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The Fat Frogg, located just off Elon University’s campus, is usually more popular with trivia contestants instead of business professors. But Tuesday, Oct. 9, nearly a dozen professors sat in the establishment with a few students and locals to listen to professors Greg Lilly and Jen Platania give a talk titled, “Who’s in control – the president or the economy?”
In a 30-minute lecture on why the public is the real driving force behind the economy, Lilly and Platania began by showing the movie trailer of “The Tree of Life” to exemplify the elements of “nature” and “grace.”
“Can you take this struggle of grace and nature and apply it to societies?” Lilly asked.
He used the question to transition into a discussion about Einstein, who he described as a man of both nature and grace. According to Lilly, Einstein believed three things that support his own argument on the economy: man is a social being, a tightly controlled economy is necessary and man can be trained to follow grace, in the right conditions.
“What type of society has flourished?” Lilly asked.
He identified specific characteristics that allow groups to attain success, including political and economic choice.
“There needs to be a significant amount of economic choice and economic freedom,” he said, explaining this was preferable to a single plan or president.
Platania agreed with Lilly’s statement. She suggested centrally planned economies are lower-performing than unplanned ones. She said households and businesses have a much higher impact on the national gross domestic product than government.
“Government plays a very small role,” she said. “The president has very little control over the economy itself.”
Platania explained that while the administration sets the tone, they don’t establish the path. She said it’s much more effective when Congress and the president are on the same page, saying there’s very little he can do without Congressional support.
There was also a discussion of the “fiscal cliff,” the time at the end of 2012 when many taxes are set to increase and spending is expected to decrease, but that the president is not the sole arbiter of the fate of the U.S. economy.
“We have to look beyond the president,” Platania said. “The greatest single person that has control of the economy is the chairman of the Federal Reserve, Ben Bernanke.”
Platania said Bernanke and the Federal Reserve have the power to act very quickly, controlling interest rates and money supplies.
“These are the things that really get the economy going,” she said, although she added even Bernanke said the Fed doesn’t have any control over the impending fiscal cliff.
Platania concluded by pointing out the economy isn’t a representation of Washington or the president or the Federal Reserve, it is “you and me,” the day-to-day economic behavior of the American people.
No matter which candidate is elected in November, the economy will remain relatively unaffected on its slow path to recovery, they said.
This talk was part of the “Tectonic Plates: Alamance County’s Science Cafe,” a series of events that take place at Fat Frogg the second Tuesday of every month.
Last week the Federal Reserve announced another round of qualitative easing to increase employment. That’s like stuffing rats down a python’s throat and hoping it excretes enough white meat to feed everybody else. Sure, there’ll be a little more food for a minute, but it won’t be very appealing. And all you’ll get in the end is a lot of fat pythons.
At least the Fed’s trying, and it deserves credit for the that. It means that the only powerful people who showed an appropriate level of urgency toward the public’s ongoing crisis were, ironically, the only ones who won’t have to answer to the public this November. (If you want to know more about quantitative easing, here’s a visual representation that should help.)
But the media and the politicians missed the point altogether. Whether they were discussing last week’s jobs numbers, this week’s census data, or the latest announcement by the Federal Reserve, nobody on the evening news seemed to be addressing the subject that is casting a shadow over 100 million dining room tables: the jobs that can’t be found, the pay raises that never come, or the bills that can’t be paid.
When you turn on the TV, what you hear isn’t nearly as important as what you don’t hear.
The Fed did something else right: It said that it will continue to inject money into the system until the job situation improves. It’s too bad our elected officials aren’t facing the problem the same way: by promising to keep treating the patient until it gets well. The unfortunate downside of their strategy is, as a Bank of England report recently confirmed, that in the long run the wealthy will benefit far more from it than the middle class will.
That’s why corporate profits have risen so sharply since the financial crisis, even as most people’s income was falling. Mitt Romney says “Corporations are people, my friend.” But they’re not human – not like the people whose financial fortunes are dying.
The Fed’s actions stand in sharp contrast to the White House’s increasingly passive posture toward the jobs crisis — which is also a crisis of stagnating middle-class wages. And it’s a far cry from the radical disinterest toward middle-class and lower income Americans we’ve seen from the Republicans.
