Saturday, August 23
The Associated Press: Wall Street bailout aid questioned at Fed event
Jeaninie Aversa writes:
JACKSON, Wyo. (AP) — Do Washington policymakers listen too much to Wall Street? A possible bailout of Fannie Mae and Freddie Mac, on the heels of similar action involving investment firm Bear Stearns, seems to send a loud signal to financial companies that the government will clean up their messes.Save the corporations, fuck the people.
That's the feeling of some analysts and academics here Saturday, the final day of a high-profile economics conference. The Federal Reserve's handling of the worst financial crisis to hit the country in decades spurred much debate.
"The Fed listens to Wall Street," said Willem Buiter, professor of European political economy at the London School of Economics and Political Science. "Throughout the 12 months of the crisis, it is difficult to avoid the impression that the Fed is too close to the financial markets and leading financial institutions, and too responsive to their special pleadings, to make the right decisions for the economy as a whole," he wrote in a paper presented to the conference.
Critics like Buiter worry that the Fed's unprecedented actions — including financial backing for JPMorgan Chase & Co.'s takeover of Bear Stearns Cos. — are putting taxpayers on the hook for billions of dollars of potential losses. They also say it encourages "moral hazard," that is, allowing financial companies to gamble more recklessly in the future.
Fed Chairman Ben Bernanke, who spoke to the conference on Friday, defended the Fed's actions, saying they were "necessary and justified" to avert a meltdown of the entire financial system, which would have devastated the U.S. economy.
Yet, Bernanke also acknowledged that mitigating moral hazard is one of the critical challenges policymakers face as they weigh steps — including strengthening regulation — to make the financial system better able to withstand shocks down the road.
"If no countervailing actions are taken, what would be perceived as an implicit expansion of the safety net could exacerbate the problem of `too big to fail,' possibly resulting in excessive risk-taking and yet greater systemic risk in the future," Bernanke said.
Because you know if that the little people's actual wages actually start increasing a bit, the Fed's going to do their part to zero that out, "to fight inflation", but refuse to do anything when corporations have record earnings when that itself is enough to cause inflation. But the little people don't have the influence that the big corporations have. Relevant Link Permanent link posted by bytehead @ 8/23/2008 09:01:00 PM
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