The Bernanke Scandal: Full-Frontal Cluelessness

How I wish that Ben Bernanke would get caught emailing photos of his underwear-clad groin. Otherwise we don’t stand a chance of reversing this administration’s economic policy, which is shaping up to be every bit as disastrous as that of its predecessor.

Indeed, the Fed chairman’s much anticipated remarks on Tuesday take one back to the contemptuous indifference of a Herbert Hoover to the public’s suffering: Bernanke dismissed the wobbly economy with its anemic 1.8 percent first-quarter growth as merely “somewhat slower than expected.” The rise in unemployment to 9.1 percent was “some loss of momentum.”

The problem with Bernanke is that he is utterly clueless as to the stark pain and fear endured by the 50 million Americans who have experienced, or face the prospect of, losing their homes. His remarks reflected the insularity of a ruling-power elite that is magnificently impervious to the damage that Bernanke’s policies in the current and past administration helped inflict on what used to be called the American way of life. This is a man who assured us there was no housing crisis, while his policies at the Fed encouraged the mortgage securitization swindles that caused the meltdown of the economy.

His full statement stands as a classic example of the limits of economic language as morally descriptive: “Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers.” Frustratingly slow—how about going bat nuts with fear over not being able to make your mortgage payment and losing your home? Tell it to workers who must contend with stagnant wage rates and sharply rising gas and food costs as better jobs and therefore consumer demand move offshore. Bernanke takes low wages to be reassuring news on what he sees as the all-important inflation front: “subdued unit labor costs should remain a restraining influence on inflation.”

At home we are experiencing a social tsunami with the disappearance of a middle-class workforce of stakeholders who were assumed by observers as varied as Thomas Jefferson and Alexis de Tocqueville to be the very bedrock of America’s experiment in freedom. Many with jobs are struggling desperately to get by as the average workweek and pay scales fall, and countless workers find themselves settling for rewards well below their skill sets. Even those slim pickings are denied to the unemployed. Bernanke concedes: “Particularly concerning is the very high level of long-term unemployment—nearly half of the unemployed have been jobless for more than six months.”

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The jobs that have been created by our large multinational corporations, like the bailed-out GE, are primarily outside of the country, as Bernanke admitted: “Many U.S. firms, notably in manufacturing but also in services, have benefited from the strong growth of demand in foreign markets.” Those foreign gains, fueled by far more successful anti-recession policies in China, Brazil and Germany, have driven up demand and prices abroad in the areas of petroleum, food and key construction commodities.

Bernanke, speaking at a monetary conference in Atlanta, conceded that “the depressed state of housing in the United States is a big reason that the current recovery is less vigorous than we would like,” and that the “U.S. economy is recovering from both the worst financial crisis and the most severe housing bust since the Great Depression.”

But he offered not a word as to how the severe effects of that housing bust might be mitigated. Not a word about assisting people to stay in their homes. Yet he claimed that the relief that the Fed provided to the bankers by buying up more than $1.2 trillion of the toxic mortgages those bankers had created “has been accomplished, I should note, at no net cost to the federal budget or to the U.S. taxpayer.”

This is the Big Lie technique at work, employed by a huge banking lobby that stresses the direct cost of the TARP program while ignoring other programs that will not be paid back, as well as the additional cost of $5 trillion to the national debt that a proper Fed policy could have avoided.

The record is by now indelibly clear that the economic approaches pursued by George W. Bush and Barack Obama, with Bernanke playing a key role in both administrations, can be most accurately summarized as a policy of government of the bankers, by the bankers, and for the bankers.

Assurances of stability to the financial markets, meaning the ability for companies to borrow government funds at a near-zero interest rate without giving anything back to the public in the form of mortgage relief or job creation, have been the overwhelming goal. But even by that standard, as the latest statistics on job creation and construction starts attest, the government’s effort is not working. Putting the bankers first has represented pushing on a string, what Paul Volcker condemns as a “liquidity trap,” a situation in which taxpayer money has been made available to major corporations that invest in job creation that benefits foreigners instead of U.S. workers. Now that’s an obscenity we should be concerned about.