Steven Rattner, the Master of the Universe who may have had to step down from the Obama Administration because of ties to a kickback scandal, tells us we’re ignorant for thinking that Ben Bernanke might not the best guy to run the Fed.
But much of the barrage of criticism is unfair, and some of it is simply ignorant.
For a guy calling others ignorant, though, what is supposed to be a defense of Bernanke (but is, instead, a defense of MOTUs generally) is really stupid.
Start with Rattner’s endpoint–that, rather than putting together a systemic regulator free from the incestuous ties to the banks that the Fed has (or, better yet, reimposing Glass-Steagall), Congress should give the Fed that power.
In return, instead of looking backward, we should give the Fed the tools it needs so that the unwinding of the next AIG doesn’t need to result in an unjust enrichment of stakeholders.
I’ll leave you all to chew on that sentence for a bit, with its “instead of looking backward” refrain even while it calls for giving the Fed more power. But for the moment, keep in mind that Rattner’s basically arguing not that Bernanke should be confirmed (the logic behind the timing of his op-ed), but that Bernanke should be confirmed and be given vastly increased powers.
Now, one of the reasons for that, presumably, is because (Rattner asserts) the Fed has “independence” from those it regulates.
[The Fed] “should remain adamant about its need for independence in conducting monetary policy”
But here are three of the lame-ass excuses Rattner gives for the mistakes the government’s MOTUs made last year and before:
- “The refrain from all quarters after the bailout of Bear Stearns in the spring was that the next floundering bank needed to be allowed to fail”
- “All of the regulators should have been more attentive to the irresponsible lending practices and excessive risk-taking of our major financial institutions than the free-market principles of the incumbents allowed. … Regulators were not the only ones at fault; the constant push, particularly by liberals, toward the worthy goal of increased homeownership put people into homes they couldn’t afford.”
- Policymakers labored under “unfathomable pressure” last fall
Everyone was saying the next bank had to be allowed to fail, everyone was pushing increased homeownership, and policymakers were under unfathomable pressure.
Three of the five excuses Rattner gives his buddies are that they they were under some kind of pressure, and in two cases, that pressure was distinctly political (the “unfathomable pressure” in the last instance refers to time stress as much as everything else). In a piece arguing for the independence of the Fed, then, Rattner says they fucked up because they were under too much political pressure to make the decisions they did.
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