To be sure, last week we saw the nation’s policymakers and newsreaders go through their monthly ritual of reacting to the latest round of employment numbers, which they uniformly described as “disappointing.” But here’s the point the newshawks and politicos never get around to making: For the great majority of Americans, even a “good” jobs report is pretty lousy.
Meanwhile nobody’s talking about the rate of job creation that would be needed to restore the American middle class. It’s tragic that only 96,000 private sector jobs were created in August. But even a “better” number, like July’s figure of 141,000, is far below the number that’s needed to restore a vital economy. And a truly positive number — something, say, in the 400,000 range — is easily achieved. As Paul Krugman’s always saying, “This isn’t rocket science.” We know we understand the problem and we know how to fix it.
The government has the right rockets at its disposal. Here are two of the biggest: It can hire more employees, and it can finance more infrastructure work. But our leaders aren’t willing to fire those rockets. They’d rather pretend that tax cuts will magically do tomorrow what they haven’t done yesterday or today.
Could that be because the wealthiest among us don’t want to fix the problem? As a recent poll made clear, very-high-earning individuals place a much higher emphasis and cuts to government spending than they do to job creation. And the wealthy control our political conversation, in the halls of media outlets and inside the walls of government.
That’s why all our jobs talk is centered around the level of private employment, and turns a blind eye to the number of people who work in government jobs. That’s why leaders of both parties describe “deficit spending” at the government level as our most urgent national crisis, when many (if not most) American families face a budget crisis of their own every day.
We’re left with the spectacle of public leaders who ae talking about job creation — that is, when they do talk about it — while at the same time debating a “Grand Bargain” where their only disagreement about jobs isn’t how many workers they’re willing to hire, but how many they’re willing to fire.
And too many of them — almost all Republicans, and far too many Democrats – are using the Chicago teacher’s strike as an opportunity to dismiss and demonize even our most respected government employees: the people who teach our kids.
Here’s the secret they won’t mention: Adding government jobs lead to added private sector jobs. When teachers, police officers and firefighters are hired, they spend money — and businesses hire more employees to meet the demand.
Last week the Federal Reserve announced another round of qualitative easing to increase employment. That’s like stuffing rats down a python’s throat and hoping it excretes enough white meat to feed everybody else. Sure, there’ll be a little more food for a minute, but it won’t be very appealing. And all you’ll get in the end is a lot of fat pythons.
At least the Fed’s trying, and it deserves credit for the that. It means that the only powerful people who showed an appropriate level of urgency toward the public’s ongoing crisis were, ironically, the only ones who won’t have to answer to the public this November. (If you want to know more about quantitative easing, here’s a visual representation that should help.)
But the media and the politicians missed the point altogether. Whether they were discussing last week’s jobs numbers, this week’s census data, or the latest announcement by the Federal Reserve, nobody on the evening news seemed to be addressing the subject that is casting a shadow over 100 million dining room tables: the jobs that can’t be found, the pay raises that never come, or the bills that can’t be paid.
When you turn on the TV, what you hear isn’t nearly as important as what you don’t hear.
The Fed did something else right: It said that it will continue to inject money into the system until the job situation improves. It’s too bad our elected officials aren’t facing the problem the same way: by promising to keep treating the patient until it gets well. The unfortunate downside of their strategy is, as a Bank of England report recently confirmed, that in the long run the wealthy will benefit far more from it than the middle class will.
That’s why corporate profits have risen so sharply since the financial crisis, even as most people’s income was falling. Mitt Romney says “Corporations are people, my friend.” But they’re not human – not like the people whose financial fortunes are dying.
The Fed’s actions stand in sharp contrast to the White House’s increasingly passive posture toward the jobs crisis – which is also a crisis of stagnating middle-class wages. And it’s a far cry from the radical disinterest toward middle-class and lower income Americans we’ve seen from the Republicans.
To be sure, last week we saw the nation’s policymakers and newsreaders go through their monthly ritual of reacting to the latest round of employment numbers, which they uniformly described as “disappointing.” But here’s the point the newshawks and politicos never get around to making: For the great majority of Americans, even a “good” jobs report is pretty lousy.
