Romney Goes Ron Paulie-Bananas on Bernanke and the Fed

I am severely crazy, and I approve this message.

Look up Mitt Romney and desperate in Google and you won't require Nate Silver to discern the probability of the winner of the 2012 presidential election in November.

Romney's desperation is clear by his abandonment of Etch-a-Sketching toward the right-center, in favor of:

• a full-blown, racist-right move to his low-information base
• incoherent attacks on Obama's foreign policy, in the face of murderous violence
• moving forward with long-term GOP project of phasing out Social Security and Medicare
• and his bizarre embrace of Ron Paul and the John Birch Society's scorn of the Federal Reserve System

Notes Paul Krugman:

Last week Ben Bernanke, the Federal Reserve chairman, announced a change in his institution’s recession-fighting strategies. In so doing he seemed to be responding to the arguments of critics who have said the Fed can and should be doing more. And Republicans went wild. ...

So last week we learned that Ben Bernanke is willing to listen to sensible critics and change course. But we also learned that on economic policy, as on foreign policy, Mitt Romney has abandoned any pose of moderation and taken up residence in the right’s intellectual fever swamps.

Ed Kilgore terms Romney's serpentine "econo-manic campaign" (nearly identical to the campaigns of W. Bush, McCain and the other great deregulaters) as demonstrating a movement "so locked down on tactical day-to-day maneuvering that it’s lost sight of any coherent strategy or rationale-for-candidacy."

So now, Romney wants (and openly advocates) the Federal Reserve Act of 1913 declared as creating a mere inflation-fighting tool, no matter the legislative and administrative history of the law and the function of the Federal Reserve System.

Honest money

Who needs monetary policy? We need "honest money," as Paul Ryan phrases it, whatever that would be in GOP land.

As Brad DeLong puts it in his Paul Ryan calls for fewer jobs and higher unemployment in America: "'Honest money' is a Ron Paul dog whistle: the good productive workers, the bad exploitative usurers, the necessity of a hard-money depression to cleanse the monetary colon--you know the drill."

Continues Kilgore: "Long-time if somewhat muted (at least outside the Ron Paul campaign) Republican muttering about stimulative monetary policies broke out into the open in the Romney campaign’s reaction to the Fed’s QE3 announcement [last week]."

This is the same Fed that saved the country in the great crash of 1987 when we "'came within an hour' of the disintegration of the stock market," as noted by Felix Rohatyn, a partner of Lazard Freres and Company. (Johnson. Sleepwalking Through History, America in the Reagan Years; W.W. Norton Company, 1991. p. 381) [A reviewer of Haynes Johnson's book writes, "A readable critique of the fatuous illusions foisted on a willing society by American leadership in the 1980s." (Hyland. Foreign Affairs; Summer 1991)

Fatuous illusions indeed.

Haynes Johnson also notes, "In that moment of maximum peril (in 1987) the Federal Reserve Board in Washington stepped in forcefully and dramatically, [announcing its 'readiness to serve as a source of liquidity to support the economic and financial system.'"]

Damn stimulative forces! I say, let 'em crash.

Not the first time the Fed has saved the system, though 2008 has evidently fallen into the black hole where facts and history no longer exist.

And 1929? Pay no nevermind.

Those 18th, 19th and 20th century recessions. God and the Magical Market made sure nothing bad happened to good, Christian Americans; though 1987 was a bit scary—Satan, no doubt.

Joseph Stiglitz and Paul Krugman; they're just part of those liberal elitists calling for our country not to commit economic suicide: Trying to control our lives, just like them liberals!

Probably went to college too. (See Jacob Hacker and Paul Pierson. The New York Review of Books)

What a couple of snobs, Rick Santorum might say.

Political journalists seriously ought to ask of Romney: Are you totally deranged?

To which Romney might reply, 'Look, I need my base, folks. It's my only shot at this thing.'

Paul Ryan's Insider Trader Scandal May Blow Back onto Romney

Paul Ryan cashes in for $1,000s

This story is not just about Paul Ryan, Washington creature and pampered scion, caught downing two $350 bottles of wine with a hedge fund manager at a D.C restaurant.

