Tag: jerome powell
Jerome Powell

Biden Didn't Cause Inflation -- And Now Prices Are Falling

MAGA Republicans have been quick to blame President Joe Biden for rising prices, although inflation following the COVID-19 pandemic is hardly limited to the United States. Statista published a list of the 20 countries with the world's high inflation rates in 2023, and the U.S. was nowhere to be found.

Inflation has been a global problem, not a problem that is limited to the U.S. And according to new U.S. government data, prices are declining here.

NBC News' Brian Cheung reports, "The Personal Consumption Expenditures Price Index (PCE), one of two major readings on inflation, fell by 0.1 percent between October and November, the Bureau of Economic Analysis said Friday — the first monthly decline in more than 3½ years. Combined with other recent data showing disposable personal income and consumer sentiment rising, the United States' economy appears to be heading into 2024 on strong footing even as it cools down."

A separate report from the University of Michigan, Cheung reports, "showed consumer sentiment soaring 14 percent in December."

The report's author, Joanne Hsu, wrote, "All age, income, education, geographic, and political identification groups saw gains in sentiment this month. The index is now just shy of the midpoint between the pre-pandemic reading and the historic low reached in June 2022."

The U.S. Federal Reserve, after a series of interest rate hikes, is now saying it may cut interest rates sometime in 2024 — although it remains to be seen how much will be cut, and when. The Fed has been raising interest rates in the hope of taming inflation, and Inflation Insights founder Omair Sharif is urging the Fed to proceed with caution before making a decision about a possible cut.

Sharif, according to Cheung, said of 2024's first quarter, "The more benign inflation data is certainly something to celebrate, but there is some turbulence ahead."

Reprinted with permission from Alternet.

Jerome Powell

When 'Free Marketeers' At Silicon Valley Bank Begged For A Federal Bailout

On Sunday, March 12, Biden Administration officials announced that Silicon Valley Bank (SVB) depositors would have full access to their funds the next morning. The announcement came two days after SVB's collapse.

SVB lobbyists has been highly critical of federal banking regulations. But The Nation's Jeet Heer, in a biting article published on March 13, emphasizes that bankers who rail against regulations are the first to ask for help from the federal government when they run into problems.

Heer explains, "In 2015, Greg Becker, then president of Silicon Valley Bank (SVB), lobbied Congress to exempt his institution from what he saw as onerous and unnecessary regulations imposed on the banking industry after the 2008 financial meltdown…. Over the last few days, the many critics of SVB have been vindicated. It turned out that SVB's 'strong risk management practices' were nonexistent. In fact, the bank was carrying out an extremely risky strategy that ended with its collapse on Friday, (March 10), making it the second-biggest banking failure in American history."

SVB, Heer notes, had a problematic business plan that emphasized serving tech start-ups in the Silicon Valley. But the bank didn't plan for interest rate hikes by the U.S. Federal Reserve. Under Chairman Jerome Powell, the Fed has been gradually increasing interest rates as a way to fight inflation.

"SVB's strategy of putting all its eggs in the basket of long-term bonds itself made sense only as long as interest rates remained low, and as long as the start-ups were flush with enough cash that they continued to pump money into the bank," Heer observes. "The rise of interest rates changed both dynamics, creating a situation where depositors were pulling out more cash — which the bank didn't have on hand, because its investments were tied up in long-term bonds…. As SVB circled the drain, Silicon Valley plutocrats and their political allies started agitating for a bailout of depositors. Very quickly, the very free-market absolutists who love agitating for austerity and a pull-up-by-your-bootstraps ethos for the poor suddenly discovered the value of collective action and government intervention in the economy."

Republican presidential hopeful Nikki Haley was quick to attack President Joe Biden in response to SVB's problems. In a March 13 tweet, the former U.S. ambassador to the United Nations and ex-governor of South Carolina, tweeted, "Joe Biden is pretending this isn't a bailout. It is. Now depositors at healthy banks are forced to subsidize Silicon Valley Bank's mismanagement."