Meanwhile nobody’s talking about the rate of job creation that would be needed to restore the American middle class. It’s tragic that only 96,000 private sector jobs were created in August. But even a “better” number, like July’s figure of 141,000, is far below the number that’s needed to restore a vital economy. And a truly positive number – something, say, in the 400,000 range – is easily achieved. As Paul Krugman’s always saying, “This isn’t rocket science.” We know understand the problem and we know how to fix it.
The government has the right rockets at its disposal. Here are two of the biggest: It can hire more employees, and it can finance more infrastructure work. But our leaders aren’t willing to fire those rockets. They’d rather pretend that tax cuts will magically do tomorrow what they haven’t done yesterday or today.
Could that be because the wealthiest among us don’t want to fix the problem? As a recent poll made clear, very-high-earning individuals place a much higher emphasis and cuts to government spending than they do to job creation. And the wealthy control our political conversation, in the halls of media outlets and inside the walls of government.
That’s why all our jobs talk is centered around the level of private employment, and turns a blind eye to the number of people who work in government jobs. That’s why leaders of both parties describe “deficit spending” at the government level as our most urgent national crisis, when many (if not most) American families face a budget crisis of their own every day.
We’re left with the spectacle of public leaders who ae talking about job creation – that is, when they do talk about it — while at the same time debating a “Grand Bargain” where their only disagreement about jobs isn’t how many workers they’re willing to hire, but how many they’re willing to fire.
And too many of them — almost all Republicans, and far too many Democrats — are using the Chicago teacher’s strike as an opportunity to dismiss and demonize even our most respected government employees: the people who teach our kids.
Here’s the secret they won’t mention: Adding government jobs lead to added private sector jobs. When teachers, police officers and firefighters are hired, they spend money — and businesses hire more employees to meet the demand.
And when you fire them, businesses lay people off.
It’s the same with wages: Raise them for the middle class and they’ll spend the money, which increases employment. The competition for workers will cause wages ro rise. But if you let the median income fall with each passing year, jobs and wages will keep withering away.
Why aren’t we adding more government jobs? Because the wealthy patrons of our political system don’t want to pay more in taxes. That’s why the Republicans keep pushing illogical economic crack to an audience of wealthy addicts. And this kind of crack makes other people waste away, while the addicts stay fat and happy.
The President does want to raise taxes on the wealthy, but not to anything near the level they paid during most of the last century. And he accepted his party’s nomination for a second term without even mentioning the jobs bill he introduced last year — a bill which Congress rejected, even though it was watered down with relatively unproductive tax breaks to placate the wealthy.
In our wealth-dominated political discourse neither our leaders, nor our candidates, nor our media had much to say about the latest census figures, either. They tell us that median family income is has fallen roughly 8 percent, or $4,400 per year, since the Great Recession began. And that happenede while, as Jared Bernstein notes, while “the share of income going to the top fifth was the highest on record.” (And, as Bernstein explains, that’s without counting the capital gains income that contributes significantly to the income of the most wealthy.)
Nothing will change unless the public demands action. If not our leaders will continue to address the concerns of the 1 percent rather than the 99 percent. The pythons will keep getting fatter, and rest of us will have nothing better to do than keep sifting through their crap looking for Rat McNuggets.
Last week the Federal Reserve announced another round of qualitative easing to ease unemployment. That’s like stuffing rats down a python’s throat and hoping it excretes enough white meat to feed everybody else. Sure, things may get a little better for a little while. But all you get in the end is a lot of fat pythons.
At least the Fed is trying, and it deserves credit for that. It means that powerful people who showed an appropriate level of urgency were, ironically enough, the only ones who won’t have to answer to the public this November. (If you want to know more about quantitative easing, here’s a visual representation that should help.)
For the media and the politicians, it was a different story: Whether it’s last week’s jobs numbers, this week’s census data or the latest announcement by the Federal Reserve, nobody on the evening news seems to be addressing the subject that casts a shadow over 100 million dining room tables: the jobs that can’t be found, the pay raises that never come or the bills that can’t be paid.
