal Reserve as he has configured it.
Bernanke insisted that the trillions of dollars that he has authorized for bank bail outs are newly printed bills and not taxpayer money. That’s because there aren’t enough taxpayer dollars to go around. His unchallenged insinuation was that the new money is therefore cost-free for the nation, like it exists in some parallel universe. Are we being punked?
Bernanke’s most mind blowing assertion during the 60 Minutes interview was the analogy he used to explain the necessity for the tax payer bailouts of the wealthy. He said it was like a neighbor’s house on fire because the owner had accidentally fallen asleep with a lit cigarette. “The fire might endanger your house, too, so you call the fire department.”
Here’s the real analogy: A group of thugs breaks into your house and deliberately burns it down while the police look the other way. The last thing you expect is to be forced to pay those delinquents for their smoke inhalation.
What you do expect is help while you rebuild the house: unemployment insurance for the duration, health care coverage, pension and social security protection, credit guaranteed by the government at reasonable rates. You want better police protection and severe punishment for the miscreants.
It’s OK with us if Wall Street, the banks-too-big-to-fail, and all the gamblers that kept them in business, wash into the Atlantic. We know that the bankers will be replaced by more responsible owners, by default. They could not possibly be replaced with LESS responsible owners.
Sixty Minutes interviewer Scott Pelley called Bernanke the smartest kid in the class, just like the media labeled Geithner a few months back.
Couldn’t make this up.