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AFL-CIO Blasts Proposals To Give Federal Reserve Excess Powers, Questions Fed Governance Structure
In a surprisingly aggressive piece of prepared testimony before the House Financial Services Committee by AFL-CIO president Richard L. Trumka, the labor union, which represents over 11 million working members, shares some very harsh words with regard to the proposed regulatory reform in general, and the continue functioning of the Federal Reserve in particular. Notable is that many of the concerns voiced by the AFL-CIO are precisely those that should be highlighted by many other presumably much more sophisticated entities which are expected to carefully consider all potential impacts of future regulatory reform, yet which have expressed a surprising interest in perpetuating the status quo except for a few minor cosmetic changes.
From the AFL-CIO testimony:
On Fed proposed powers and governance issues:
[W]e cannot support the discussion draft made public earlier this week because it gives dramatic new powers to the Federal Reserve without reforming its governance so that the banks themselves are removed from the governance of the Federal Reserve System. Even more alarmingly, the discussion draft would appear to give power to the Federal Reserve to preempt a wide range of rules regulating the capital markets—power which could be used to gut investor and consumer protections. If this Committee wishes to give more power to the Federal Reserve, it must make clear this power is only to strengthen safety and soundness regulation and it must simultaneously reform the Federal Reserve’s governance. Reform cannot be put off until another day.
On the Fed's responsibility for the bubble:
The Federal Reserve currently is the regulator for bank holding companies. In that capacity, it was responsible throughout the period of the bubble for regulating the parent companies of the nation’s largest banks.
On the conflicts of interest within the Fed:
While regulatory authority rests in the Board of Governors of the Federal Reserve in Washington, routine responsibility for regulatory oversight has been delegated by the Board of Governors to the regional Federal Reserve Banks. The Federal Reserve System’s regulatory expertise resides in these regional banks. The problem is that these regional Federal Reserve Banks are actually controlled by their member banks—the very banks whose holding companies the Fed regulates. The member banks control the selection of the majority of the regional bank boards, and the boards pick the regional bank presidents, who are effectively the CEO’s of the regulatory staff. These arrangements may explain why the Federal Reserve has never given any account of how it allowed bank holding companies like Citigroup and Bank of America to arrive at a point where they required tens of billions of dollars of direct equity infusions from the public purse to avoid bankruptcy.
On the complicity of the Fed, the Treasury and the Too Big To Fail banks:
Giving the Federal Reserve with its current governance control over which financial institutions are bailed out in a crisis is effectively giving the banks the ability to raid the Treasury for their own benefit.
On the Fed's ongoing position as merely enhancing ongoing risk:
We are also deeply troubled by provisions in the discussion draft that would allow the Federal Reserve to use taxpayer funds to rescue failing banks, and then bill other nonfailing banks for the costs. The incentive structure created by this system seems likely to increase systemic risk.
On who is protected as a result of regulatory changes:
In addition, language in the draft that appears to limit taxpayer bailouts of bank stockholders actually does no such thing, rather it simply ensures that when stockholders are rescued with public funds, bondholders and other creditors are rescued with them.
On the ongoing secrecy vis-a-vis Goldman et al's future bailouts:
Finally, and not least, the discussion draft appears to envision a process for identifying and regulating systemically significant institutions, and for resolving failing institutions, that is secretive and optional—in other words, the Federal Reserve could choose to take no steps to strengthen the safety and soundness regulation of systemically significant institutions. In these respects, the discussion draft appears to take the most problematic and unpopular aspects of the TARP and makes them the model for permanent legislation.
Full testimony below:
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why is a union boss testifying at a financial regulation hearing?
Even better yet, why is a union boss actually making salient points?
And even better yet, why is the president of the NY FED a AFL-CIO union boss?
from: http://online.wsj.com/article/SB125112547653253819.html
The AFL-CIO wants a seat at the table. Or perhaps numerous seats - on the Fed Board Of Governors.
They got 0 elected. There are benefits!
Take note......the above character is a ZERO, not a letter.
lol
Aren't they interchangable?
Why is a union boss president of the NY FED?
http://online.wsj.com/article/SB125112547653253819.html
because that's what the chairman wants
Above all else, they're missing the obvious:
Power does NOT = foresight.
Even if, hypothetically, you were to buy into the notion that an economy can be engineered by heads of the state (which I don't see how any one with half a brain can), then at least acknowledge that the Fed did not see the problems coming -- even in the second half of 2008 when everything was on the brink!
Here's a reminder: http://www.zerohedge.com/content/confidence-game-quotes
Giving a blind person electronic stability control will not prevent him from crashing the car. (Keeping the Travis-Car theme on ZH alive).
Perhaps the AFL-CIO is beginning to figure out that finanical regulation essentially is a labor issue, given that their huddled masses have to pay taxes and all.
As TD said, the arguments are solid. One wonders whether Obama will side with his Organized Labor buddies, or stand behind his terribly misguided Economics Team.
This is simply terribly bad legislation, and no amount of amendments will make it good. The Federal Reserve at the very least should NOT be given any additional power without changes in (1) governance structure; and (2) full audit authority by Congress.
Even then, I'm not real sure allowing the Fed to oversee the "important financial instiutions" makes much sense... gven their track record and all...
While I agree the FED is absolutley responsible for this mess, who the fuck is AFL-CIO? Since when did some Obamatron union soldiers start deciding policy. Just because one of their heads was appointed New York FED prez...uh oh we're doomed.