When you turn on the TV, what you hear isn’t nearly as important as what you don’t hear.
The Fed did something else right: It said that it will continue to inject money into the system until the job situation improves. It’s too bad our elected officials aren’t facing the problem the same way: by promising to keep treating the patient until it gets well. The unfortunate downside of their strategy is, as a Bank of England report recently confirmed, that in the long run the wealthy will benefit far more from it than the middle class will.
That’s why corporate profits have risen so sharply since the financial crisis, even as most people’s income was falling. Mitt Romney says “Corporations are people, my friend.” But they’re not human — not like the people whose financial fortunes are dying.
The Fed’s actions stand in sharp contrast to the White House’s increasingly passive posture toward the jobs crisis — which is also a crisis of stagnating middle-class wages. And it’s a far cry from the radical disinterest toward middle-class and lower income Americans we’ve seen from the Republicans.
To be sure, last week we saw the nation’s policymakers and newsreaders go through their monthly ritual of reacting to the latest round of employment numbers, which they uniformly described as “disappointing.” But here’s the point the news-hawks and politicos never get around to making: For the great majority of Americans, even a “good” jobs report is pretty lousy.
Meanwhile, nobody’s talking about the rate of job creation that would be needed to restore the American middle class. It’s tragic that only 96,000 private sector jobs were created in August. But even a “better” number, like July’s figure of 141,000, is far below the number that’s needed to restore a vital economy. And a truly positive number — something, say, in the 400,000 range — is easily achieved. As Paul Krugman’s always saying, “This isn’t rocket science.” We know understand the problem and we know how to fix it.
The government has the right rockets at its disposal. Here are two of the biggest: It can hire more employees, and it can finance more infrastructure work. But our leaders aren’t willing to fire those rockets. They’d rather pretend that tax cuts will magically do tomorrow what they haven’t done yesterday or today.
Could that be because the wealthiest among us don’t want to fix the problem? As a recent poll made clear, very-high-earning individuals place a much higher emphasis on cuts to government spending than they do on job creation. And the wealthy control our political conversation, in the halls of media outlets and inside the walls of government.
That’s why all our jobs talk is centered around the level of private employment, and turns a blind eye to the number of people who work in government jobs. That’s why leaders of both parties describe “deficit spending” at the government level as our most urgent national crisis, when many (if not most) American families face a budget crisis of their own every day.
We’re left with the spectacle of public leaders who are talking about job creation — that is, when they do talk about it — while at the same time debating a “Grand Bargain” where their only disagreement about jobs isn’t how many workers they’re willing to hire, but how many they’re willing to fire.
And too many of them — almost all Republicans, and far too many Democrats — are using the Chicago teacher’s strike as an opportunity to dismiss and demonize even our most respected government employees: the people who teach our kids.
Here’s the secret they won’t mention: Adding government jobs lead to added private sector jobs. When teachers, police officers and firefighters are hired, they spend money — and businesses hire more employees to meet the demand.
And when you fire them, businesses lay people off.
It’s the same with wages: Raise them for the middle class and they’ll spend the money, boosting employment. The competition for workers increases wages even more. But if you let wages fall with each passing year, jobs and wages will keep withering away.
Why aren’t we adding more government jobs? Because the wealthy patrons of our political system don’t want to pay more in taxes. That’s why the Republicans push illogical economic crack to an audience of wealthy addicts. And this kind of crack makes other people waste away, while the addicts stay fat and happy.
The President does want to raise taxes on the wealthy, but not to anything near the level they paid during most of the last century. And he accepted his party’s nomination for a second term without even mentioning the jobs bill he introduced last year — a bill which Congress rejected, even though it was watered down with relatively unproductive tax breaks to placate the wealthy.
In our wealth-dominated political discourse neither our leaders, nor our candidates, nor our media had much to say about the latest census figures, either. They tell us that median family income is has fallen roughly 8 percent, or $4,400 per year, since the Great Recession began. And that happened while, as Jared Bernstein notes, “the share of income going to the top fifth was the highest on record.” (And, as Bernstein explains, that’s without counting the capital gains income that contributes significantly to the income of the most wealthy.)
