I sent a joint letter to Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson a year ago.
I wrote, "As you have pointed out, the meltdown occurring in the United States is taking place in large part because of a lack of available liquidity, meaning that lenders — commercial banks in the lead — are not lending to applicants seeking to borrow in order to purchase housing, cars and other big ticket items that the economy relies on to flourish, as well as denying loans to small businesses and local governments seeking to borrow to pay their bills with municipal bond markets largely closed to them.
"One of the purposes of the $700 billion recently made available as a result of legislation enacted by the Congress is to give additional liquidity to commercial banking institutions so that they can once again perform their leading raison d’etre – lending money. The major reason for lack of liquidity – availability of loans – is fear, as you have stated, fear that the money will not be repaid either by individuals, governments or institutions, e.g., other banks.”
Paulson never responded to my letter of Oct. 9, 2008. Bernanke did, seven days later.
"But requiring directly that banks extend specified amounts of credit to creditworthy borrowers would entail many complications. For example, bank regulators would need to create an objective definition for determining which borrowers were creditworthy. Moreover, because the volume of banks’ credit activities can fluctuate over time for a variety of reasons, including those over which they have no control (such as the rate of economic growth in their geographical regions), determining appropriate targets for individual banks’ lending activities would be complex and potentially arbitrary. In addition, because of the very large number of banking institutions in the country — more than 8,000 — administering such a program would be extremely resource intensive."
On July 29, I wrote to Bernanke again, stating that I hoped and expected President Obama would reappoint him as chairman. I also asked, “Would you agree that your not requiring banks receiving TARP funds to make loans in accordance with federal reserve regulations so as to provide the liquidity that you were and are seeking was in error?”
To date he has not responded.
We still don’t have full liquidity. Even worse, many of the firms securing TARP funds did not fulfill their mission as lenders. Instead, they used TARP funds for investment purposes and became even richer than they were before the debacle they were responsible for.
Graham Bowley of The New York Times summed it all up in his article of Oct. 17, in which he wrote, in part: “Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year.
So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza.
" 'All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,’ said Gary Richardson, a research fellow at the National Bureau of Economic Research. ‘But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.’”
Financial institutions are making huge profits as a result of having been saved by the taxpayers and TARP money, and not having used that money for lending purposes. They also know that our government still believes in the two axioms: “too big to fail” and “too big to jail.”
Obama's Enemies List Grows
President Obama is threatening the insurance companies, which last week told us that premiums would go up enormously under the Baucus-Obama comprehensive insurance proposal. The Oct. 18 Times reports:
“President Obama mounted a frontal assault on the insurance industry on Saturday, accusing it of using ‘deceptive and dishonest ads’ to derail his health care legislation and threatening to strip the industry of its longstanding exemption from federal antitrust laws.
"In unusually harsh terms, Mr. Obama cast insurance companies as obstacles to change interested only in preserving their own ‘profits and bonuses’ and willing to ‘bend the truth or break it’ to stop his drive to remake the nation’s health care system. The president used his weekly radio and Internet address to challenge industry assertions that legislation will drive up premiums.”
The insurance companies are being threatened for telling what in all probability is the truth, since they control the premiums to be charged. If President George W. Bush had made these threats, he probably would have been accused of making an enemies list.
Apparently, Obama is capable of compiling an enemies list. Look at what the Obama administration is doing to Fox News Channel, which forcefully disagrees with the Obama insurance proposal. The administration is trying to pressure Fox into changing its coverage of Obama.
The White House is saying that Fox is not a news station, thereby raising the specter of a licensing challenge. Our freedom of speech is in danger here. Other television and radio licensees should jump to the defense of Fox, and some have.
When those in power seek to intimidate opponents, it is essential that the rest of us stand up and shout: "No, you can’t do this." Speaking truth to power is essential if we are to preserve our liberties.
Indeed, why hasn’t Obama sought long before to end the insurance industry exemption from anti-trust laws? Why haven't he and Congress pressed to allow consumers to cross state lines to buy insurance policies? Why haven't he and Congress supported allowing volume discounts for Medicare? And why haven't he and Congress moved for tort reform? The Congressional Budget Office has said that action would save $54 billion over a 10-year period.
Many would say Obama and Congress haven't taken action because of campaign contributions. If that's true — and I believe it to be true — it is shameful.
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