Last week, Barack Obama announced that his new plan for Wall Street regulation would be hinged upon an enhanced oversight role for the Federal Reserve. Robert Pollin, while welcoming a first attempt at regulation, points out that the Fed already was tasked with bank oversight, but allowed the excess and recklessness to continue due to lack of transparency and accountability. Furthermore, while the Obama plan gives the Fed more power, it does not give one reason to expect a more transparent or accountable agency. When seen together with Treasury Secretary Geithner's plan to relieve banks of their so-called toxic assets, Pollin believes that the White House's vision for an overhauled financial system, falls horribly short.
BioRobert Pollin is Professor of Economics at the University of Massachusetts in Amherst. He is the founding co-director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His books include A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the US and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity. Comments from Registered Members | (Register or log in to make your comment.) | dan the man 2009-06-25
These lying, cheating, back-stabbing, no good, dirty little low-life scum bags will NEVER change!!! They are forcing a very violent and ugly revolution! Their Greed is their only reason for living. | andruman 2009-06-25
the banking system is just well done slavery in my opinion. every dollar more pumped in the system will just lead to more money required to pay the debts of. and if all the money is lend from the fed in the first place then there simply doesnt exist the money to pay it back at all resulting in more loans and debts. | dart 2009-06-24
Obama is the bankers` boy.I doubt he could explain fractional reserve bank banking or the mandrake mechanism dubbed by griffin.He campaigned on tighter regulation -he`s doing the opposite.He backed off bankruptcy protection for homeowners but protects hedge funds.Take a look at the scale of naked short selling-there are no free markets in the US-its an insiders game.The mega investment banks (that opted for bank holding company status for bailouts) are being built for global domination for a global currency.Look at the new regulatory powers of BIS recently announced and note Bilderberg leaks of discussions on reg. of markets to be held in Jerusalem. | dart 2009-06-24
The wake up call that led directly to people examining the FRB was 9.11.and for them the game has long since moved on from this clip.Ron Paul`s Sushine Bill will likely clear Congress but a heavy lobbyist front is being built in the senate.This is about Revolution no less.The owners of the FED are attempting global monetary control from basel.They control the US Govt.,they want EU control via Bilderberg-we know this in the UK,the SCO knows it and the rulers of Iran know it.The US is corrupt from the top down and the world knows that. | DJ2008 2009-06-24
Americans, as they currently are, CANNOT get rid of the Federal Reserve system. They are too unsophisticated to understand it, or how to get rid of it, let alone how to 'buy back' their representatives in Congress and the Senate, who are completely under the auspices of said private banking cartel. At this point, it is just a matter of planning ahead for what the Fed has in store for the US (i.e. replete bankruptcy and grave political instability) and planning for one's self and family around said events. | doyog 2009-06-24
We do need to get rid of the Federal Reserve. Thomas Jefferson got rid of something similar to what we know as the Federal Reserve today and told us to beware of its like for it will ruin the country. On December 22, 1913 the Federal Reserve was voted in existence when most of congress was at home so that total control of our countries money fell under total control of private hands. This does the country no good but it does profit the private bankers. So now these private bankers with a Federal name will have more power given to them? The Federal Reserve or private bankers now have more control than ever before. This is the same Federal Reserve that creates money out of nothing then lends it to us and we pay interest on it. We pay interest on money that didn’t even exist? That sure is a lot of profit. It will do the country good to get rid of them. | sevenahm 2009-06-24
the reference should have been www.webofdebt.com | sevenahm 2009-06-24
I agree with Shaw. The Fed needs to be replaced, not patched up. The U.S. should issue its own debt-free greenbacks and lend these through a national (nationalized) bank to private banks. The interest collected would allow us to eliminate the personal tax which was instituted the same year as the Fed. Read the web of debt, see thewebofdebt.com. How about more REAL news on this topic! | JohnK 2009-06-24
Note that Obama makes specific mention of bank holding companies (i.e., Citigroup). See http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1410072 to get a sense of how, contrary to reducing "casino capitalism" banking risk, the moral hazard of government protection may actually provide holding companies a strong incentive to "bet the bank." | AJ Smith 2009-06-24
"...; finance must be democratized."
Ha HAAA! Good luck with that, professor. You'd have a better chance of turning lead into gold. | 14Hertz 2009-06-24
Rome is Burning ! | neoconbuster 2009-06-24
What about the 500 FBI Regulators that BUSH took out after 9-11 And never returned back according to P.Black in a this Bill Moyers PBS Interview: ( http://www.pbs.org/moyers/journal/04032009/watch.html )They were the ones suppouse to detect the "LIAR LOANS " Fraud mostly Responsable for the Real State Crisis, Which had a mayor impact in today's Crisis. Please Correct me if i am mistaken. | JohnK 2009-06-24
The name of the new Fed regulation should be called: "Opaque Currency Creation, Distribution and Oversight using Enhanced Fastow/Enron II Black Box Banking and other Structured Financial Practices." | shawmutfinlay 2009-06-24
OMG! I can't believe were still talking about ways to make the Fed work better.
