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Political Risk: The Bernanke Nomination and the Return of American Populism
- AIG
- Alan Greenspan
- American International Group
- BAC
- Bank of America
- Bank of America
- Barack Obama
- Ben Bernanke
- Ben Bernanke
- Counterparties
- Darrell Issa
- Enron
- Federal Reserve
- Goldman Sachs
- goldman sachs
- Illinois
- Iraq
- Jim Bunning
- John McCain
- Ken Lewis
- Lehman
- Lehman Brothers
- Main Street
- New Orleans
- Nomination
- President Obama
- Reality
- recovery
- SIGTARP
- Unemployment
- White House
Below is our comment today in The Institutional Risk Analyst. I spent a few delighful moments today talking with my old friend William Greider about the Benanke vote and the upcoming mid-term election. We both agreed that members of the Senate in both parties have not a clue what is about to happen to them at the polls. Like finance, politics is a backward-looking science. But that is the nature of all political systems. The elites cling to the issues and rhetoric that helped them gain power yesterday, but know nothing about today and think nothing of tomorrow. -- Chris
Political Risk: The Bernanke Nomination and the Return of American Populism
The Institutional Risk Analyst
January 27, 2010
In the last presidential election, the issues before the Today the Federal Reserve and the bailouts for the largest The 2010 elections promise to be the most contentious and The 2010 mid-term elections and the general election in 2012 Politics The White House is telling members of the Senate that a vote in But wait a minute. Fewer than 1 in 5 Americans support the A vote for Bernanke is an endorsement of all The Economy & Jobs Chairman Bernanke is responsible both for the economy and the Regardless of what one believes about Bernanke's involvement in Fed Deception of Congress Regarding AIG Even as the Senate prepares to vote on the Bernanke nomination, In a January 26, 2010 letter obtained by The Rep. Issa, the ranking member of the Committee, refers to a Members of the Senate need to ask themselves a question: With So given the above, why is Chairman Bernanke seemingly en route Staffers who frame issues for Senators do not know that Fed and Look at how the Fed and AIG are changing the dynamic for Bottom line: A "yes" vote for Chairman Bernanke raises the
country were President George Bush and the war in Iraq vs. the promise of change
via a young and untested Democratic Senator from Illinois named Barack Obama.
The Federal Reserve and the banking industry were not even factors in the
election.
banks are the central issues in American politics. The upset defeats of
Democrats John Corzine in New Jersey and Martha Coakley in Massachusetts,
following the earlier Democratic loss in Virginia, were driven by the
public's growing disgust with the management of the economy.
significant since the election of Andrew Jackson in 1828. For those of you who
missed that particular episode in American history, Jackson was the first
American leader who was actually chosen by popular vote and not selected by the
nation's founders or their offspring. And one of the key issues which drove the
hero of New Orleans into the presidency was popular anger at the central bank.
likewise promise to see the unseating of an entrenched elite and the start of an
extended period of political instability in America. Below we discuss why a
"yes" vote for Ben Bernanke may doom members of the Senate in both
parties who are up for re-election to defeat in November.
support of Ben Bernanke will not be a political liability. Indeed, in meetings
and telephone calls, President Obama is urging a "yes" vote on Bernanke as a way
to support the recovery of the US economy. The White House also claims that the defeat
of Bernanke will be bad for the financial markets.
re-nomination of Chairman Bernanke, a remarkable poll statistic since few
members of Congress much less most Americans have any idea about the job
responsibilities of Bernanke and other Fed governors. More, Chairman Bernanke
was a Bush appointee, and then reappointed by Obama, so he is associated with
two unpopular political figures. His confirmation is being managed by Linda
Robertson, the former chief lobbyist of Enron. Chairman Bernanke is toxic
measured in any political terms and is perceived as more friendly to Wall Street
than Main Street by a 2 to 1 margin.
financial policies undertaken from 2007-2009. These issues are not
going away, and will remain salient for the foreseeable future,
especially as credit remains tight and the real economy continues to
shrink. Indeed, the negative impact of the Bernanke years could doom
President Obama and many incumbent members of the House and Senate. And
while the markets might initially react negatively to a defeat of
Chairman Bernanke's re-nomination, the impact of his continued service
at the Fed in the weeks and months ahead may be far more problematic,
both for global financial markets and political careers.
bailouts. He has overseen an economy with 10% unemployment and no credit, with
massive bonuses for bankers who were rescued at public expense. The
high unemployment was inevitable after the boom years of Alan Greenspan,
but Chairman Bernanke was also at the Fed during that period. More,
Chairman Bernanke is also on record advocating policies that would suppress
employment levels rather than increase them.
covering up undue manipulation of Bank of America (BAC) CEO Ken Lewis, excess
payments to American International Group's (AIG) bank counterparties or attempts
to stymie the investigation of abuses committed during the bailout by SIGTARP,
the reality is the Fed has a dual mandate - price stability and full employment.
