Quite a bit has been written about the Federal Reserve’s December 1 release of documents revealing the details of its bailouts to those business entities benefiting from the Fed’s eleven emergency lending programs initiated as a result of the 2008 financial crisis. When you consider the fact that those documents concern over 21,000 transactions, all the attention should come as no surprise.
The two individuals who seem to have benefited the most from this event are Congressman Ron Paul and Senator Bernie Sanders. The two became unlikely allies in their battle to include an “Audit the Fed” provision in the financial reform bill. Ron Paul, the Libertarian Republican from Texas (considered the “Godfather of the Tea Party movement”) authored the book, End The Fed. Congressman Paul sponsored the original “Audit the Fed” proposal in the House of Representatives – H.R. 1207. Bernie Sanders, who describes himself as a democratic socialist, sponsored the watered-down “Audit the Fed” bill — S. 3217 — which replaced Congressman Paul’s version in what finally became known as the Restoring Financial Stability Act of 2010.
A recent article in The Wall Street Journal by Maya Jackson Randall recalled the backstory of how the Sanders proposal was incorporated into the financial reform bill:
Under pressure from the Obama administration, Mr. Sanders, who has described himself as a democratic socialist, made last-minute changes to his proposal; it doesn’t require audits of monetary policy, and it doesn’t require disclosure of the names of banks that use the discount window.
An unhappy Paul, a long-time Fed critic, said Mr. Sanders had “sold out.”
Who would have ever thought that a Libertarian Republican would, one day, accuse a democratic socialist of “selling out” on a bill to regulate the financial industry?
With the Republicans’ becoming the majority party in the House, the numerous committee chairmanships will now pass from the Democrats to the GOP for the 112th Congress. Although quite a bit of concern has been expressed by liberal pundits that the banking lobby will now have unfettered control over Congress, many banking industry lobbyists are sweating over the fact that Ron Paul will be the likely Chairman of the House Financial Services Committee. That fear and the efforts by ranking Republicans to assuage that dread were discussed in a recent article by Phil Mattingly and Robert Schmidt for Bloomberg BusinessWeek:
Five GOP leadership aides, speaking anonymously because a decision isn’t final, say incoming House Speaker John Boehner has discussed ways to prevent Paul from becoming chairman or to keep him on a tight leash if he does. If Boehner, who will help determine who gets to chair subcommittees as early as Dec. 8, rejects Paul, he may have to contend with thousands of grassroots supporters and dozens of younger lawmakers who see Paul as a hero. Boehner, through a spokesman, declined to comment. “A lot of the older members probably think Ron is a little bit out of step,” says Representative Bill Posey, a Florida Republican and unabashed Paul fan. “The depth of his knowledge on monetary policy, his understanding of it all, is second to none.”
Nevertheless, Ron Paul accused a socialist of “selling out” by capitulating to the pressure exerted by the banking lobby through its puppet – the Obama administration. His use of such a reproach demonstrates that Congressman Paul cannot be trusted to make certain that the House Financial Services Committee serves as a tool of the banking lobby. Beyond that, the extreme, partisan elements of the Republican Party cannot depend on Congressman Paul to “follow the script” written to portray Obama as the socialist.
As the Bloomberg BusinessWeek article pointed out, any efforts to deprive Congressman Paul of this chairmanship will guarantee some serious blowback from the Tea Party ranks as well as the other supporters of Ron Paul. John Boehner is in a serious double-bind here. If he allows Paul to assume the chairmanship, Boehner’s anticipated efforts to keep Paul “on a tight leash” should provide some good entertainment.
A Preemptive Strike By Tools Of The Plutocracy
The Financial Crisis Inquiry Commission (FCIC) was created by section 5 of the Fraud Enforcement and Recovery Act (or FERA) which was signed into law on May 20, 2009. The ten-member Commission has been modeled after the Pecora Commission of the early 1930s, which investigated the causes of the Great Depression, and ultimately provided a basis for reforms of Wall Street and the banking industry. As I pointed out on April 15, more than a few commentators had been expressing their disappointment with the FCIC. Section (5)(h)(1) of the FERA established a deadline for the FCIC to submit its report:
In light of the fact that it took the FCIC eight months to conduct its first hearing, one shouldn’t be too surprised to learn that their report had not been completed by December 15. The FCIC expects to have the report finalized in approximately one month. This article by Phil Mattingly and Robert Schmidt of Bloomberg News provides a good history of the partisan struggle within the FCIC. On December 14, Sewell Chan of The New York Times disclosed that the four Republican members of the FCIC would issue their own report on December 15:
Beyond that, Shahien Nasiripour of the Huffington Post revealed more details concerning the dissent voiced by Republican panel members:
I gave those four Republican members more credit than that. I was wrong. Commission Vice-Chairman Bill Thomas, along with Douglas Holtz-Eakin, Peter Wallison, and Keith Hennessey issued their own propaganda piece as a preemptive strike against whatever less-than-complimentary things the FCIC might ultimately say about the Wall Street Plutocrats. The spin strategy employed by these men in explaining the cause of the financial crisis is to blame Fannie Mae and Freddie Mac for the entire episode. (That specious claim has been debunked by Mark Thoma and others many times.) This remark from the “Introduction” section of the Republicans’ piece set the tone:
Many economists and other commentators will have plenty of fun ripping this thing to shreds. One of the biggest lies that jumped right out at me was this statement from page 5 of the so-called Financial Crisis Primer:
That lie can and will be easily refuted — many times over — by the simple fact that a large number of essays had been published by economists, commentators and even dilettantes who predicted the housing collapse.
Yves Smith provided a refreshing retort to the Plutocracy’s Primer at her Naked Capitalism website:
The fact that a pre-emptive strike by the Plutocratic “Gang of Four” has been initiated with the release of their Primer could indeed suggest that that their patrons are worried about the ultimate conclusions to be published by the FCIC next month. The release of this Primer will surely draw plenty of criticism and attract more attention to the FCIC’s final report. Nevertheless, will the resulting firestorm motivate the public to finally demand some serious action beyond the lame “financial reform” fiasco? Adam Garfinkle’s recent essay in The American Interest suggests that such hope could be misplaced:
Will this situation ever change?
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