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Friday, April 13, 2018

How a Chairman of the Federal Reserve Made Strategic Use of the Media

Just as the US Senate was to take up the matter of Ben Bernanke’s re-appointment as Chair of the Federal Reserve in 2010, Time magazine came out with its announcement that he is to be its person of the year.  According to the magazine, “when turbulence in U.S. housing markets metastasized into the worst global financial crisis in more than 75 years, he conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies; ratcheted down interest rates to zero; lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash; jump-started stalled credit markets in everything from car loans to corporate paper; revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed’s balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation. He didn’t just reshape U.S. monetary policy; he led an effort to save the world economy.”  Not to be outdone in service to the Chairman, CNN furnished its own reporters, who gave credit to Bernanke for these measures.  Interestingly, however, even though one reporter admitted that Bernanke had said in 2007 that the subprime market and its derivatives would not threaten the financial market and the banks, she attributed the fault there to the imperfections in the market rather than to Bernanke himself in being wrong.   So, he gets credit for having cleaned up the mess (ignoring the foreclosed homeowners) but not the blame for being wrong about the contagion (and not urging regulation of the derivatives).  

The full essay is at "How a Chairman of the Fed Used the Media."

Obama's Meeting with Culpable Top Bankers

When he was running for US President, Barak Obama said that the financial crisis provided an opportunity for financial system reform beyond that which is in the interest of the big banks because the power of the latter is temporarily eclipsed and the US Government can take advantage of that.  His assumption is that during normal times, the banking industry essentially owns the Congress (Sen Dick Durbin’s statement just after the banking lobby defeated a foreclosure bill in the US Senate in 2009).  Sadly, the government did not use the eclipse; rather, it has been using the appearance of power and direction in the relumed post-crisis period to engage in window-dressing to assuage populist anger at the banks.

The full essay is at "Obama under Culpable Bankers."

A Nobel Peace Prize Awarded in spite of a Troop Surge

In December of 2009, Barak Obama was the first sitting U.S. president in 90 years and the third ever to win the Nobel Peace Prize. Yet he did so under the long shadow of the war in Afghanistan, where he was ordering 30,000 more troops into battle.  Could Truman’s decision to drop the A-bomb on Japan be along the same logic because it was meant to preempt the loss of life that would have come had the US invaded Japan?  President Reagan’s peace through strength logic was that a military build-up would forestall or prevent war from breaking out (hence no loss of life would be involved even in the forestalling).   The logic of awarding a surge President with a peace prize seems more dubious.  

The full essay is at "A Nobel Peace Prize amid a Troop Surge."

Eleven Time Zones in Russia: A Problem of Consolidated Empire

As of 2011, Russia had 11 time zones, from the Polish border to near Alaska, a system so vast that a traveller could get a walloping case of jet lag from a domestic flight.  In 2009, Russia was considering shedding some of its time zones.  People running businesses in the far east were complaining because the regulators were typically in Moscow, which could be several hours behind.    The issue blossomed at the end of 2009 into an intense debate across the Russian Federation about how Russians saw themselves, about how the regions should relate to the center, and about how to address the age-old problem of creating a sense of unity in a diverse federation that had been consolidated politically.  In short, the issue concerned the challenges involved in a consolidated empire. 

The full essay is at "Russia as a Consolidated Empire."

