All Aboard the Global Gazillionaire Gravy Train!
If Janet Yellen is to convince the American people that the Fed is on their side, she's got her work cut out for her.
According to a 2013 Gallup poll, Americans' disgust for the Federal Reserve ranked just above the IRS among federal agencies. That's a lot of hate, people.
And it's easy to see why.
In recent memory, we've had Alan Greenspan, proponent of economic quackery, Wall Street casinos, and an Ayn Rand acolyte. The subprime mortgage disaster came right after Greenspan left office, and as the documentary Inside Job pointed out, Big Al bears big responsibility for the meltdown. (Time magazine named him one of the "25 People to Blame for the Financial Crisis.”) And just before Yellen we had Ben Bernanke, who prioritized holding down inflation over putting Americans back to work, one of the reasons Wall Street is enjoying record profits, while 6.3 percent of Americans remain unable to find a job.
But Ben Bernanke would like to stick another fork in your eye. A diamond-studded fork.
According to the New York Times' Alexandra Stevenson, Bernanke had barely left his office when he jumped aboard the global gazillionaire gravy train:
"On Tuesday, Ben S. Bernanke spoke in Abu Dhabi; on Wednesday, he was in Johannesburg. By Friday, he was in Houston. That week in March was a particularly busy one for Mr. Bernanke ... During his eight years as steward of the world's largest economy, Mr. Bernanke's salary was about $200,000 a year. Now he makes that in just a few hours speaking to bankers, hedge fund billionaires and leaders of industry. This year alone, he is poised to make millions of dollars from speaking engagements.
Mr. Bernanke is following a well-trodden path that his predecessor, Alan S. Greenspan, and other Washington policy makers have taken. ... Mr. Bernanke has agreed to speak with a Middle Eastern bank, private equity firms and trade associations, as well as at investment bank get-togethers, charging his hosts fees that range from $200,000 in the United States and $400,000 for engagements in Asia. While he has dined with hedge fund managers at small events arranged by investment and brokerage firms including JPMorgan Chase, some Wall Street firms have balked at the high fees."
Is Wall Street paying back a friend for favors? You be the judge....
The nation’s central bank, born in 1913, serves as one of the two great levers of our economy, the other being the Treasury. It sets interest rates that affect how much it costs everybody to borrow money. The Fed controls the nation's money supply by buying and selling U.S. treasury securities, and can use monetary policy to spur growth or diffuse inflationary pressures. Part of the Fed’s job is to move the country toward full employment, and it plays a major role in writing of financial rules.
Obviously, if Americans are ever to fully recover from the Great Recession and decades of bad economic policy, we need a Federal Reserve that doesn't play footsie with Wall Street.
Marriner S. Eccles proved that this is possible. Eccles, who served from 1934- '48 under Roosevelt, often gets credit for having saved capitalism from itself. He fought for FDIC insurance on bank deposits, higher income and inheritance taxes on the 1 percent (hello!!!), and other policies to combat inequality. He backed federal regulation of child labor, unemployment insurance, financial reform, Social Security and policies that helped stabilize the economy and create the robust middle-class that once thrived in America. In his historic testimony to the Senate in 1933, just before he became Fed chair, he took a hard swing at the wealthy:
“It is for the interests of the well to do—to protect them from the results of their own folly—that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not 'soaking the rich,' it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.”
Janet Yellen has said nothing so strong as this, but there's evidence she has some sympathy for Americans who are unemployed (unemployment is one of her research specialties). She has also said point blank that the Fed's job is to help Main Street, not Wall Street. And she has recently signaled that she supports the nomination of a community banker to the Fed, which would be a positive development.
Let's hope she'll chart a different course from her recent predecessors.