ABOLISH THE FED ALREADY! They are a private bank. Of course Grayson can't get a straight answer. Give the Fed more regulartory power? How about allowing Chase to reg Citigroup? I'm sure it would be fair.. Tell the US Govt. to print their own money and END THE FED! |
JESSE FREESTON, TRNN: Last week, President Obama unveiled his plan for a new era of financial sector regulation with the promise of avoiding another calamity on Wall Street. BARACK OBAMA, US PRESIDENT: That's our goal, to restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed.~~~ROBERT POLLIN, POLITICAL ECONOMY RESEARCH INST., UNIV. OF MASS.: The proposal is certainly an improvement on the virtually nonexistent financial regulatory system that we've had for the past decade or more, but it is not adequate to move our current virtual nonregulated system, our casino-capitalism version of a financial system, to one which is focused on channeling credit to productive activities to reward work and responsibility. Let me give you a couple examples why. One of the major features of this proposal is to provide the Federal Reserve itself with enhanced authority over regulating the big institutions that are called "too big to fail".~~~OBAMA: We were facing one of the largest financial crises in history, and those responsible for oversight were mostly caught off guard and without the authority needed to address the problem. It's time for that to change. I am proposing that the Federal Reserve be granted new authority and accountability for regulating bank holding companies and other large firms that pose a risk to the entire economy in the event of failure.~~~POLLIN: The problem is the Fed has already had an enormous amount of regulatory power. They just don't exercise that power. They didn't exercise that power. Alan Greenspan, for example, who was chairman of the Fed for 17 years, said that the Fed was not going to intervene in the speculative markets, because the smart guys and women on Wall Street know better than the regulators. So why should we assume that giving more power to the Fed in and of itself is going to improve the rewarding of responsibility and hard work? What we need instead are things that are—shift the whole structure of the Fed, shift the whole regulatory environment. FREESTON: The Federal Reserve has long been criticized for its lack of transparency, and Fed officials have done little to put those fears to rest over recent hearings, especially when under questioning by Congressman Alan Grayson.~~~House Financial Services CommitteeJanuary 13, 2009REP. ALAN GRAYSON (D-FL): Mr. Kohn, how much has the balance sheet of the Federal Reserve increased since September 1?DONALD KOHN, VICE CHAIRMAN, FEDERAL RESERVE: It's increased from around $800 billion to about $2 trillion.GRAYSON: Which institutions received that, and how much for each institution?KOHN: I don't know which institutions, which specific institutions received it, but—and I think I would be very, very hesitant to give the names of individual institutions. In fact, I think it would be a very bad idea, because I think it would undermine the utility of the facilities that we're giving.GRAYSON: Mr. Kohn, you just said that $1.2 trillion has been lent or spent, as the case may be. That's $4000 for every man, woman, and child in this country. Don't Americans have the right to know how you spent that money?~~~House Financial Services CommitteeMay 5, 2009GRAYSON: We're talking about events that started unfolding eight months ago. Have you reached any conclusions about the Fed expanding its balance sheet by over $1 trillion since last September?ELIZABETH COLEMAN, INSPECTOR GENERAL, FEDERAL RESERVE: We have not yet reached any conclusions.GRAYSON: Do you know who received that money?COLEMAN: For the—? We're in the process right now of doing our review, and—.GRAYSON: Right, but you're the inspector general. My question to you specifically is: do you know who received that $1 trillion-plus that the Fed extended and put on its balance sheets since last September? Do you know the identity of the recipients?COLEMAN: I do not know. We have not looked at that specific area at this particular point on those reviews.GRAYSON: What about Bloomberg's report that there are trillions of dollars in off-balance-sheets transactions that the Federal Reserve has entered into since last September? If your agency has in fact, according to Bloomberg, extended $9 trillion in credit—which, by the way, works out to $30,000 for every single man, woman, and child in this country—I'd like to know, if you're not responsible for investigating that, who is?COLEMAN: We actually—we have responsibility for the Federal Reserve's programs and operations, audits, to conduct audits and investigations in that area. In terms of who's responsible for investigating—would you remind repeating the question one more time?GRAYSON: What have you done to investigate the off-balance-sheets transactions conducted by the Federal Reserve, which, according to Bloomberg, now total $9 trillion in the last eight months?COLEMAN: I'll have to look specifically at that Bloomberg article. I'm not—I don't know if I have actually seen that particular one.GRAYSON: That's not the point. The question is: have you done any investigation or auditing of off-balance-sheet transactions conducted by the Federal Reserve?COLEMAN: At this point, we're at the very—we are conducting our lending facility project at a fairly high level and have not gotten to a specific level of detail to really be in a position to respond to your question.GRAYSON: Mr. Chairman, my time is up, but I have to tell you, honestly, I am shocked to find out that nobody at the Federal Reserve, including the inspector general, is keeping track of this.~~~FREESTON: And as for the agency's accountability, here's former Fed chairman Alan Greenspan back in 2007 on the Jim Lehrer NewsHour.