The Federal Reserve Expanded Its Turf in Spite of Having Come Up Short

Testifying before the US Senate Finance Committee on his re-appointment, Ben Bernanke volunteered that the Fed had been “slow” in protecting consumers from high-risk mortgages during the housing bubble and that it should have forced banks to hold more capital for all the risks they were taking on.  “In the area where we had responsibility, the bank holding companies, we should have done more.” he told lawmakers.  The hearing provided new evidence of doubt among lawmakers about the Federal Reserve’s  role as the nation’s guardian of the financial system. “In the face of rising home prices and risky mortgage underwriting, the Fed failed to act,” said Senator Richard Shelby of Alabama, the senior Republican on the banking committee. “Many of the Fed’s responses, in my view, greatly amplified the problem of moral hazard stemming from ‘too big to fail’ treatment of large financial institutions and activities.”  Accordingly, Senator Dodd proposed that the Fed’s powers as a bank regulator ought to be transferred to a new consolidated agency. Even though Bernanke admitted that the Fed made mistakes as a regulator of the bank holding companies, he and other top Fed officials adamantly opposed Dodd's proposal, arguing that the Fed has unique expertise nonetheless and that the Fed's ability to preserve financial stability depends on having the detailed information that only a regulator has about the inner workings of major institutions.

The full essay is at "The Federal Reserve Bank."

Human Rights Violations in Syria and Bahrain: On the American Reaction

The New York Times reported on March 25, 2011 that Syrian military troops opened fire on protesters in the southern part of Syria. Tens of thousands of demonstrators in the southern city of Dara’a, a well as protesters in some other cities and towns around the state, were defying a ruler who once again demonstrated his willingness to use lethal force against his own citizens. The paper reported on March 27th that "(w)ith 61 people confirmed killed by security forces, the country’s status as an island of stability amid the Middle East storm seemed irretrievably lost." Weeks earlier, the Arab League had declared that Qaddafi had lost his sovereignty—meaning his right to rule without intervention from other countries—because he had been engaged in having Libyan civilians killed. Since the League’s declaration on the Libyan dictator, the “president” of Yemen had use force against protesters—even gaining power from the legislature to lock up his detractors. As if these cases would not be enough of a bad precedent, Bahrain’s ruler had also been using lethal force against protests—just days after sitting down with U.S. Secretary of Defense William Gates, who was urging restraint.
In the midst of the Syrian government's violence, MSNBC reported on March 25th that the United States called on the Syrian government to stop the violence against marchers, White House spokesman Jay Carney said. "We strongly condemn the Syrian government's attempts to repress and intimidate demonstrators,'' he told reporters. Meanwhile, according to The New York Times, the new American ambassador in Damascus, Robert Ford, was "quietly reaching out to . . . Assad to urge him to stop firing on his people." Quietly? Meanwhile, American fighters had been bombing what was left of Qaddafi's airforce in Libya. The inconsistency was not lost on some American officials, according to The New York Times. "Having intervened in Libya to prevent a wholesale slaughter in Benghazi, some analysts asked, how could the administration not do the same in Syria? Though no one is yet talking about a no-fly zone over Syria, Obama administration officials acknowledge the parallels to [Qadaffi]. Some analysts predicted the administration will be cautious in pressing Mr. Assad, not because of any allegiance to him but out of a fear of what could follow him — a Sunni-led government potentially more radical and Islamist than his Alawite minority government." So strategic interests, even if running at cross-purposes with itself, are thought by some as a legitimate basis for a rather blatant inconsistency from the standpoint of human rights and the long term goal of democracy in the Middle East.
I contend that the continued support of rulers in Syria, Bahrain and Yemen while turning on Qaddafi, as if diplomacy were sufficient in dealing with the former three but not with the latter, is not at all in the interest of the United States beyond short-term political expediency in the theatre of international relations. Moreover, the double-standard concerning the rulers who have turned on their own people undercuts the credibility of the American government. 

On the Police Power of Chinese Banks

In July, 2010, a few days after the Agricultural Bank in China went public in an IPO bringing in $22 billion, dozens of former bank employees stealthily gathered outside the headquarters of the country’s central bank. Like many other state-owned companies, the bank slashed its payroll and restructured in order to raise profitability and make the bank more financially attractive to outside investors. By Western standards, the bank was overstaffed, a legacy of its role as one of the pillars of China’s socialist financial system. The fired bankers had no legal redress. 

The full essay is at "On the Police Power of Chinese Banks."

Source: http://www.nytimes.com/2010/08/16/world/asia/16china.html?pagewanted=1&_r=1&dbk