Haley didn't mention that she was a major Donald Trump ally during his four years in the White House, or that Trump did everything he could to roll back Barack Obama-era financial regulations.

Heer warns that a "reprise of the Tea Party backlash that started in 2009" following the 2008 crash "might be in the cards."

"Given the potential for demagogic abuse, it's imperative that the Biden White House develop a counternarrative — one that emphasizes the role of Trump’s deregulation," Heer argues. "There needs to be an active push to restore and enhance regulations, not just because it is good economic policy, but also, as a way to counter demagoguery. If Democrats don't offer more than bailouts for rich investors, then they’ll face the wrath of a righteously — and rightly — angry citizenry."

Reprinted with permission from Alternet.

Why Republican Threats On Debt Default Are So Feckless And Frightening

Why Republican Threats On Debt Default Are So Feckless And Frightening

When, after a scuffle among Republicans, a frazzled Kevin McCarthy finally abased himself enough to squeak through on the 15th ballot, you could feel the historical symmetry. It was fitting that the chaotic election of this historically weak House speaker in this political climate took place on Friday night — exactly two years after insurrectionists tried to upend American democracy.

I’m not talking here about the ghoul in the “Camp Auschwitz” tee shirt or the vandal carrying the Confederate flag or the rest of the violent mob. I mean the insurrectionists wearing coats and ties and little gold pins identifying them as members of Congress. It was two years ago almost to the hour that 147 Republicans ignored the broken glass and human feces in the Capitol and voted late in the evening to overturn the election.

Almost all of those election deniers are still there — and now they’re in charge of the House. Many of them voted last year against giving the Congressional Medal to heroic Capitol Police officers. That’s who they are. Their fealty to Donald Trump may have atrophied, but their instinct to throw sand into the gears of government is stronger than ever. They want to destroy what they call “the deep state” and now possess the gavels to pursue investigations of everything connected to it.

This week’s Speaker Follies will soon be a dim memory. Beyond the emergence of an exciting new Democratic leader, Hakeem Jeffries (whose teleprompter-free alliteration covered all 26 letters in the alphabet!), what will endure are at least some of the deals that McCarthy made to end his public humiliation and become speaker.

These concessions (actually, capitulations) will help send the House into perpetual chaos that could end up being even worse for the country and the world than McCarthy’s original sin. That came on January 28, 2021, when — after saying that Trump “bears responsibility” for the assault on the Capitol — he traveled to Mar-a-Lago to provide craven absolution for the disgraced tyrant.

In exchange for helping to rehabilitate Trump, McCarthy expected that Trump would help elect “My Kevin” as speaker. But loyalty is always a one-way street with Trump and his efforts on McCarthy’s behalf were perfunctory. What made the difference were the concessions contained in the “rules package” that has not yet been approved by the House.

McCarthy won by empowering far-right firebrands to make him their bitch. One new rule likely to be adopted says that a single member (filing a “motion to vacate”) can at any time require the House to vote on a new speaker. Talk about a short leash! Does anyone believe that Matt Gaetz or Lauren Boebert or Bob Good won’t make that motion—I dunno—a month from now? Then it’s Groundhog Day all over again.

McCarthy won in part by promising choice committee assignments to the members trolling him and by promising to establish a “Church Committee” (patterned after a legendary Senate select committee chaired by the late Democratic Sen. Frank Church of Idaho) designed to undermine the FBI, DHS, and other federal law enforcement and generate juicy stories for rightwing media. That’s in keeping with the performative bent of the dissidents, whose demands were more procedural than ideological. One of the reasons McCarthy couldn’t close the deal earlier was that the holdouts had “no idea what they wanted,” as Rep. Dan Crenshaw put it. They were “acting like terrorists and children.”

Debt Crisis Caused Havoc In 2011

But by midweek, they returned to a golden oldie for the GOP: shutting down the government and refusing to lift the debt ceiling (two separate congressional actions). Both have been used intermittently for 40 years to achieve deficit reduction.