One either measure of his job, Chairman Bernanke has not been a success.
Rep. Darrell Issa (R-CA) has asked the Chairman of the House Committee on
Oversight and Government Reform to subpoena AIG-related documents from the Fed,
documents which apparently prove that Chairman Bernanke played a major role in
deciding to bail out AIG and, indirectly, Goldman Sachs (GS) and other large
bank dealers.
IRA, Issa claims that Bernanke overruled a recommendation by Fed
staff that AIG be allowed to declare bankruptcy "just like Lehman Brothers" and
instead authorized the bailout of the crippled insurance giant over the
objections of Fed staff in Washington. The Fed appears to be withholding
these documents from Congress until after the Senate votes on the Bernanke
nomination.
statement by Senator Jim Bunning (R-KY), whose staff has been examining these
same documents under strict rules of confidentiality imposed by the Fed's staff,
to the effect that Chairman Bernanke overruled the recommendation of his staff
and pushed the bailout of AIG. How can the Senate vote on the Bernanke
nomination when the Fed is refusing to come clean on AIG?
the current disclosure by the Fed, what further revelations will surface
regarding the central bank, AIG and the bailout of the large New York banks
between now and November?
to confirmation? Why do members of the Senate seem to indifferent to the
mounting popular anger at Chairman Bernanke and the Fed? There are several
reasons the Senate is making a major political and economic miscalculation in
its appraisal of Ben Bernanke's role at the Federal Reserve. The most
significant is that Senators think that the Federal Reserve and the bailouts are
not voting issues, because there are no traditional organized constituent groups
that lobby around them.
its profile in American politics has changed in a way reminiscent of the days of
President Jackson and the battle over the Second Bank of the United
States. After all, issue groups have an incentive to mislead incumbent
Senators in a way biased towards the interest of incumbent financial interests.
This is a terrible mistake for the political health of any Senator who wants to
get reelected in 2010 or 2012. The bailouts happened from 2008-2009, and voters
now understand them and loath them. And this applies equally to Democrats
and Republicans in the Senate.
incumbent GOP Senators. Republicans are seeing bailout-themed primary
campaigns, where incumbents like Utah Senator Bob Bennett and Arizona Senator
John McCain are explicitly attached to the bailouts. As noted above,
democrats saw losses in Virginia, New Jersey, and Massachusetts. And Brown
voters in Massachusetts showed significant dissatisfaction with Democratic ties
to Wall Street. But the same populist wave will carry away
Republicans as well.
likelihood of defeat for every member of the Senate standing for election in
2010 and 2012. And in any event, the rising tide of popular unhappiness with
Washington and Wall Street promises to remake the American political landscape
in a way not seen in the post WW II era. The comfortable assumption of
stability in American political life is about to be replaced by instability and
change, but that is what democracy is all about.
»
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all commenters should check out this article: http://www.marketoracle.co.uk/Article14397.html
Sorry, Nov , 2007 is when I noticed , not Nov 2008.
The political environment has now become a no mans land of politically self inflicted toxicity. Too bad our elected representatives last concern is concerning themselves with the concerns of their constituents. Speaking of which, my $2,300.00 check is waiting for Corkers opponent in 2012, even if that person comes from the most politically corrupt family in Memphis. I am sure that there is another 50K-200K here in TN-7 easily obtainable should Corker keep his yes on Bernanke pledge..