This is a venal insider trading story that has the legs and potential to dominate the all-important news cycle for weeks moving past Labor Day.

"Over the weekend, the Richmonder blog broke what looked like a whopper of a story: that Republican vice-presidential hopeful Paul Ryan had lined his pockets from information he had obtained from a now-legendary meeting that took place on September 18, 2008," writes Lynn Parramore.

Parramore notes media avoidance of Ryan's many political problems thus far, as Paul Krugman notes this morning, likely won't persist.

Certainly this insider trading story is moving forward, no matter that some are buying the Romney campaign's knock down that Ryan's trades "were part of a Russell 1000 index fund that automatically traded stocks as part of a pre-set formula," as Benjy Sarlin asserts.

Brad DeLong, professor of economics at the University of California, Berkeley, scoffs at Sarlin's explanation.

Writes DeLong:

There is no way in hell--if you are rebalancing to try to track the Russell 1000 index--you make only 58 trades in a year, that you make 27 of those 58 in large money-center banks, and that 10 of those trades involve shifting your money from Citi to Goldman and back five times.

No way in hell.

I don't know what was going on. But it appears that Ryan's flacks are--for some reason--simply making s@#& up.

Romney and Ryan lying? No.
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By Lynn Parramore

On [September 18, 2008], Fed Chairman Ben Bernanke and then-Treasury Secretary Hank Paulson broke the news to congressional leaders that they would have to approve a bailout to avert a complete meltdown of the financial system.

America was lurching toward catastrophe. But some folks were apparently thinking about their stock portfolios. Checking through Ryan’s financial disclosure reports, the Richmonder discovered that Ryan had sold the stocks of several major banks that day, while purchasing – surprise! – stock in Paulson’s old firm Goldman.

Check out the rest of Parramore's piece, because no way this story gets buried.

GOP Concerns the Fed over the Economy

The Republican Party has made clear it will head off any jobs stimulus plan animated by its my-way-or-off-the-cliff fiscal policy, and its brand of political fundamentalism on coming budget talks. This stance has the Federal Reserve concerned.

The New York Times reports, "Fed officials also have indicated a desire to insure against a pair of looming risks, that events in Europe will freeze global financial markets and that the political stalemate in Washington over fiscal policy will undermine the domestic recovery."

Understated as usual, the Federal Open Market Committee made clear that it stands ready to act to promote stability and job growth, even as the GOP carps.

"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. ... To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy," reads the Fed's statement.

Translated, this can interpreted as meaning the Fed, with the likely coordination of the Treasury Dept, will not let the Republican Party terrorize the U.S. and world economy. “We are prepared to do what is necessary,” Fed’s chairman, Ben S. Bernanke said, repeating a promise that has become his byword. “We are prepared to provide support for the economy.”

From the Federal Open Market Committee

Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.

Statement Regarding Continuation of the Maturity Extension Program

$700 Billion TARP Was a Distraction to $Trillion-plus Bailout

Jonathan Schwarz has fascinating piece out reacting to Bloomberg's blockbuster on the Fed and the Global Financial Crisis.

What is clear is that without the massive Fed intervention, we have a depression. Is that the desired outcome? I think for the Tea Party, the answer is 'yes.'

Democratic accountability and oversight have not happened, as the Tea Party screams, 'hurrah.'

But most Americans really don't seem to care beyond a vague sense of despair that our country is a rigged game, and Congress is bought-and-paid-for.

Personally, I'm glad the Fed averted a depression, just would like a populist president as well.
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Bloomberg recently won a lawsuit against Wall Street and the Federal Reserve to force the Fed to reveal how many trillions of dollars they handed out to banks and on what terms.

By Jonathan Schwarz

All of Bloomberg's giant new article about what they found out is worth reading. But I was particularly struck by this section:

TARP and the Fed lending programs went “hand in hand,”says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says.“Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says.

Since this is what I wrote in June, 2009, I've reposted it below. The Federal Reserve's bailout of Wall Street is what mattered; TARP was a sideshow created to distract everyone from what the Fed was up to. ...

See Jonathan Schwarz for entire piece.