"Bernanke Tells It Like It Is"
John Berry isn't sure that politicians will be willing to provide additional help if the $700 billion in TARP money falls short of what is needed to stabilize the banking system:
Bernanke Tells It Like It Is, Some Don’t Listen, by John M. Berry, Commentary, Bloomberg: This may be as close as we’re going to get to a Fed chairman labeling some in Congress as irresponsible.
Sure, Federal Reserve Chairman Ben S. Bernanke was typically careful with his wording in a Jan. 13 speech in London. ... After explaining how the world economy “is critically dependent on the free flow of credit,” Bernanke issued his challenge: “Responsible policy makers must therefore do what they can to communicate to their constituencies why financial stabilization is essential for economic recovery and is therefore in the broader public interest.”
Three days after that speech, 33 of 39 Republican senators ignored Bernanke’s warning and voted against releasing the remaining $350 billion in Troubled Asset Relief Program money. (So did eight Democrats...) Fortunately, that left enough supporters, mostly Democrats, to clear the release of the much-needed money.
Too many senators shrugged their shoulders at Bernanke’s wise words. OK, perhaps they didn’t like the way Treasury Secretary Henry Paulson had jerked them around... Or maybe they didn’t like something else about the program.
And of course many of their constituents, who have their own financial and job worries as the economy falls deeper into recession, indeed are furious that banks that created the crisis are getting help when it seems ordinary people aren’t.
They aren’t going to be any happier... In all probability, $700 billion won’t be enough. ... At some point, politicians are going to have to stop pandering to their constituents and show leadership by explaining why the economy can’t survive without a banking system.
If more is needed, they are going to have to do more than that, this time they need to articulate a plan that makes sense. Because if they are going to do what Paulson did with the first round and never really explain how the plan is supposed to work, jump back and forth between plans, say a plan are dead and then revive it - maybe - and act haphazardly when banks are in trouble so that nobody knows quite what to expect, then there are better uses for the money.
Posted by Mark Thoma on Tuesday, January 20, 2009 at 12:15 AM in Economics, Financial System |
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