This is the enlightened age of the internet. Blogs like ZH has made us very aware. I knew nothing about economics until I noticed in November, 2007 when Citi fired Prince, and Oneal forced out from ML. Why? So , I followed the smoke, found out about CDS, jumped aboard SKF etf. Now I have to spend 2 hours a day, and became a financial expert, just like millions of others, found out all my friends just as knowledgable about "The Creature from Jeckyl island". Millions like us emailing outrageous bank insults to each other. Even my 19 y/o nephew knows about Ron Paul. Everybody knows about Ron Paul. No more secrecy...It's a new age...
word to the up
Chris Whalen: It has been said here, before -- you are a rock star. Thanks for lending your considerable talents to this forum. Huge essay!
"It's much more than mindless blind rage and we should all resist the attempts to invalidate the legitimacy of what most people perceive."
The hell you say! Break out the guillotines!! The tricoteuse are beginning to knit faster.
Chris, you should read this piece by Matt Taibbi (via Naked Capitalism) critiquing the use of the term "populism" in connection with public opinion.
http://www.nakedcapitalism.com/2010/01/taibbi-assaults-criticizing-wall-...
Taibbi points out that "populism" is a veiled class-based put-down of the legitimacy of current opinion, along the lines of "the peasants are angry." It suggests that people outside of elite circles can't possibly have a valid basis for "anger" because they just aren't educated enough in the details of the financial world.
Yes, it's about jobs but it's also about social justice and the accurate perception of a hijacked power structure that leaves most people feeling powerless. It's much more than mindless blind rage and we should all resist the attempts to invalidate the legitimacy of what most people perceive.
"Yes, it's about jobs but it's also about social justice and the accurate perception of a hijacked power structure that leaves most people feeling powerless."
It's my opinion that we Americans have always had a high tolerance for a "hijacked power structure" just as long as.......
1) I got my piece of the pie (the fictional American prosperity based upon credit).
2) My powerlessness wasn't flaunted (shoved is probably a more accurate term to use here) in my face. At least let me enjoy my denial in peace and ignorance.
But a "hijacked power structure" has only one purpose. When the chips are down and the men are being separated from the boys, the compromised power structure will abandon both of the principals above to deliver the "goods" to those who hold the power.
The so called "Golden Rule" in all it's ugly applications and permutations.
I hear you, but I dial back the cynicism just a tad. After a point people with kids start living less for themselves and more for their kids/grandkids. When the social mobility goes and generational standard of living declines too much to cover up with mildly Orwellian rhetoric, then all bets are off. The social contract is broken and the S really will HTF. I'm afraid we're right on the bubble now.
I understand your view but wish to expand upon something you said.
In my view, being a cynic means I have a negative view simply because I am negative with everything or I expect something to be negative for no good reason. I'm actually often positive about many different things. But I chose not to participate in denial or happy thinking simply to go with the flow and not appear negative. If you read my frequent posts, you will see I try to apply psychology and philosophy to all aspects of life, which can often be misconstrued as negative simply because it's stark and frank.
I'm not saying my view is correct, only that it wasn't arrived at through cynicism. Thus I don't like to be labeled a cynic simply because I'm stating what others may see as a negative view. We live in a world of forced smiles and happy talk/thought. The Tony Robbins world of positive thinking to create a positive world. This only works if you are genuinely positive. Faking it doesn't make it.
I'm actually quite positive about the eventual outcome for the human race. But we must suffer a great deal of pain first before we realize that our current path is not the softer easier way.
No offense meant. I just associate the "I got mine" rationale for behavior with a cynical mindset. But I'm also less precise in the way I use "cynical." Didn't intend to demean the thoughtfulness of your approach at all. And I wouldn't have bothered responding to what you wrote if I didn't see value in it.
I understand and didn't take it personally. If I jumped on you, my apologies. But I try to state my case when the word cynical is used because some people (not you, I've read you many times and you don't do this) use the word to dismiss the speaker, particularly when someone else uses the word, thus making it "OK" to do so.
The word "cynical" belongs in the category I called "brain freezers" or "mind freezers" the same way something that goes against conventional wisdom of the established truth is called a "conspiracy theory". Thus the term is used to dismiss valid criticism of the "official" truth.
One of the ways we are indoctrinated and conditioned is to adopt the language of the oppressor. Once we use their language, we can be twisted by their language. Once you are grouped into a category, you can be dismissed or demeaned by demeaning the category, while ignoring the actual message. It's part of the spin process. I don't wish to play that game when I'm aware of it and I urge others to reject the games as well.
Group think is insidious and suffocating.
Its called a tipping point.
