I picked up a copy of the Wall Street Journal yesterday and what I read in there was an absolute revelation. Just reading that one issue of that one newspaper I learned more about the ways this President is fighting for a progressive, liberal, populist agenda, the important ways he continues to move the agenda forward, and the obstacles he is up against, than I learn in two weeks of frequenting my favorite liberal websites.
I used to be a regular reader of the Wall Street Journal. Several years ago, I used to buy the dead tree version of the paper on regular basis. However, since I got an iPhone a few years ago, I've pretty much stopped buying newspapers. Now, I practically consume 100% of my printed news material on line. I used to also regularly read the Wall Street Journal on line; however, that ended sometime after they put up their pay wall and I decided I could no longer afford the subscription.
But yesterday my iPhone battery was practically dead, I forgot to bring a book and I had to take the E train from the World Trade Center to Jamaica, Queens, which is about and hour long ride. So, I went to the newsstand in the World Trade Center E station and found that they had a horrible selection. I wanted to get a New Yorker, Atlantic Monthly, Harpers or the Economist. No, no, no and no. Then I tried to get New York Times - nope. I briefly considered getting a Newsweek or Time, but, like I said, I was looking at an hour long train ride and I figured neither of those magazines would have enough interesting content to keep me busy that long.
Then I saw the Wall Street Journal sitting on a dusty shelf and thought to myself "hey, that'll do." It turned out to be the best $2 I've spent on reading material in a long time.
The first article I read was Economy Deeply Divides Fed, an article which makes it pretty clear that Ben Bernanke is pushing a recalcitrant Fed as hard as it will be pushed:
Minutes of the Fed's Aug. 9 meeting, released Tuesday after the normal three-week lag, offered new evidence that some officials wanted to immediately restart a controversial bond-buying program aimed at spurring the economy. Others felt that even the smaller steps the central bank instead chose were too aggressive.
Officials considered a range of actions—which included setting numerical targets for inflation and unemployment, rejiggering their holdings of Treasury securities and trying to push already-low short-term interest rates a little closer to zero, all with the purpose of boosting markets and economic growth. They also considered doing nothing.
[snip]
At the August meeting, officials ultimately decided by a 7-3 vote to make what amounts to a conditional promise: They would keep short-term interest rates near zero for at least two years, as long as inflation doesn't threaten to rise too much or unemployment doesn't fall substantially before then. It marked the first time since 1992 that three Fed officials dissented from a policy decision.
[snip]
In a speech Tuesday, Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, sought to explain why he dissented from the August decision.
He felt the economy had improved in the past year and didn't need additional help, and that inflation also had picked up, which could be fueled by more Fed actions. He said he wasn't inclined to dissent again, but if the Fed considers more actions he would consider opposing them.
I don't think most people understand how Fed governance works, I know I really didn't until I decided to do some research for this post. Dr. Paul M. Johnson has an excellent Fed primer at Auburn University's website:
The Federal Reserve System's highest decision-making body is its Board of Governors, which consists of seven members. Members of the Fed's Board of Governors are nominated for their positions by the President of the United States and then must be confirmed by a majority vote of the Senate before taking office. The members of the Federal Reserve's Board of Governors serve very long terms (fourteen years), and, once appointed and confirmed, they may not be removed from office by either President or Congress (except through a cumbersome process of impeachment by Congress for serious violations of the criminal law). People selected for appointment to the Board of Governors have nearly always been professional bankers, executives of Wall Street brokerage houses, or, occasionally, professional economists. They tend to share many of the relatively conservative political and economic views of the business and professional groups from which they are drawn. Because the President can not fire them from their positions before their fourteen-year terms expire, members of the Board of Governors normally feel relatively free to ignore or oppose the President's preferences when they make U.S. monetary policies. Moreover, even though some members of the Board of Governors perhaps feel an ideological kinship or sense of political loyalty that might predispose them to support the policy views of the President who appointed them, the terms of the Governors are staggered, so that only one Governor's term expires every two years, making it unlikely that any President would be able to dominate the Board with a majority of his own appointees until near the end of his own second four- year term in office. (However, every four years, the President does at least get the opportunity to designate which one of the seven Governors will serve for the next four years as Chairman of the Board of Governors and exercize "moral leadership" as first among equals in the Governors' collective deliberations on monetary policy.)
