economy – Page 12 – Hank Kalet

Score one for the little guys

The Federal Reserve, as William Greider has written, thrives on secrecy, making it the perfect tool for the banking and finance industry to gin up profits. Whatever its earliest mission, it now functions as nothing more than the bankers’ private government support system.

The veil, however, could be lifted if legislation that has garnered wide, bipartisan support can get through Congress with enough support — both from members of the two houses and from the public at large — to force the president to sign it.

The legislation, as described by Ryan Grim on The Huffington Post, is pretty straightforward.

The measure, cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed’s opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.

Critics of the bill say it will compromise the Fed’s independence, opening it up to political manipulation. The problem with the argument, however, is that the Fed already is subject to political influence — but from the banking industry, without any say from the government or the people it is supposed to represent.

That was the gist of a letter from a coalition of labor, left-leaning economists and other progressives seeking to democratize the Web, as reported by The Huffington Post earlier in the week.

The letter notes that during the financial crisis of the past two years, the Fed’s role has shifted from simply setting monetary policy via interest rates to rapidly acquiring “a wide variety of private assets and extend[ing] massive secret bailouts to major financial institutions.”

Among those bailouts, critics argue, was the Fed’s funneling of cash to AIG counterparties. Earlier this week, a government watchdog issued a blistering report that blamed the Federal Reserve for withholding details of its massive rescue of AIG last fall. In particular, the report blamed the Federal Reserve for paying for botching its private negotiations regarding the price AIG’s rapidly souring derivatives investments, a secret move that cost taxpayers at least $13 billion.

The issue has created what to Washington’s eyes might seem like strange bed fellows — libertarian rightwinger Ron Paul and lefties like Alan Grayson and Dennis Kucinich — but that’s only because the Washington establishment cannot see beyond the D-R paradigm. The Fed question must be viewed from a different vantage point, one that arranges the political world along the question of economic democracy.

Paul and Grayson may have different views, ultimately, of how the economy should function, but they both are concerned about the outsized and still-growing influence of the financial industry on the economy and our democracy.

This legislation is not perfect, either, but it is necessary. The fact that people like Timothy Geithner and Lawrence Summers oppose it should be enough to make us realize just how much.

DeFazio is right

The Obama administration should never have turned to these guys for economic advice, and their record since January has only proven this. The president should listen to Peter DeFazio and replace them.

There are plenty of options, of course, including progressive economists like James K. Galbraith, Robert Reich, Paul Krugman, Joseph Stiglitz, Dean Baker, who could refocus not only the Obama administration away from Wall Street but help create a new path for the economy as a whole.

More bad news on the economic front

I keep hearing that things are getting better, but the reality is that things are not — at least not for workers. The Labor Department issued another bleak jobs report today, announcing 263,000 lost jobs in September and an unemployment rate of 9.8 percent, the highest in 26 years.

As The New York Times reports,

the report offered little good news for the 15.1 million unemployed people in the United States. The number of hours worked stagnated. Overtime hours slipped in many industries. And temporary help companies — typically, among the first to rebound after a recession — shed 1,700 jobs.

“People have been celebrating that we’re through the financial crisis, but the underlying issues are all still there,” said Dean Baker, co-director of the Center for Economic and Policy Research. “We’ve lost trillions of dollars in housing wealth, and consumption’s going to be weak. It’s not the ’30s, but there’s really nothing to boost the economy.”

The reality is that, while things appear better on some fronts than they were a year ago (thanks to a federal stimulus package that pumped some money back into the economy, though it could have been more robust), most of us have no reason to be optimistic.

The economy has been bleeding jobs every month, without interruption, for nearly two years. More than 15 million people in the United States are now unemployed, and more are working part-time jobs for less pay, or have given up looking for work altogether.

“This is still severe,” said Andrew Stettner, deputy director of the National Employment Law Project. “It’s not going to be turning around as fast as people want.”