Nothing will change unless the public demands action. If not, our leaders will continue to address the concerns of the 1 percent rather than the 99 percent. The pythons will keep getting fatter, and rest of us will have nothing better to do than keep sifting through their crap looking for Rat McNuggets.
Statistics are boring, but it’s important to wrap your head around this latest one from the Federal Reserve as the definitive epitaph for the American dream. Wall Street’s financial shenanigans, the banking games that made some fat cats outrageously wealthy as they turned home mortgages into toxic securities, wiped out 20 years of growth in American families’ net worth.
“Americans saw wealth plummet 40 percent from 2007 to 2010, Federal Reserve says,” is how The Washington Post headlined the startling news that all of the economic gain of the past two decades had been destroyed by the banking meltdown. And with housing values — the bulk of middle-class savings — indefinitely moribund, the situation will not get better anytime soon.
“The recession caused the greatest upheaval among the middle class,” the Post noted. “… Their median net worth … suffered the biggest drops. By contrast, the wealthiest families’ median net worth rose slightly.”
That outcome, disastrous to the American ideal of a nation of mostly middle-class stakeholders competing on a relatively equal economic playing field, was preordained. When tens of millions lost their jobs and homes as a result of financial swindles that the Federal Reserve failed to prevent, this ostensibly public agency, with strong bipartisan support in the White House and Congress, adroitly directed the flow of public funds to save the bankers while abandoning their victims.
On Tuesday Sen. Bernie Sanders, acting under authority of the Dodd-Frank financial regulations, released the conclusions of a Government Accountability Office report showing that “during the financial crisis, at least 18 former and current directors from Federal Reserve Banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve.”
One of those Fed directors, Jamie Dimon, chairman and CEO of JPMorgan Chase, who has been on the New York Fed board since 2007, testified before Congress on Wednesday that he was sorry his company lost billions in risky trading even after all of the warnings concerning too-big-to-fail banks.
Dimon — whose company last year paid him $24 million, compared to the $45,800 median U.S. family income — testified that the bank could manage its own affairs. But that is hardly reassuring given that the Fed provided JPMorgan Chase $391 billion in total assistance as well as paying the bank to administer the government’s emergency lending program. It was the Fed that back in March of 2008 made $29 billion available to Dimon’s bank so it could acquire beleaguered Bear Stearns; the Fed also agreed to purchase Bear Stearns’ most toxic assets before the merger.
Such sweetheart deals are the norm, and they are further illustrated by the case of Stephen Friedman, chairman of the New York Fed board, on which Dimon serves. Friedman simultaneously was a director at Goldman Sachs when the N.Y. Fed allowed Goldman to become a bank holding company and thereby become eligible for cheap Fed loans. Thanks to a plea by then-New York Fed President Timothy Geithner that Friedman be granted a waiver from conflict-of-interest rules, he continued to own and buy additional Goldman stock. Friedman ended up with $13 million in stock whose value was bolstered by Fed assistance to Goldman totaling $814 billion. And Geithner ended up becoming President Barack Obama’s treasury secretary.
The Fed backed the bailout of Citigroup, the result of deals dreamed up by Dimon, who before his JPMorgan days had teamed with Sanford Weill to merge privately held investment firms with government-insured commercial banks, which would have been illegal under the Glass-Steagall law. Weill succeeded in getting President Bill Clinton to back the reversal of Glass-Steagall, and as a consequence, Citigroup soon became too big to fail. Weill was on the Fed board on the eve of a crisis that would lead to Citigroup receiving more than $2.5 trillion in Fed financial assistance.
Geithner’s stewardship of the bailout of AIG is perhaps the most egregious example of the Fed’s preoccupation with the welfare of the banks as opposed to the well-being of the ordinary folk the Federal Reserve was created to protect.
The Fed has been run like an elite club, handsomely rewarding its banker directors while sacrificing the homeowners and families who most need safeguarding.
Statistics are boring, but it’s important to wrap your head around this latest one from the Federal Reserve as the definitive epitaph for the American dream. Wall Street’s financial shenanigans, the banking games that made some fat cats outrageously wealthy as they turned home mortgages into toxic securities, wiped out 20 years of growth in American families’ net worth.