[snip]
The Federal Reserve System presided over by the Board of Governors consists organizationally of 12 separate Federal Reserve District Banks -- each one located in and serving one of twelve geographical regions of the country. The district Federal Reserve banks are organized rather like private banking corporations whose shareholders consist of the private member banks in the district. But despite their semi-private character, the district Federal Reserve banks exercise Congressionally delegated legal powers to regulate the banking industry. Each district Federal Reserve Bank is managed from day to day by its own president, who is elected to a 5-year term by his district Federal Reserve Bank's own individual board of directors. Two-thirds of the members of the district boards of directors are elected to their positions by the privately owned commercial banks in the district that are member banks of the Federal Reserve system. (Member banks are divided on the basis of their assets into "small", "medium", and "large" banks, with each category of banks allowed to elect two directors on a "one bank, one vote" basis.) The other one- third of the directors in each district are appointed from Washington by the Fed's Board of Governors, rather as though the Board of Governers were a major creditor or minority stockholder with guaranteed representation on the district boards.
[snip]
The Fed's Board of Governors sets policies regarding reserve requirements and the discount rate all by itself, but changes in these two policy levers tend to be relatively infrequent (perhaps once or twice a year on average for the discount rate, and perhaps once every five to ten years on average for the reserve requirement). The Fed's main policy tool of choice for exerting its influence on the money stock and interest rates on a week-to-week basis is its "open market operations." The necessary policy decisions about the Fed's on-going open market operations (buying or selling varying quantities of U.S. bonds and other treasury securities on the New York financial markets) are made for the Fed's Board of Governors by a slightly expanded body called the Federal Open Market Committee (FOMC). The FOMC consists of all seven members of the Board of Governors plus five of the 12 banker-elected presidents of the Federal Reserve district banks. (The president of the New York district bank is a permanent member of the FOMC, while the other 11 district bank presidents serve one-year terms on a rotating basis, with only four of them having the right to vote at any given time.) The FOMC meets rather frequently in Washington, DC, but it has also been the practice in recent years for the FOMC membership to convene informally via long-distance telephone conference calls or one-on-one communications with the Fed's Chairman on almost a daily basis.
As you can see, the President has had very little opportunity to put his imprint on the Fed at all. Right now four of the seven members of the Board of Governors are Bush appointees and it is going to remain that way until the end of President Obama's second term. Yes, he reappointed Ben Bernanke as Fed Chair, but even if he hadn't Bernanke would have continued to serve as one of the seven members of the Board of Governors. And Bernanke is on the right side of the argument at the Fed.
Right now there are two Clinton appointees, four Bush Appointees and one Obama appointee on the Board of Governors. If President Obama had elevated one of the Democratic appointees to the position of Fed Chair, do you really think that would have helped to liberalize Fed policy? If anything it probably would have had the opposite effect.
Obviously President Obama's action or inaction with respect to the Fed is really not the reason for Fed action.
The next article I read was An Accidental Housing Chief Embraces the Power of No. The article describes how a Bush holdover is in a position, thanks to a Republican filibuster, to sabotage the Obama administration's housing policies:
Mr. DeMarco, acting director of the Federal Housing Finance Agency, is the regulator who ended up as the conservator of mortgage giants Fannie Mae and Freddie Mac when the U.S. government nationalized them three years ago. The U.S. Treasury has spent $141 Billion so far bailing out Fannie and Freddie. But with the White House now pressing to stimulate the housing market, it's Mr. DeMarco who will call the shots.