~~~CBS NewsHour with Jim LehrerSeptember 18, 2007JIM LEHRER, HOST: What should be the proper relationship between a chairman of the Fed and a president of the United States?GREENSPAN: Well, first of all, the Federal Reserve is an independent agency, and that means basically that there is no other agency of government which can overrule actions that we take. So long as that is in place and there is no evidence that the administration or Congress or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don't frankly matter.~~~POLLIN: One idea would be to put the governors of the Federal Reserve up for democratic elections. That would force them to address the public's concerns. Those concerns would be on the table; they would be openly debated. And that would then open up the books of the activities of these institutions. That alone is not going to solve the problem of casino capitalism, but it'll at least create a much-enhanced level of accountability. And that's one starting point to move towards a responsible financial system.FREESTON: During the speech, President Obama gave his take on the cause of the financial crisis.~~~OBAMA: A regulatory regime basically crafted in the wake of a 20th-century economic crisis, the Great Depression, was overwhelmed by the speed, scope, and sophistication of a 21st-century global economy.~~~POLLIN: There was a remarkable set of regulations that were put in place in 1933-1934 that came under the name of "Glass-Steagall system". One of them was to separate out commercial banks from investment banks. So let me put it more simply: to separate out the day-to-day, normal activities of people that want to just put their money in a safe place, versus casino capitalism. Investment banks is a fancy way of talking about highly speculative investing in all kinds of Wall Street activities that most people don't want to touch with a 10-foot pole. So those things were separated out, so that under that regulation it said, well, okay, if you want to be in the casino, you can be in the casino, but it is not going to affect what happens in the regulated banking system that people count on for their savings and investment. Now, what's happened over the years is that that distinction that was put in place in the '30s between the highly regulated plain-vanilla banking system and the highly speculative casino were integrated. Those barriers were broken down. And finally—under Bill Clinton, in fact—those barriers were formally eliminated. So Obama's quote is not accurate, because what really happened is that we had a pretty good financial regulatory system in place, but for 30 years, bit by bit, both Democrats and Republicans dismantled this system because Wall Street wanted it dismantled. And so, by the end of the century, we have a pure casino system, and we've had severe financial crises all along the way.FREESTON: Another piece of the financial system that would be left largely unfazed by the new rules is the private credit-rating system.POLLIN: Another proposal would be to create a public credit-rating agency. We know that Moody's, Standard & Poor's, and Fitch, the big credit rating agencies, the ones you hear about that give AAA ratings, AA ratings, they were waving along all kinds of ultra-speculative activities. Why? Because the people that pay them are the financial institutions that are trying to get regulated in the first place. So of course the agencies know that they will get more business if they give all A's, just like teachers become more popular if they give all A's. We need a public credit-rating agency that will take an objective look and put that information out.FREESTON: The new regulatory proposal can be seen as the second half of Obama's plan to restructure the US financial system, the first being Treasury Secretary Geithner's plan for relieving banks of their so-called toxic assets, a plan that was heavily criticized, including damning objections by renowned mainstream economists like Jeffrey Sachs and Joseph Stiglitz.POLLIN: The system that Geithner put in place is one in which financial institutions—anybody can come and buy up the so-called toxic assets that these big banks hold. Okay? You can come and buy them up. The US government is going to guarantee 90 percent of the losses you might incur by buying up these assets, and if the assets fail, if nobody can pay back their debts, the US government covers 90 percent of the losses. If those assets turned good, if you're holding the paper, if you're the creditor, you get 100 percent of the gains. So that's the deal: 100 percent of the gains go to the big Wall Street financiers; if there are losses, 90 percent are absorbed by the public.FREESTON: The new framework will now head to a series of congressional committees. Meanwhile there was little sign of Wall Street making any independent corrections. According to former insider William Cohan in his appearance on Bloomberg TV:~~~Courtesy: Bloomberg TVJune 3, 2009WILIAM COHAN, FMR. MANAGING DIR., MERRILL LYNCH AND JPMORGAN CHASE: What happened six months ago seems to be completely evaporated from the current sensibility in the market. And you have people wanting to pay back their TARP funds as quickly as possible so they can be free of government oversight and government accountability, they can pay people what they want, they can invest again in what they want. They'll probably be wanting to return to the days of huge amounts of leverage again. And it's really disturbing to me, frankly, that this is happening as quickly as it is without any people stepping back and saying, hey, what's really going on here? Do we really want to go back to reconnect and reestablish the system that didn't work very well at all for the last, you know, 10 or 15 years?~~~FREESTON: While US banks appear to go back to business as usual, the world is watching closely. Some are suggesting that decisions are already being made outside of Washington and New York that could drastically alter the global power structure by moving away from the US dollar as the world's reserve currency. In Part Two, we will discuss whether or not we are entering what economist Michael Hudson recently labeled "the ending of the US financial-military empire".DISCLAIMER:Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy. |
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