Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
HAVE YOUR DONATION DOUBLED!

If you are able to donate $100 or more for our Annual Fund Drive, your donation will be matched by another generous CounterPuncher! These are tough times. Regardless of the political rhetoric bantered about the airwaves, the recession hasn’t ended for most of us. We know that money is tight for many of you. But we also know that tens of thousands of daily readers of CounterPunch depend on us to slice through the smokescreen and tell it like is. Please, donate if you can!

FacebookTwitterGoogle+RedditEmail

We Won’t Get Tarped Again!

by DEAN BAKER

The Senate’s decision on approving Ben Bernanke for a second term as chair of the Federal Reserve Board is coming down to the wire and the Wall Street crew is once again pulling out all the stops. To get the 60 votes they need for Senate approval they are reaching into the treasure chest of tall tales they used to push through the TARP. They are once again telling the American people that the world will end if we don’t do exactly what they want.

The main story they are pushing is that if Bernanke is not approved then the markets will panic and send the economy tumbling. Both parts of this story deserve some serious skepticism. First, there undoubtedly will be some uncertainty in the financial markets if Bernanke is not reappointed. Markets like continuity. A new Fed chair means a break in continuity. Therefore, we can expect to see some decline in the stock market, probably about the same as we get when there is a worse-than-expected jobs report.

However, focusing on day-to-day movements in the stock market is no way to make economic policy. For practical purposes, the daily movements in the market have no impact on the economy. Furthermore, there is no way to move the economy away from its current Wall Street bubble-driven growth path to one built on a productive economy without at least some temporary decline in stock prices.

Such a decline is inevitable if for no other reason than the fact that Goldman Sachs, J.P. Morgan and the rest account for a substantial portion of thevalue of the stock market. If we can never do anything that even temporarily hurts stock prices then we can forget about ever reining in Wall Street.

Interestingly, the bond market, which is far more important for the economy than the stock market, has been rallying in recent days as Bernanke’s nomination faces increasing difficulty. Bernanke’s troubles may not be the case of this rally, but they have not prevented the 10-year Treasury rate from falling considerably.

It is also worth pointing out that one supposed source of bad news – a declining dollar – would actually benefit the economy. The country has a huge trade deficit because the dollar is over-valued. If the dollar were to decline as a result of Bernanke not being reappointed, it would give a boost to our exports and cause domestically manufactured products to displace imports.

Bernanke’s troubles don’t seem to be depressing the dollar at the moment, but if the Wall Street fear mongers and their allies push this line, we should realize that they are once again spouting nonsense. A lower-valued dollar is good news for the economy.

To briefly summarize the case against Bernanke, at the top of the list is the fact that his failures at the Fed (both as chairman since 2006 and as a governor since 2002) brought the economy to the brink of a second Great Depression (Bernanke’s assessment, not mine). Anyone else who had failed so completely at his or her job would be fired in a minute.

Only in Washington and on Wall Street could such a disastrous record be rewarded with another term in office.

Second, the focus of his bailout was to return Wall Street to health while leaving the rest of the country reeling. Bernanke rightly tapped the Fed’s virtually unlimited resources to keep the financial system from collapsing; however, he gave out money to the banks at below market interest rates with no strings whatsoever.

They were able to use this money to restore themselves to health, but were not required to do anything about compensation practices, risky trading or helping homeowners facing foreclosure. Nor were their shareholders and bondholders required to incur any losses. In effect, Bernanke gave a huge gift from the taxpayers to the Wall Street boys who were responsible for the crisis in the first place.

Finally, he misled Congress to help get the TARP passed back in October of 2008. He told Congress that the commercial paper was shutting down, which meant that even healthy companies would not be able to borrow the money needed to meet their payroll and to pay other bills. This would have quickly led to an economic collapse.

Bernanke did not tell Congress that he was planning to set up a special lending facility to directly buy commercial paper. He announced this facility the weekend after Congress approved TARP. It is not the Fed chairman’s job to deceive Congress. Nor is it his job to bail out Wall Street at the expense of the rest of the country. And, it is his job to prevent the growth of dangerous bubbles. That’s three really big strikes.