Economists in the Obama administration and at the Federal Reserve believe Fannie and Freddie, which guarantee around half of the country's $11 trillion in mortgages, could boost the economy by making it easier for borrowers to refinance their loans. Others believe the firms could accelerate a housing recovery by financing more local investor purchases of foreclosed properties and by reducing loan balances for underwater borrowers or approving short sales.
Mr. Demarco says his mission is to conserve Fannie and Freddie's assets and that sometimes means putting his foot down on well-meaning but expensive new initiatives. "It is a very slippery slope to say, 'Well, this would help,'" he says.
[snip]
Ordering Mr. DeMarco absorb new losses, even if they offset potentially larger ones in the future, is politically treacherous for the White House. "You try to cross swords, all that will happen is the Republicans on the Hill...will come running and screaming that the administration is destroying an independent agency," says Jared Bernstein, an economist who left the White House in April.
The Obama administration thought it had found a solution in November, when it nominated Joseph A. Smith Jr., the North Carolina banking commissioner, to take the post. Widely respected by banking executives and consumer advocates, Mr. Smith didn't pass muster with Republicans. Alabama Sen. Richard Shelby called him a "lapdog" of the administration in opposition to his confirmation."
It's a pretty lengthy and very informative article, which those of you who haven't plunked down the $104 dollars for an annual online subscription will not be able to read. I myself am not a subscriber, which means I had to transcribe the above quoted items from the paper I bought yesterday. But here's some good, free information posted by Ezra Klein yesterday:
All through the fall and winter, the Obama administration tried to pressure Fannie and Freddie to join a program that would allow banks and other creditors to write down mortgages. But in April, DeMarco finally put his foot down, telling Congress, “It has been our conclusion that it is not loss minimizing for Fannie and Freddie.” The administration has also attempted a number of programs to help distressed homeowners refinance or otherwise save their mortgages, but DeMarco’s insistence on tightening Fannie’s and Freddie’s lending standards and avoiding losses has undercut their effectiveness.
Even DeMarco’s critics agree that he’s been left in a very unusual position. “DeMarco is a very able guy, but he’s a career appointee, designated by the Bush guy who left, and he should have been replaced by a policy appointee reflecting the broader concerns,” says Rep Barney Frank (D-Mass.) who, as the top Democrat on the House Financial Services Committee, has dealt with DeMarco extensively. “Unfortunately, he wasn’t.”
[snip]
According to one housing expert with knowledge of the discussions, a few months ago, Geithner began looking for ways to fire DeMarco. But the plan would have required moving a credible replacement into the FHFA for at least 90 days beforehand. Geithner gave up the effort after being rebuffed by multiple candidates (Treasury declined to comment on this story).
Nor, experts say, is it clear that the White House actually can fire DeMarco. By law, the White House has to have cause to remove the head of the FHFA, which is supposed to be an independent regulator. Simply disagreeing with the agency’s policy direction isn’t enough. Which means that DeMarco is likely to remain the most powerful man in housing for some time to come.
Another article I read shows pro-labor policy making some progress under the Obama administration. An article titled Business Irked as Labor Board Back Unions, makes it clear that National Labor Relations Board has distinctively shifted toward labor under Obama:
The National Labor Relations Board sided with unions in several cases involving rules for organizing and representing workers, further riling business groups as the board continues to push through decisions by years end.
The board's three Democrats outvoted the group's sole Republican member in all three cases.
[snip]
The board's decisions were issued Tuesday but finalized before longtime board member Wilma Liebman's term expired as chairman Saturday. Mr. Obama, who appoints the members, named Democrat Mark Pearce - already a board member - as the new chairman over the weekend. Mr. Pearce has disclosed specific plans but has defended board decisions by saying it was simply carrying out labor law and ensuring workers have "unencumbered choice" to unionize.
With Ms. Liebman's departure, the five-seat board now has just three members, the minimum needed to make major new rules and issue case decisions. The board is set to shrink to two when Democrat Craig Becker's term expires Dec. 31, unless Mr. Obama fills one or both of the vacancies before then.
