Jane D’Arista: Obama admin. and leading members of Congress want to leave power in the hands of the Fed
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. We’re in Hadlyme, Connecticut, with Jane D’Arista. We’re talking about a financial apocalypse redux. We got a fair sense of how vulgar this cash-grab has been by the financial institutions. In the last segment, you laid out four or five what are pretty obvious things that would at least go a long way to stopping this from happening again, but it seems like no serious regulation has really seemed to be about to be enacted. President Obama, when he spoke to the nation, selling the bank bailout, he said, yes, there’s been too much greed, but really we’re doing all this for Main Street, not for Wall Street. What do you make of the performance of the Obama administration in terms of exposing to people what’s really going on and doing something to stop it?
JANE D’ARISTA, AUTHOR, THE EVOLUTION OF US FINANCE: I’m not sure that the president knew what was going on. I think this is not his field. He was relying on the experts he chose. And the experts he chose would like very much to have, as would the financial sector itself, everything return to January 2007. And they think that was the way to go, that if they could just hold it up, prices would come back, assets would regain their value. And so they have this false dawn that we talked about before, where, you know, there seems to be profits in the financial sector again.
JAY: Well, before we get back into that, I want to just back up one step. I mean, he didn’t have to pick the people he picked. He picked the people who were all the players in the creation of the mess in the first place.
D’ARISTA: Well, that’s right, that’s right. And the complaint has been really very real about that. Many reporters now ask that question. And so, presumably, it’s his choice. Many of us feel these people should go, and we’re disappointed that other voices are not being heard. And they’re not. There are famous stories out there about various other voices and so on. I won’t get into that. I think the issue is also that the Congress was not hearing other voices as well. And so there is something called the Americans for Financial Reform. And the group that I’m part of, which is a group of economists and analysts who are for financial reform as well, up at University of Massachusetts—but, of course, our group is much broader—and we’ve been clamoring to be heard. So far, a few of us have been heard, but under great pressure to have this kind of witness on. You have this situation in the Congress where the Banking Committee—what we used to call the Banking Committee (Financial Services Committee now) has grown astronomically in numbers. There are about 70 members of the committee now, and there’s not much room for an audience in the room, because that’s where all the members are. And it’s not a deliberative body. It’s a body that necessarily has to have strong leadership. And it’s getting it from Chairman Frank, but it does preclude a lot of discussion. That means a lot of things are not getting examined. When I was there, what I saw was a kind of a pushback on the part of Democrats, as well as Republicans. And some of that had to do with the move to give the Fed a great deal more power. And there’s concern about the constitutional issues. They’re concerned about the concentration-of-power issues. There’s great sympathy for Sheila Bair, the head of the FDIC [Federal Deposit Insurance Commission], who feels it should be a committee, a commission making the determinations and not the Fed.
JAY: This is about who’s going to be the regulatory body.
D’ARISTA: Who’s going to be the big systemic regulator. Who’s going to really say, you know, this should happen, you have to die institution, etc. So these fights are now beginning to emerge, and I think they will be there with us. The major difference between positions is the administration and so far the Financial Services Committee are voting for discretion; the rest of us want rules.
JAY: Meaning the Fed would be the regulatory body, and the Fed would have discretion—.
D’ARISTA: Yeah. And to say, “Go forth and do good.”
JAY: “This day we’re going to do this, and that day we’re going to do that.”
D’ARISTA: Yeah. That’s right.
JAY: “And it’s up to us to decide what’s good for the economy.”
D’ARISTA: Right. And what we feel is—.
JAY: And just to remind everybody, the banks control two-thirds of the votes of the Fed and most of the decisions.
D’ARISTA: Well, that would be banks, of the Federal Reserve Banks. So the Federal Reserve is a problem. And the head of the AFL-CIO, who testified on the day that I did, said, “We can’t go along with that unless you democratize the Fed.” So the issues are getting to be rather heated, and they should be. There’s a lot of power that is being pushed around. And I think people were really distressed, because the idea was, on the one hand, this commission would be formed. It would be informative. It would collect data. It would tell everybody where they saw the problems. But the real power would be with the Fed. And at the same time, the Treasury also would gain in power, because the Fed would have to go to the Treasury and get written permission to do emergency actions. So this did not sit well with the Congress at all. The politics of it in general are also—there’s so much money there.
JAY: Lobbying money.
D’ARISTA: Lobbying money is huge. You know, you know that, in the health-care legislation and so on. But it’s very, very big. And so what can we do on our side? Well, Richard Trumka sits there, and he’s got a—.
D’ARISTA: Yeah, AFL-CIO. Sits there with a lot of members. The Americans for Financial Reform has 200 members, a group of NGOs, as we call them, non-governmental consumer groups, labor unions, and AARP [American Association of Retired People]—and we know how many millions of members that is. So what we can simply try to do is remind the Congress that we’re out there.
JAY: Do most congresspeople understand the dynamics of how all this worked? Or are they bamboozled themselves?
D’ARISTA: No, they are, they are bamboozled. I think, you know, that probably they don’t have a lot of time to read. I think some of the reporting that has been done now—not in the past, but now—is excellent. They don’t necessarily have time to read it. And that’s why we feel that they should be listening to other voices, ’cause they’re going to come and listen, or they’ll watch it on the screen in their offices, etc., hearing.
JAY: Do they get that the profound global crash that’s triggered by this Ponzi scheme in the finance sector is very likely to happen again? Do they get this?
D’ARISTA: They don’t. The numbers for GDP went up at the same time that there was a big meeting of a lot of people who were saying the numbers are no good, we’ve got to change it, we’ve got to spend money to collect the real data.
JAY: What is going up if we’re approaching 20 percent real unemployment?
D’ARISTA: Unemployment. Exactly.
JAY: And what does it mean [inaudible]
D’ARISTA: Yeah, exactly. So why is this? Well,—.
JAY: Or if it’s just some stimulus money hitting, then what happens when that’s gone?
D’ARISTA: They aren’t able to discriminate on what is going on overseas and how much of that we’re counting as part of our GDP.
JAY: And Ponzi schemes are part of GDP.
D’ARISTA: Exactly. Exactly. Exactly. So they see the financial sector making money. They don’t like the bonuses. The compensation issue is very big. What they don’t understand is they couldn’t pay these bonuses if they weren’t doing proprietary trading. Stop it at the source. Don’t just say, “Oh, you can’t pay more than X.” That’s not enough.
JAY: So maybe there needs to be this several-million-person march to Washington, like, down with the American kleptocracy.
D’ARISTA: Well, something like that might help.
JAY: Next segment of our interview, let’s get into some people’s favorite subject, the Fed, ’cause it’s a big debate. What should be the role of Fed? What is the Fed? And please join us for the Fed on The Real News Network.
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