Bernanke should be sent out to enjoy his TIME “Person of the Year” status in retirement.

To get through this nonsense we just have the repeat the great mantra: It’s the economy stupid.

DEAN BAKER is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy.

This column was originally published by The Guardian.

 

More articles by:

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

Weekend Edition
October 20, 2017
Friday - Sunday
John Pilger
Clinton, Assange and the War on Truth
Michael Hudson
Socialism, Land and Banking: 2017 Compared to 1917
Jeffrey St. Clair
A Day in the Life of CounterPunch
Paul Street
The Not-So-Radical “Socialist” From Vermont
Jason Hirthler
Censorship in the Digital Age
Jonathan Cook
Harvey Weinstein and the Politics of Hollywood
Andrew Levine
Diagnosing the Donald
Michelle Renee Matisons
Relocated Puerto Rican Families are Florida’s Latest Class War Targets
Richard Moser
Goldman Sachs vs. Goldman Sachs?
David Rosen
Male Sexual Violence: As American as Cherry Pie
Mike Whitney
John Brennan’s Police State USA
Robert Hunziker
Mr. Toxicity Zaps America
Peter Gelderloos
Catalan Independence and the Crisis of Democracy
Robert Fantina
Fatah, Hamas, Israel and the United States
Edward Curtin
Organized Chaos and Confusion as Political Control
Patrick Cockburn
The Transformation of Iraq: Kurds Have Lost 40% of Their Territory
CJ Hopkins
Tomorrow Belongs to the Corporatocracy
Bill Quigley
The Blueprint for the Most Radical City on the Planet
Brian Cloughley
Chinese Dreams and American Deaths in Africa
John Hultgren
Immigration and the American Political Imagination
Thomas Klikauer
Torturing the Poor, German-Style
Gerry Brown
China’s Elderly Statesmen
Pepe Escobar
Kirkuk Redux Was a Bloodless Offensive, Here’s Why
Jill Richardson
The Mundaneness of Sexual Violence
Caoimhghin Ó Croidheáin
The Choreography of Human Dignity: Blade Runner 2049 and World War Z
Missy Comley Beattie
Bitch, Get Out!!
Andre Vltchek
The Greatest Indonesian Painter and “Praying to the Pig”
Ralph Nader
Why is Nobelist Economist Richard Thaler so Jovial?
Ricardo Vaz
Venezuela Regional Elections: Chavismo in Triumph, Opposition in Disarray and Media in Denial
Kevin Zeese - Margaret Flowers
NAFTA Talks Falter, Time To Increase Pressure
GD Dess
Why We Shouldn’t Let Hillary Haunt Us … And Why Having a Vision Matters
Ron Jacobs
Stop the Idiocy! Stop the Mattis-ness!
Russell Mokhiber
Talley Sergent Aaron Scheinberg Coca Cola Single Payer and the Failure of Democrats in West Virginia
Michael Barker
The Fiction of Kurt Andersen’s “Fantasyland”
Murray Dobbin
Yes, We Need to Tax the Rich
Dave Lindorff
Two Soviet Spies Who Deserve a Posthumous Nobel Peace Prize
Rafael Bernabe – Manuel Rodríguez Banchs
Open Letter to the People of the United States From Puerto Rico, a Month After Hurricane María
Oliver Tickell
#FreeJackLetts
Victor Grossman
From Jamaica to Knees
Michael Welton
Faith and the World: the Baha’i Vision
Barbara Nimri Aziz
Kirkuk the Consolation Prize?
Graham Peebles
Beyond Neo-Liberal Consumerism
Louis Proyect
On Gowans on Syria
Charles R. Larson
Review: Candida R. Moss and Joel S. Baden’s “Bible Nation: the United States of Hobby Lobby”
David Yearsley
Katy Perry’s Gastro-Pop, Gastro-Porn Orgy
FacebookTwitterGoogle+RedditEmail