My final selection is an editorial by Mary Kissel, Justice's New War Against Lenders:
The 1990s may have brought us supercharged politicized lending, but Eric Holder's Department of Justice is taking the game to an entirely new level, and then some. The weapon is a "fair lending" unit created in early 2010, led by special counsel Eric Halperin and overseen by Civil Rights Division head Thomas Perez.
[snip]
Justice is pushing the legal envelope on red-lining, too. In a July 1 letter to Cardinal Financial Corp., Justice contends that after the bank bought George Mason Mortgage in 2004, it "failed to serve predominantly black areas on an equal basis with predominantly white areas" by not opening branches in majority-black areas or engaging in "effective outreach activities." Justice wants the bank to add nine counties to the Federal Deposit Insurance Corp.-approved geographic area where Cardinal does business.
[snip]
But Justice is on a roll. In less than two years, the government has settled with AIG ($6.1 million), PrimeLending ($2 million), Midwest BankCentre ($1.5 million) and Citizens Republic Bancorp ($3.5 million), to name a few. More cases are in the hopper, and bigger banks are now in Justice's sights.
I posted this one on the theory that cause for lamentation at the Wall Street Journal Opinion page, should be a cause for rejoicing here.
Reading these four articles on my train ride to Jamaica, I got a good sense of some of the ways in which the Obama administration continues to fight for progressive values, even with a hostile congress to contend with and a clearer idea of the obstacles preventing them from implementing more change.
These articles actually gave me a renewed sense of purpose. Just imagine what we could accomplish if Democrats were to recapture the House, hold on to the Senate and then reform the filibuster rules.
There are a hell of a lot of good reasons for liberals to fight for President Obama's reelection and for the election of MORE and better Democrats across the country. If you ever find yourself forgetting that, go pick up a copy of the Wall Street Journal.
UPDATE:
Commenter xnyz has pointed out an important erroneous assumption I was making in the portion of this diary discussing. I'm posting the comment here because it is a key and rather embarrassing oversight on my part even though xnyz's comment was unnecessarily unkind, I felt and I strongly disagree with his/her assertion that he/she was being "charitable":
I'll be charitable and say that you don't know... (1+ / 0-)
Recommended by:seanwright
....what the hell you're talking about:
As you can see, the President has had very little opportunity to put his imprint on the Fed at all.
"Unfortunately" the pesky little facts don't support your ignorant defense of President Obama; so it's no wonder you have to cite Murdoch's WSJ.
We find some actual FACTS from the Dec 2008 WaPo:
President-elect Barack Obama has an unusual opportunity to remake the Federal Reserve in the early part of his presidency, shaping the institution at a time that it is undergoing dramatic change......within 18 months of taking office, Obama will likely have appointed five of the seven Fed governors.
Digging further, we find that 80% of the current Board of Governors were appointed by President Obama:
Ben Bernanke............(Reappointed by Obama)
Janet Yellen .............(Appointed by Obama)
Daniel Tarullo ...........(Appointed by Obama)
Sarah Bloom Raskin....(Appointed by Obama)
There are two more vacant seats that Obama can fill: there is ONLY one Bushie left on the Board.
The current Federal Reserve Board of Governors belongs to President Obama.
While I don't hold Obama in high esteem, that doesn't mean I would say he's the Devil Incarnate and the lessor of evils. He is merely the lessee of evils.
by xynz on Thu Sep 01, 2011 at 06:58:17 PM EDT
The comment contains some useful links, so I recommend you check them out.
In my defense, I will note that I didn't pretend to be an expert on the Fed, having said this above:
I don't think most people understand how Fed governance works, I know I really didn't until I decided to do some research for this post.
In any event, while this means that Barack Obama has had a larger role in shaping the current Fed than I inferred from the material I read and implied in my post, I don't think it undermines my broader point about the administration pushing back on some serious institutional inertia.