The first of these — where at the end of the fiscal year in September the Republicans threaten a government shutdown — isn’t so alarming. Historically, government shutdowns don’t go well for the GOP. Once the Washington Monument closes and checks to millions of government employees stop going out, everyone scurries back to the table and works out a deal that does no permanent damage.

It’s the second threat — playing chicken with default on the national debt — where things could get grim. To help explain why, let’s look back at the debt ceiling crisis of 2011, a story I covered in one of my Obama books.

That summer, President Barack Obama was on the ropes. Nine months earlier, the Democrats had lost 63 seats in the House, the most in a midterm since 1938. Tea Party Republicans, feeling emboldened, insisted that the budget needed to be cut by the exact amount that the debt ceiling (the government’s borrowing limit) was raised —in other words, by hundreds of billions of dollars.

The House was then run by Speaker John Boehner and Budget Committee chair Paul Ryan— two conservative Republicans who tried to keep the crazies in the caucus at arm’s length.

One day, Jerome Powell, a former Treasury undersecretary in the first Bush Administration, called up Ryan and asked if he, as a private citizen, could give a white board presentation to the Republican Caucus about the dire consequences of defaulting on the national debt. Ryan invited him to do so. Obama so appreciated Powell trying to talk sense into what were supposed to be business-friendly Republicans that he later appointed him to the Fed.

Then, as now, many Republicans were arguing that using the vote on raising the debt ceiling would be a reasonable cleansing process — a way of reversing big Democratic spending with one vote. “It’s reasonable,” said Bruce Bartlett, a Reaganite economist who, like Powell, understood reality, “if you think sticking a knife in your eye is a good way of dealing with glaucoma.”

Even after the parties assembled a balky Rube Goldberg contraption to cut spending, Standard and Poor’s downgraded the U.S. government’s credit rating from AAA for the first time since World War II. The markets cratered and the economy grew sluggishly for the next five years.

Downgrade Would Spark Global Recession

Flash forward to today, when a downgrade would likely bring a recession (along with high interest rates), and even a brief default would likely bring a global depression. Republicans seem unfazed by this prospect. Could it be that they plan to drive the economy over the cliff, then try to win the the White House by blaming Democrats for the crash?

In any event, we’re almost certainly headed for a debt ceiling showdown. Chip Roy, a Texas Republican and not an election denier, explained that the price for his vote for McCarthy was “a specific, concrete limit on spending attached to a debt ceiling increase.” McCarthy has now apparently agreed that any member can use the full faith and credit of the United States to impose any limit on spending at any time.

So is there anything Democrats can do to prevent the crazies from taking the global economy hostage? I’m not sure. The bad news is that Kevin McCarthy makes John Boehner look like Alexander Hamilton. Boehner wrote in his memoirs that the Freedom Caucus practiced “legislative terrorism” when he was speaker and now says that the problem is much worse.

The good news is that while Republicans had a 24-seat margin in 2011, today it’s only five. That means that if the “terrorists” use their perches on the House Rules Committee (obtained in this week’s shakedown of McCarthy) to prevent the debt ceiling bill from coming to the floor, Democrats only need five reasonable Republicans to sign what’s called a discharge petition — a difficult but not impossible process for bringing a bill straight to a vote. Those five signatures (and, later, votes) would most plausibly be obtained from one of the 19 Republicans representing purple districts that Joe Biden carried in 2020. They’re hardly moderates but could vote to prevent themselves from being blamed for a recession generated by the hostage-taking of House Republicans.

In the meantime, we’re in for yet more wounds inflicted on our democratic institutions. The only solution is for Democrats to build on their impressive unity and win in a wipeout in 2024. Then the stench of January 6 might finally begin to lift.

Jonathan Alter is a bestselling author, Emmy-winning documentary filmmaker, and a contributing correspondent and political analyst for NBC News and MSNBC. His Substack newsletter is OLD GOATS: Ruminating with Friends.