“Americans saw wealth plummet 40% from 2007 to 2010, Federal Reserve says,” is how The Washington Post headlined the startling news that all of the economic gain of the past two decades had been destroyed by the banking meltdown. And with housing values — the bulk of middle-class savings — indefinitely moribund, the situation will not get better anytime soon.
“The recession caused the greatest upheaval among the middle class,” the Post noted. “Their median net worth … suffered the biggest drops. By contrast, the wealthiest families’ median net worth rose slightly.”
That outcome, disastrous to the American ideal of a nation of mostly middle-class stakeholders competing on a relatively equal economic playing field, was preordained. When tens of millions lost their jobs and homes as a result of financial swindles that the Federal Reserve failed to prevent, this ostensibly public agency, with strong bipartisan support in the White House and Congress, adroitly directed the flow of public funds to save the bankers while abandoning their victims.
On Tuesday, Sen. Bernie Sanders, acting under authority of the Dodd-Frank financial regulations, released the conclusions of a Government Accountability Office report showing that “… during the financial crisis, at least 18 former and current directors from Federal Reserve Banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve.”
One of those Fed directors, Jamie Dimon, chairman and CEO of JPMorgan Chase, who has been on the New York Fed board since 2007, testified before Congress on Wednesday that he was sorry his company lost billions in risky trading even after all of the warnings concerning too-big-to-fail banks.
Dimon — whose company last year paid him $24 million, compared to the $45,800 median U.S. family income — testified that the bank could manage its own affairs. But that is hardly reassuring given that the Fed provided JPMorgan Chase $391 billion in total assistance as well as paying the bank to administer the government’s emergency lending program. It was the Fed that back in March of 2008 made $29 billion available to Dimon’s bank so it could acquire beleaguered Bear Stearns; the Fed also agreed to purchase Bear Stearns’ most toxic assets before the merger.
Such sweetheart deals are the norm, and they are further illustrated by the case of Stephen Friedman, chairman of the New York Fed board, on which Dimon serves. Friedman simultaneously was a director at Goldman Sachs when the N.Y. Fed allowed Goldman to become a bank holding company and thereby become eligible for cheap Fed loans. Thanks to a plea by then-New York Fed President Timothy Geithner that Friedman be granted a waiver from conflict-of-interest rules, he continued to own and buy additional Goldman stock. Friedman ended up with $13 million in stock whose value was bolstered by Fed assistance to Goldman totaling $814 billion. And Geithner ended up becoming President Barack Obama’s treasury secretary.
The Fed backed the bailout of Citigroup, the result of deals dreamed up by Dimon, who before his JPMorgan days had teamed with Sanford Weill to merge privately held investment firms with government-insured commercial banks, which would have been illegal under the Glass-Steagall law. Weill succeeded in getting President Bill Clinton to back the reversal of Glass-Steagall, and as a consequence Citigroup soon became too big to fail. Weill was on the Fed board on the eve of a crisis that would lead to Citigroup receiving more than $2.5 trillion in Fed financial assistance.
The GAO list includes Jeffrey Immelt, the CEO of General Electric, who was on the N.Y. Fed board from 2006 to 2011, a period during which the Fed refused to even consider a moratorium on mortgage foreclosures or any other serious effort to help homeowners survive the mortgage crisis the banks had created.
One of those banks is GE Capital, which was started by GE and was a major contributor to the banking disaster. The government came to GE’s assistance by purchasing GE Capital and giving GE an additional $16 billion in low-cost financing. Immelt, whose company now has shipped two out of three of its jobs abroad, is the head of the President’s Council on Jobs and Competitiveness.
Geithner’s stewardship of the bailout of AIG is perhaps the most egregious example of the Fed’s preoccupation with the welfare of the banks as opposed to the well-being of the ordinary folk the Federal Reserve was created to protect.
The Fed has been run like an elite club, handsomely rewarding its banker directors while sacrificing the homeowners and families who most need safeguarding.
Statistics are boring, but it’s important to wrap your head around this latest one from the Federal Reserve as the definitive epitaph for the American dream: Wall Street’s financial shenanigans, the banking games that made some fat cats outrageously wealthy as they turned home mortgages into toxic securities, wiped out 20 years of growth in American families’ net worth.