He would be given standing because he represents 11 million people that got (are getting) screwed by banks and funds, and by the Fed Res, the Treasury, Congress, Senate, White House.... you know.
Yeah, I know, join the fucking club.
Solid post
There is only one qualification they deem fit for assuming power. A willingness to acknowledge and execute any means justify the ends.
What's that I'm seeing? No, it can't be. Labor sporting some balls and real honest-to-goodness pubic hair? I thought all that was buried with Hoffa!
Say it ain't so, Trumka, say it ain't so.
it's nothing but a turf war....the mafia infested labor unions are muscling in for some action against the bankster thugs....al capone vs buggsy malone kind of thing...
ding, ding, ding...
nail on the head
I wonder how he feels about GMAC's latest handout?
8/25/09 -- "Denis Hughes, president of the New York State AFL-CIO, was named chairman of the powerful Federal Reserve Bank of New York today."
What a co-inky-dink.
People,
As much as the intelligent people who are on this board who contribute a lot to the discussion here, we should not denigrate and adopt a closed mind attitude towards unions. Sure, they are not the best of the lot, but many of the arguments which they make are highly relevant and probably the precise kind of arguments which are made by true-blue free marketeers like us.
I think there should be a genuine desire on the part of both ends of the political spectrum (i.e the Ron Paul republicans on one side and the Blue collar AFL-CIO on the other end) to enact genuine legislation regarding the workings of the Fed. And make no mistake, the current mess including the loss of free market capitalism is directly attributable to the Fed. To enhance the competitiveness, the Fed beast needs to slayed or at least tamed. Any support from anywhere is always welcome.
Unions are pretty much the largest body and the closest thing to "we the people" you can get right now. Millions in the AFL-CIO/SEIU. Both bodies are pushing back and are organized for the most part. More power to them for bringing these points to the forefront.
It's good to see an organization with political clout pose these issues.
People,
As much as the intelligent people who are on this board who contribute a lot to the discussion here, we should not denigrate and adopt a closed mind attitude towards unions. Sure, they are not the best of the lot, but many of the arguments which they make are highly relevant and probably the precise kind of arguments which are made by true-blue free marketeers like us.
I think there should be a genuine desire on the part of both ends of the political spectrum (i.e the Ron Paul republicans on one side and the Blue collar AFL-CIO on the other end) to enact genuine legislation regarding the workings of the Fed. And make no mistake, the current mess including the loss of free market capitalism is directly attributable to the Fed. To enhance the competitiveness, the Fed beast needs to slayed or at least tamed. Any support from anywhere is always welcome.
So what is finally being said, to paraphrase, is that the people who are put in charge of safe guarding the strength and sercurity of the US financial system have a duty to their corporations and shareholders first, and the American people second. Their actions and decisions are made acordingly.
It finally took a person responsible for the job security of 11.5 million workers, those currently paying the price in either taxes, sweat, stress and unemployment to bring tis up to Congress.
Unfortunately, and I hope I am wrong, this message will not be clear enough to the politicians, because the 11.5 million represented by Mr. Trumka do not contribute enought money to the campaign funds of the people that supposed to represent them.
I hope this testimony is the beginning of something.
I love the words that came out of his mouth, of course motivation is another question as he could just be jockeying for populist support from his unions, looking like he is sticking up for the little guy and fighting for us (so we don't go to the streets), while accepting more power, favors, and/or a payoff for folding or accepting a compromise. Or, he may realize that most of the union will be powerless and bankrupt without future government handouts, so he wants those assured.
Typically when negotiating, you go for more than you know you can get (fed asking for all regulatory power) and then negotiate to the middle so the other side can claim they won. I hope his intentions are honorable and that he truly just represents the Unions well.
To be squidz or not squidz, that is the AFL-CIO question.
Are they ignoble, suffering the slings and arrows of banker's outrageous good fortune?
Or do they take up arms against a sea of troubles and by opposing the Fed, end the Fed...
Nah, they're Squidz, taking part in the great circle jerk that is the oligarchy.
As a union representing the constituency the Fed is trying to kill (the middle class), I can see why they are pissed off.
The Fed has a target squarely on the back of their membership, and anyone else in the middle class.
I'm tracking this hearing while writing this post...
Geithner had a tough time this am from dems as well as reps. Shelia Bair was also critical of this legislation.
Chairman Frank has continually injected his partisan views. Even if this bill survives a Committee vote here, which is possible due to Frank's ability to get what he wants, Senate Banking will not go along with this radical idea.
I am cynical enough to see all this as a show. They know it will be defeated so some folks who badly need good populist PR right now are using the dog and pony show to get theirs. Meanwhile, as posted above, AFL-CIO gets their chair at the Fed table, finishing the wholesale sellout of the American middle class.
Ask Jimmy Hoffa. We are all in the Mafia now.
I haven't liked what I've heard of this bogus "reform" and control.
But now that a union guy comes out against it, I need to re-evaluate.
The UAW & AFL-CIO have stated back in the 90s that they would run every non-union American job out of the country to save the last union job.
They have been real successful. Soon, every minimum wage worker in the country will be sending hours of work to the unions for the pleasure of paying for their own insurance (mandatory) and for increased utilities and food. Can't wait to see the success that creates as legions learn the "its not my job" mantra AND are stuck making the bare minimum.
Consider that they're in a position to take back what the PATCO firings took away from labor(both union and nonunion, blue collar and white collar) since the 80's.
They would not let that good deed go unpunished, even if it took a generation's worth of time to respond.
http://mises.org/books/twenty_year_revolution.pdf
Change a few names and dates your up to date.