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Matt Stoller @matthewstoller
, 21 tweets, 5 min read Read on Twitter
1. Ok, time to address this piece by Hank Paulson, Tim Geithner, and Ben Bernanke on the need for more bailout authority to address financial crises. It is a surprisingly interesting but hidden political argument.
2. The argument is that the banking system 'outgrew' protections against panics put in place during the Great Depression. They didn't see the crisis coming, but their response as firefighters was pretty good. Banks were bailed out, which was unfair, but America recovered.
3. It's couched in technical terms, but basically they argue, accurately, that what happened was a standard banking panic, only one that happened in the unregulated sector of the banking system which ordinary people don't have access to. But one critical to the flow of credit.
4. To address this we need to stem such panics. That mean the gov't has to be able to bail out financial institutions and ensure the functioning of the payments system, as they did. So far, so good. Now, here's where their political argument comes in.
5. Regulators need tools, aka the right to spend trillions, to address panics. And Congress took those tools away. That's bad. How will we ever deal with panics? And now the sleight of hand occurs. They aren't unhappy that the tools are gone. They are unhappy Congress has them.
6. The basic lie of Geithner/Paulson/Bernanke is the argument that now regulators have no bailout authority. Leave aside the various misleading elements here. Yes, they do. They just have to ask Congress, which is the most democratic branch of government.
7. They are arguing against democracy. They are angry the people have some formal check on their right to do whatever they want during a crisis. They are couching this in terms of the need to stem panics. They are pretending an attack on democracy is a technical point. It's not.
8. There are a lot of misleading metaphors here. Pretending they are firefighters, narratives of modernization instead of corruption, etc. But the basic lie is that they are neutral players trying to solve a technical problem when they are attempting to subvert the public.
9. Time to lose followers. Because this is a narrative that both parties and economists validate. Paulson/Geithner/Bernanke want to vest most of this undemocratic power in the Federal Reserve. And they want the Fed to be 'independent' of politics. The anti-democracy two step.
10. The reality here is that how we choose the value of money, how we organize property rights, is an intensely political question. These men are autocrats. And anyone who says they want an independent Fed is putting forward an autocratic framework. Often without meaning to.
11. There are many ways to do bailouts. But the Obama bailout didn't stop a depression. It stopped a New Deal. And that's what Bernanke/Geithner/Paulson were after. That's what they got. We needed to stem the panic. We didn't need them to rob middle class to reward their cronies.
12. This power grab by the plutocrats, and yes, Obama is an ally of the plutocrats, had devastating effects worldwide. This is perhaps the hardest outcome to square with Obama's bailouts, the destruction of black wealth.…
13. The racism was obvious but impossible to square with the narrative of the Obama Presidency. "According to a 2013 study of TARP investments, black-owned banks were ten times less likely to receive bailout money than nonminority-owned banks."…
14. Those without power were hit the hardest. But unless you were in the top 1%, it was bad. And if you were in the club, it was fine. Lots of weird stuff got pushed into the memory hole.…
15. Like the "independent" Federal Reserve lending $220 million to two wives of Morgan Stanley execs.…
16. Or... hundreds of millions of Fed dollars flowing to "hedge funds and other investors with addresses in the Cayman Island..."
17. The only reason we know of any of the weird things the Fed did is because a few of us in Congress actually forced disclosure on these emergency lending facilities. Which a good number of macro-economists, and the saintly Paul Volcker, lobbied against. Independent Fed nonsense
18. Only way to fix this is have a *democratic* approach to money. That means putting the Federal Reserve under the direct control of Congress or Treasury, and having Congress or the Executive branch directly set interest rates and bailout policies. Not plutocrats.
19. People sometimes ask do you want members of CONGRESS setting monetary policy? Yes I do. More than Jerome Powell or Janet Yellen. Members of Congress actually have to face voters. And if you don't want members of Congress running the country, you don't believe in democracy.
20. And that is ultimately the point of the Geithner/Bernanke/Paulson op-ed. It's to intimidate you into thinking that we cannot govern, that democracy is perhaps a nice ornament, but not when stuff is important and trillions of dollars is at stake. Do you believe that? Do we?
21. Yes I do. I think Congress acts like a bunch of tantrum throwing children because they have no actual responsibility. Responsibility is the great developer. Give them authority over monetary policy and they'll change real quick.
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