“Americans saw wealth plummet 40 percent from 2007 to 2010, Federal Reserve says,” is how The Washington Post reported the startling news that all of the economic gain of the past two decades had been destroyed by the banking meltdown. And with housing values — the bulk of middle-class savings — indefinitely moribund, the situation will not get better any time soon.
“The recession caused the greatest upheaval among the middle class,” the Post noted. “Their median net worth … suffered the biggest drops. By contrast, the wealthiest families’ median net worth rose slightly.”
That outcome, disastrous to the American ideal of a nation of mostly middle-class stakeholders competing on a relatively equal economic playing field, was preordained. When tens of millions lost their jobs and homes as a result of financial swindles that the Federal Reserve failed to prevent, this ostensibly public agency, with strong bipartisan support in the White House and Congress, adroitly directed the flow of public funds to save the bankers while abandoning their victims.
On Tuesday, Sen. Bernie Sanders, acting under authority of the Dodd-Frank financial regulations, released the conclusions of a Government Accountability Office report showing that “during the financial crisis, at least 18 former and current directors from Federal Reserve Banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve.”
One of those Fed directors, Jamie Dimon, chairman and CEO of JPMorgan Chase, who has been on the New York Fed board since 2007, testified before Congress on Wednesday that he was sorry his company lost billions in risky trading even after all of the warnings concerning too-big-to-fail banks.
Dimon — whose company last year paid him $24 million, compared to the $45,800 median U.S. family income — testified that the bank could manage its own affairs. But that is hardly reassuring given that the Fed provided JPMorgan Chase $391 billion in total assistance as well as paying the bank to administer the government’s emergency lending program. It was the Fed that back in March 2008 made $29 billion available to Dimon’s bank so it could acquire beleaguered Bear Stearns; the Fed also agreed to buy Bear Stearns’ most toxic assets before the merger.
Such sweetheart deals are the norm, and they are further illustrated by the case of Stephen Friedman, New York Fed board chairman. Friedman simultaneously was a director at Goldman Sachs when the New York Fed allowed Goldman to become a bank holding company and thereby become eligible for cheap Fed loans. Thanks to a plea by then-New York Fed President Timothy Geithner that Friedman be granted a waiver from conflict-of-interest rules, he continued to own and buy additional Goldman stock. Friedman ended up with $13 million in stock whose value was bolstered by Fed assistance to Goldman totaling $814 billion. And Geithner ended up becoming President Barack Obama’s treasury secretary.
The Fed backed the bailout of Citigroup, the result of deals dreamed up by Dimon, who before his JPMorgan days had teamed with Sanford Weill to merge privately held investment firms with government-insured commercial banks, which would have been illegal under the Glass-Steagall law. Weill succeeded in getting President Bill Clinton to back the reversal of Glass-Steagall, and as a consequence, Citigroup soon became too big to fail. Weill was on the Fed board on the eve of a crisis that would lead to Citigroup receiving more than $2.5 trillion in Fed financial assistance.
The GAO list includes Jeffrey Immelt, the CEO of General Electric, who was on the New York Fed board from 2006 to 2011, a period during which the Fed refused to even consider a moratorium on mortgage foreclosures or any other serious effort to help homeowners survive the mortgage crisis the banks had created.
One of those banks is GE Capital, which was started by GE and was a major contributor to the banking disaster. The government came to GE’s assistance by purchasing GE Capital and giving GE an additional $16 billion in low-cost financing. Immelt, whose company now has shipped two out of three of its jobs abroad, is the head of the President’s Council on Jobs and Competitiveness.
Geithner’s stewardship of the bailout of AIG is perhaps the most egregious example of the Fed’s preoccupation with the welfare of the banks as opposed to the well-being of the ordinary folk the Federal Reserve was created to protect.
The Fed has been run like an elite club, handsomely rewarding its banker directors while sacrificing the homeowners and families who most need safeguarding.
Robert Scheer is a columnist with Creators Syndicate.
Copyright 2012 By ROBERT SCHEER All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