Reprinted with permission from OLD GOATS

Biden's Federal  Reserve Nominees Come Under Right-Wing Attack

Biden's Federal  Reserve Nominees Come Under Right-Wing Attack

Washington (AFP) - Though set up as an institution operating above the partisan fray in Washington, the Federal Reserve has again become a political football, with Republicans and business groups attacking President Joe Biden's nominees to serve on the central bank's board.

Biden last month announced a slate of candidates who would at long last fill all the seats of the seven-member board, and include the first Black woman to hold the position since the Fed was founded 108 years ago.

If all three are confirmed, the majority of the board members would be women for the first time, and most would be named by a Democratic president.

Critics say the choices threaten to inject a political slant into the Fed's management of the economy just as it pivots to fighting inflation, which threatens to undermine the recovery from the Covid-19 pandemic.

But economists and Fed watchers say the criticisms are unfounded and in some cases racially motivated.

The Senate Banking Committee is scheduled to hold a hearing Thursday to consider the nominations of Lisa Cook, an economics professor at Michigan State University, who would be the first African American woman to serve as Fed governor.

Lawmakers will also consider Philip Jefferson, of Davidson College, who would be the fourth Black man to serve on the body.

For the powerful post of Fed vice chair for supervision, which oversees the nation's banks, Biden tapped Sarah Bloom Raskin.

She previously served as Fed governor and in a senior role at the Treasury Department under former president Barack Obama, as well as the top state bank regulator in Maryland. She is married to Rep. Jamie Raskin (D-MD).

Biden also renominated Jerome Powell to a second term as Fed chair, and named current board member Lael Brainard to serve as vice chair. They are awaiting Senate confirmation.

Race And Climate

The White House said the picks "will bring long overdue diversity to the leadership of the Federal Reserve."

But Senator Pat Toomey, the ranking Republican on the Senate Banking Committee, complained about a lack of "diversity" among nominees to the board, which does not have anyone from the energy industry.

His complaints, echoed by the US Chamber of Commerce, center on Raskin, charging she would be overly aggressive in focusing on banks' roles in fighting climate change.

She has called for the Fed to ensure financial institutions take climate risks into consideration, something Powell also endorses.

Toomey's concerns are the mirror image of opposition expressed by some Democrats to Powell's nomination for a second term at the helm of the central bank, who argue he is not focused enough on climate change.

Racially Motivated Attacks?

Conservative political commentator George Will has accused the Fed of being politicized, writing in a column that Cook's "peer-reviewed academic writings pertinent to monetary policy are, to be polite, thin."

However other board members, including Powell, are not trained economists.

"I just don't understand the backlash," said Diane Swonk, chief economist at Grant Thornton. "It just really seems to be pretty biased."

Cook and Jefferson have researched inequality in the labor market, a topic Powell has repeatedly highlighted as important, since the Fed works to ensure the benefits of economic expansions reach all parts of society.

Swonk called Cook a "phenomenal" candidate.

Biden's nominees "bring enormous depth to the Fed at a time when" the central bank is "finally acknowledging inequality and what it costs us," she told AFP.

Amid the attacks, the National Economic Association issued a statement supporting Cook and Jefferson, both past presidents of the organization, that called them "uniquely and exceptionally qualified."

Republican Support

David Wessel, senior fellow at The Brookings Institution and a longtime Fed watcher, dismissed the criticisms about qualifications, saying they impose a "double standard" on Cook.

"The whole point of having a seven-member Federal Reserve Board... is to represent a cross section of America," he told AFP.

"Nobody wants to have a Federal Reserve Board... that's all white guys who went to the same three Ivy League schools."

The nominees also have won Republican support.

Kevin Hassett, a top economist under former president Donald Trump, praised Jefferson as "exactly the type of economist who should be at the Fed at this difficult time."

Representative Patrick McHenry, the top Republican on the House Financial Services committee, which oversees the Fed in the lower chamber of Congress, highlighted Raskin's "long history of distinguished government service."