Rise of the Economic Anti-Heroes: Super Fed and The Incredible Debt

The Obama administration continues its drive to obliterate capitalism, as Timothy Geithner pushes plans to strengthen the Fed, sell off more federal debt, and remove risk-taking from Wall Street.  Holy deficit, Batman!

by Michael Naragon

Barack Obama, the Kingpin, is apparently set on a multi-pronged strategy to derail the U.S. economy, and Geithner, like any good comic-book henchman, is attempting to do his boss’ dirty work.

First order of business: expand the power of the Dark Side… ahem, the Federal Reserve.  In March, Geithner made it clear that he wished the Fed to be strengthened, but that it would not become the government’s primary regulatory agency.

Now, in June, Geithner has revised his statement.  On Thursday, the Treasury Secretary told the Senate Banking Committee that the Fed would become the government’s key regulatory police officer under the Obama plan for economic reform.  Both Republicans and Democrats have expressed concern that the Fed, which is currently responsible for the nation’s monetary policy, would be asked to make politically charged decisions.

Also of concern is the possibility that the next Fed chief could come from Obama’s current staff–Lawrence Summers, for example.  This would be the same Lawrence Summers who recently said, “Our objective is not to supplant or replace markets.  Rather, the objective is to save them from their own excesses and improve our market-based system going forward.”  Placing Summers in command of the Fed would give the Obama administration command of monetary policy and would be akin to naming Lex Luthor as Metropolis Police Chief.  Conflict of interest?  Oh, yes.

Geithner’s Treasury Department will continue Phase II of its plan next week, as billions in federal debt continue to be auctioned to the highest bidder.  Treasury bill prices have been dropping steadily, a trend that will likely continue, given the fact that the government will be issuing over $2 trillion in new debt just this year.  Much of this will likely be purchased by the federal government in some form, as the Fed continues its drive to monetize the debt and devalue the dollar.

“In the weeks and months ahead,” Geithner said in his closing remarks to the Banking Committee, “I look forward to working with this Committee to build a new foundation for a stronger American economy.”  Apparently, this stronger American economy will be built upon trillions of dollars of American debt and a weak currency.  Such a destruction of the American economic system could not be better orchestrated by an overt enemy of the United States, the Red Skull notwithstanding.

The third piece of the puzzle to complete Obama’s planned dismantling of the American economy involves stripping the risk-reward system from Wall Street through heavy regulation.  While the Fed will be called upon to monitor more of the financial system than ever before, the Obama administration, in true FDR fashion, will be creating other agencies to fill in the gaps.

“Our proposed Consumer Financial Protection Agency will serve as the primary federal agency looking out for the interests of consumers of credit, savings, payment and other financial products,” Geithner told the Committee Thursday.  “This agency will be able to write rules that promote transparency, simplicity and fairness.”

The Treasury Secretary placed blame on as many sectors of the financial community as possible in his statement.

“Our financial system failed to perform as it should have – by distributing and reducing risk,” Geithner said.  “Before this crisis many federal and state regulators had authority to protect consumers, but few viewed it as their primary charge.  As abusive practices spread, particularly in the market for subprime and nontraditional mortgages, our regulatory framework proved inadequate.”

Interestingly, in true villain fashion, Geithner left out the facts.  The federal government, which overregulated the mortgage industry to the point that lenders were nearly forced to give loans to risky clients, now stands back and shakes its collective head in disgust that “this lack of oversight led millions of Americans to make bad financial decisions that emerged at the heart of our current crisis.”

Obama echoed the continuing cavalcade of blame avoidance when he said Wednesday that “millions of Americans who have worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and by the failure of their government to provide adequate oversight.  Our entire economy has been undermined by that failure.”  So the only government failure was the fact that it did not regulate well enough?

Did not Obama himself say recently that the cost of health care was the heart of the financial crisis?  Ah, but I digress.

Many of the Senators sitting on the Banking Committee were involved with making decisions that brought about the sub-prime mortgage debacle.  Christopher Dodd, one of those primarily responsible, now has the unmitigated gall to sit in his high chair and talk about the excesses of financial firms from whom he received preferential treatment, presumably in return for his cooperation.

Obama’s grand scheme, and its expected support from Geithner, was not well received among economists and financial experts.  In a Wall Street Journal article that gauged reaction to the president’s economic plan, several of them spoke out.  “Brick by brick, we are building the foundation for the next financial crisis,” said Simon Johnson of Baseline Scenario.

Peter Schiff of Euro Pacific Capital added that “this move will further burden U.S. industry with unnecessary regulation that will decrease our ability to compete globally.”

“The Obama administration’s regulatory reform proposal includes many positive features,” concluded Dean Baker of the Center for Economic and Policy Research, “but it ultimately will not make the financial system safer for the simple reason that it conceals responsibility rather than holding regulators accountable for their failures. The basic story of this crisis was not that the regulatory authorities lacked the ability to rein in this disaster before it was too late. Rather, the basic story is that the regulatory authorities — most importantly the Fed — opted not to use their power to rein in the housing bubble.”

In other words, the bad guys are out there purporting themselves to be the Justice League.  Who will stand against them and right these seemingly irreversible wrongs?  Where is Superman?  Where is Spider-Man?  Better yet, where is Captain America?  He had experience in dealing with fascists.