At the same time, other economic measures are beginning to waver, signaling that the initial phase of the recovery — a sharp rebound from a deep bottom — may be giving way to a long grind higher, marked by uncertainty and pain for many.

With every jobs report comes the sense among workers that they could be next. That makes them unwilling to spend on the kind of discretionary items — high-tech toys, for instance — that are now sitting on shelves. If no one is buying them, then there is no reason to manufacture them — which leaves the people doing the work without jobs.

Hence, the sense of pessimism that greets even the most optimistic pronouncements.

Helping the unemployed

Wall Street may think we’re coming out of this recession, but there are millions of workers who may disagree. That’s why Congress is considering another extension of unemployment benefits that “would provide 13 weeks of extended unemployment benefits for more than 300,000 jobless people who live in states with unemployment rates of at least 8.5 percent and who are scheduled to run out of benefits by the end of September.” The extension “would supplement the 26 weeks of benefits most states offer and the federally funded extensions of up to 53 weeks that Congress approved in legislation last year and in the stimulus bill enacted last February.”

This seems a no-brainer. This recession has been pretty hard on workers, leaving about 15 million out of work, and millions more working but facing pay cuts, furloughs or in part-time or temporary jobs.

Just as important is the number who are facing long-term unemployment.

Some 5 million people, about one-third of those on the unemployment list, have been without a job for six months or more, a record since data started being recorded in 1948, according to the research and advocacy group National Employment Law Project.

“It smashes any other figure we have ever seen. It is an unthinkable number,” said Andrew Stettner, NELP’s deputy director. He said there are currently about six jobless people for every job opening, so it’s unlikely people are purposefully living off unemployment insurance while waiting for something better to come along.

And,

Gary Burtless, a senior fellow at the Brookings Institution, said at the Finance Committee hearing that, according to Labor Department figures, 51 percent of unemployment insurance claimants exhausted their regular benefits in July, the highest rate ever.

“It is likely the exhaustion rate will continue to increase in coming months” as the unemployment rate continues to rise, he said.

The reality is that, without the extension, many workers likely would need to use other social services or go without. Putting money in their hands is good policy — workers are going to spend what they receive — and the right thing to do.

Behind the 8 ball because of bailouts

Robert Johnson — not the blues singer — makes a compelling case that the failure of the Obama administration to stand up to the banks and Wall Streeters in the administration’s earliest months is costing him dearly now, as he tries to pass major healthcare legislation and could cost him greatly down the road.

He writes that the bailout of the financial sector, a bailout that lacked any strings, may have “made sense in isolation,” but lacked “an awareness of the historic context and opportunity” that called out for bolder action.

Free markets had profoundly failed. Government had been given another chance by the electorate that was inspired by candidate Obama. A chance to do some good
for the general interest and regain the reputation of a productive public sector after thirty years of disparagement. Yet by refusing to stand up to the oligarchs and set proper boundaries in defense of society, they fed the cynics and dissipated the magic that Obama had created for real change. The Administration seemed closer to Jamie (Dimon) and Goldman Sachs than to us. The lesson: if you fail to defend society once, people lose faith. The loss of faith carries a high price, and we’re paying that price now in the arena of healthcare reform.

The point is, Johnson says, that we are in times of “great danger”; the Obama administration needs to act decisively or risk losing the moment.

Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. The costs to the US and the world of another failed presidency do not bear contemplating.

It is still early, of course, but we already are witnessing the seeds of a new narrative being born, with elections in Virginia and New Jersey that are turning on state issues being recast by the national media as referenda on the president. This is absurd, of course. The New Jersey vote will be about Gov. Jon Corzine and not about the president, who remains popular here.

But Obama’s decision to buy into the financial status quo — Summers, Geithner and Bernanke — and his raising of bipartisanship above policy on healthcare and the stimulus (not to mention his selling out of workers on card check and the auto bailout) are making it that much harder to generate the kind of change we thought we could believe in.