Politics is the art of persuading the population to follow policies that are NOT in their best interest but rather in the best interest of the powers that be. As silly as that sounds, I could produce a long list of laws and policies enacted during the past 10 years that do exactly that.
I'm always amazed when I listen to some obviously intelligent and well educated person spout some (pre-packaged) rubbish they heard some talking head(s) endlessly repeat (which makes it true because they heard it 10 times in 2 days) as to why this or that proposal/law/regulation should/would/could accomplish something that (at least from my point of view) does nothing for the speaker but plenty for the corporations, politicians and various other hanger-ons.
The key to this mind game is to conflate the health of the person/citizen/misguided with the health of (insert any special interest you care to name here) and bingo you have an otherwise sane and intelligent person shoveling shit from their driveway (dumped there by a special interest dump truck) into their own living room, where it will sit and decompose for the next 20 or more years.
Politics is Jedi Mind Games.
What I find amazing is that when I try to explain this to people, they keep reverting back to their left/right dogma. In the end, they just cannot understand.
Agreed though I would expand by saying that any time I hear someone say they "can't" understand (I'm not speaking to you Anon but what you were saying about others) what it really means is they "won't" understand because it's just too upsetting to their worldview. It's so much easier to stay in denial by declaring the subject too difficult or crazy or impossible or whatever. Reminds me of the boy who holds his breath until he turns blue.
The pain of Cognitive Dissonance just keeps on giving and giving and giving..........
CD - Welcome to the era of faith based governance.
I was thinking the same thing as I tuned in and out of the Obama speech last night. It seemed that these idiots were standing and clapping after every 10 to 20 words. Look at me, Joe Six-Pack, I can applaud laudable goals! Just more form over substance....
"It seemed that these idiots were standing and clapping after every 10 to 20 words."
Must be the first State of the Union speech you have ever watched - that isn't exactly new its kind of been going on, in one form or another, for centuries. Nice of you to work it into your schedule this year though!
This article is an excellent analysis of the political realities that are about to smack unsuspecting incumbents like a 2x4 to the back of the head. It is amazing so many politicians and bankers are totally clueless about the tsunami wave of populism that will hit the US political scene for years to come. Any politician that expects to survive would be wise to immediately distance themselves from the Fed, the Obama administration and the banks. Nevertheless it won't be long before even the dimmest political bulb catches on to the populist fury that has been unleashed. Rupert Murdoch certainly gets it.
Right now it is difficult to imagine an Andrew Jackson figure emerging from the current crop of piss-ant pols but history inevitably shuttles the required actors onto the stage just in time for the main act.
Chris:
Magnificently written.
Thank you very, very much.
Our government can be likened to two crime families that try to avoid destroying each other by sharing power in the same city. They end up destroying the city instead. There is no out for the inhabitants because the mobsters are in contol of every facet. Get used to it; we lost our nation by default as we accepted their bribes and failed to resist their extorions.
Perhaps now is the time for true outsiders to place their hats in the political ring. With enough populace anger, the two party system itself could take a severe beating as citizen-politicians create true democratic chaos in the republic
nice article, sums up my thoughts very well and i really like the comparison with Jackson, i hadn't thought of that. i see Joe Sixpack becoming more politically and economically aware than ever. we trusted the bus driver to take us where we wanted to go and fell asleep, now we are waking up to realize the bus driver is taking us straight to hell.
its a shame the Libertarian Party is not better organized and funded, this could have been a big year for us.
"Staffers who frame issues for Senators do not know the Fed" or anything else for that matter. That the "best and brightest" flock to Washington is a myth. Having worked on The Hill, I can assure you that Congress critters and their staff are as naive as the Joe Sixpacks they represent.
I am not as confident as you that new elections will usher in a new era. Rather, I can only see the continued decline of a once grand design.
unable to see an oncoming train wreck .. this case their own!!
Classic case of being unable to see an oncoming train wreck
Onehunglow says "Man who put head on Rail Road track to listen for train likely to end up with splitting headache."
I have been writing my senator telling him the exact same things!!
I think unemployment rates near 20% will be contagious to members of the Senate and the House.Incumbents are going bye-bye if that number does not improve, and fast.Nothing I have seen makes me believe it will, so the next election should be a true bloodbath.I hope no one votes for either parties candidates...time to try anything but and see where that goes.