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Janet Yellin for FED chair

Personally, I think that if you have proven that you have fumbled the ball in critical situations, you probably shouldn’t get the ball in critical situations. This concept works in football and it should work in government. Larry Summers was a big cheerleader for deregulation. He squashed the regulation of derivatives, which would’ve prevented the meltdown of Long-Term Capital Management in the ’90s and would’ve prevented the great recession. All we needed to do was regulate derivatives. (Let us not forget that this month marks the 10th anniversary of the meltdown of Lehman Brothers.)

Economist Joseph Stiglitz has more:

The controversy over the choice of the next head of the Federal Reserve has become unusually heated. The country is fortunate to have an enormously qualified candidate: the Fed’s current vice chairwoman, Janet L. Yellen. There is concern that the president might turn to another candidate, Lawrence H. Summers. Since I have worked closely with both of these individuals for more than three decades, both inside and outside of government, I have perhaps a distinct perspective.

But why, one might ask, is this a matter for a column usually devoted to understanding the growing divide between rich and poor in the United States and around the world? The reason is simple: What the Fed does has as much to do with the growth of inequality as virtually anything else. The good news is that both of the leading candidates talk as if they care about inequality. The bad news is that the policies that have been pushed by one of the candidates, Mr. Summers, have much to do with the woes faced by the middle and the bottom.

The Fed has responsibilities both in regulation and macroeconomic management. Regulatory failures were at the core of America’s crisis. As a Treasury Department official during the Clinton administration, Mr. Summers supported banking deregulation, including the repeal of the Glass-Steagall Act, which was pivotal in America’s financial crisis. His great “achievement” as secretary of the Treasury, from 1999 to 2001, was passage of the law that ensured that derivatives would not be regulated — a decision that helped blow up the financial markets. (Warren E. Buffett was right to call these derivatives “financial weapons of mass financial destruction.” Some of those who were responsible for these key policy mistakes have admitted the fundamental “flaws” in their analyses. Mr. Summers, to my knowledge, has not.) (more…)

By |2013-09-10T20:58:48-04:00September 10th, 2013|Economy|Comments Off on Janet Yellin for FED chair

Shhh, don’t tell the GOP

One of the great lines that the GOP has been feeding us over the last three years is that we have too much debt. According to the GOP, we need to do everything that we can, including killing Social Security and Medicare, to decrease our debt. If we, as the GOP claims, really had too much debt, then no one would want to buy our debt, right? Had we too much, investors would be increasing their risk if they were to buy our debt and should, therefore, want to stay away from US debt. Right? Then why are investors buying up US debt at record numbers? Maybe, just maybe, the GOP is 100% on this.

From Bloomberg:

The U.S. government received record demand for its bonds in 2011, pushing longer-maturity Treasuries to their best performance since 1995 in a sign that President Barack Obama may have little difficulty financing a fourth consecutive year of $1 trillion budget deficits.

The Treasury Department attracted $3.04 for each dollar of the $2.135 trillion in notes and bonds sold, the most since the government began releasing the data in 1992 during the George H. W. Bush administration. The U.S. drew an all-time high bid-to- cover ratio of 9.07 for $30 billion of four-week bills it auctioned on Dec. 20 even though they pay zero percent interest.

While Standard & Poor’s stripped the U.S. of its AAA credit rating on Aug. 5, Treasuries due in 10 years or more returned 25.6 percent this year. The spreading sovereign debt crisis in Europe and slower global growth are driving investors to the safety of U.S. assets, helping to contain borrowing costs and making it cheaper as a percentage of gross domestic product to finance deficits than when the nation last had budget surpluses.

“If the last two weeks are any indication of how next year will start, there’s near-insatiable demand,” Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York, one of 21 primary dealers that are required to bid at the auctions, said in a Dec. 21 telephone interview. “We have a significantly shrinking supply of risk-free assets in the world and U.S. Treasuries are one of the few left.”

By |2011-12-27T09:24:04-04:00December 27th, 2011|Economy|Comments Off on Shhh, don’t tell the GOP

Oh, Tim, this is all so Bush-Cheney

It is hard to figure how Timothy Geithner, who is charged with cleaning up Wall Street, will be cleaning up anything.

From Bloomberg:

Some of Treasury Secretary Timothy Geithner’s closest aides, none of whom faced Senate confirmation, earned millions of dollars a year working for Goldman Sachs Group Inc., Citigroup Inc. and other Wall Street firms, according to financial disclosure forms.

The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund.

As part of Geithner’s kitchen cabinet, Sperling and Sachs wield influence behind the scenes at the Treasury Department, where they help oversee the $700 billion banking rescue and craft executive pay rules and the revamp of financial regulations. Yet they haven’t faced the public scrutiny given to Senate-confirmed appointees, nor are they compelled to testify in Congress to defend or explain the Treasury’s policies. (more… )

How can you be one of the Untouchables when you surround yourself Wall Street dudes? I’m just askin’?

By |2009-10-15T15:02:49-04:00October 15th, 2009|Economy|Comments Off on Oh, Tim, this is all so Bush-Cheney
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