Venice video link here.

Also, Trichet Friday, the German elections, and G8 reports seem to be setting the tone for the euro zone to do something about the solvency issue. This is very good for equities and the rest of the credit stack.

At the same time it does not seem likely that any growth proposals will include fiscal relaxation, so the euro zone will have to get by the best it can with the deficits it has, which I’d guess should mean flat GDP, +/- 1% or so.

The US should also continue to muddle through with modest top line growth, and inflation low enough and the output gap wide enough to keep this Fed from hiking any time soon.

US economy muddling through, growing modestly, particularly given the output gap, but growing nonetheless.

Lower crude prices should also help some.

I had guessed the Saudis would hold prices at the $120 Brent level, given their output of just over 10 million bpd showed strong demand
and their capacity to increase to their stated 12.5 million bpd capacity remains suspect. And so with the Seaway pipeline now open (last I heard)
to take crude from Cushing to Brent priced markets I’d guessed WTI would trade up to Brent.

But what has happened is the Saudi oil minister started making noises about lower prices and when ‘market prices’ started selling off the Saudis ‘followed’ by lowering their posted prices, sustaining the myth that they are ‘price takers’ when in reality they are price setters.

So to date, contrary to my prior guess, both wti and brent have sold off quite a bit, and cheaper imported crude is a plus for the US economy. Which is also a plus for the $US, as a lower import bill makes $US ‘harder to get’ for foreigners.

But the trade for quite a while has been strong dollar = weak US stocks due to export pricing/foreign earnings translations, and also because US stocks have weakened on signs of euro zone stress, which has been associated with a weaker euro. So when things seem to be looking up for the euro zone, the euro tends to go up vs the dollar, with US stocks doing better with any sign of ‘improvement’ in the euro zone.

It’s all a tangled case of cross currents, which makes forecasting anything particularly difficult.

Not to mention possible dislocations from the whale, which may or may not have run their course, etc.

And then there’s the news from Greece.

First, they made a full bond payment yesterday of nearly 500 million euro to bond holders who did not accept the PSI discounts. This is confounding for the obvious reasons, signals it sends, moral hazard, credibility, etc. etc. But it’s also a sign the politicians are doing what they think it takes to keep the euro going as the currency of the euro zone. Same goes for the decision to fund Greece as per prior agreements even when there is no Greek govt to talk to, and lots of signs any new govt may not honor the arrangements.

Even if that means tricking private investors out of 100 billion, rewarding those who defy them, whatever. Tactics may be continuously reaching new lows but all for the end of keeping the euro as the single currency.

It also means that while, for example, 10 year Spanish yields may go up or down, the intention is for Spain, one way or another, to fund itself, even if short term. Doesn’t matter.

And more EFSF type discussions. The plan may be to start using those types of funds as needed, keeping the ECB out of it for that much longer, regardless of where longer term bonds happen to trade.

As for the euro zone economy, yes, growth is probably negative, but if they hold off on further fiscal adjustments, the 6%+ deficit they currently are running for the region is probably, at this point, enough to muddle through around the 0 growth neighborhood. The upside isn’t much from there, as with limited private sector credit growth opportunities, and substantial net export growth unlikely, and strong ‘automatic stabilizers’ any growth could be limited by those automatic fiscal stabilizers. Not to mention that this type of optimistic scenario likely strengthens the euro and keeps a lid on net exports as well.

And sad that this ‘bullish scenario’ for the euro zone means their massive output gap doesn’t even begin to close any time soon.

For the US, this bullish scenario has similar limitations, but not quite as severe, so the output gap could start to narrow some and employment as a percentage of the population begin to improve. But only modestly.

The US fiscal cliff is for real, but still far enough away to not be a day to day factor. And it at least does show that fiscal policy does work, at least according to every known forecaster with any credibility, which might open the door to proactive fiscal? Note the increasing chatter about how deficits don’t seem to drive up interest rates? And the increasing chatter about how the US, Japan, UK, etc. aren’t like the euro zone members with regards to interest rates?

Same in the euro zone, where discussion is now common regarding how austerity doesn’t work to grow their economies, with the reason to maintain it now down to the need to restore solvency. This is beginning to mean that if they solved the solvency riddle some other way they might back off on the austerity. And now there is a political imperative to do just that, so things could move in that direction, meaning ECB support for member nation funding, directly or indirectly, which removes the ‘ponzi’ aspect.

Romney: Debt is like ‘prairie fire’

Repatriation made it to Romney’s platform:

– Allow for a tax holiday for repatriated corporate profits held overseas

So I’ve been asking this question for as long as I can remember:

‘Name one company holding off on investment because it has some of its excess cash in a Citibank London account vs a Citibank New York account?’

Corporate America is currently ‘cash rich’ with all the funding they could possibly want for investment. If investment is low, it’s because they don’t see sufficiently profitable investments, and not because of lack of funding.

The funds have piled up in these ‘offshore’ accounts for one reason- the income isn’t taxed by the US until it is ‘moved’ to the ‘US books’ of the corporations. So these corporations could have either made their profits from offshore operations and paid their US taxes immediately, or made their profits and deferred taxation by leaving those profits in offshore accounts.

I understand the argument that corporations should not be taxed in the first place, as corporate taxes are all passed through to consumers, directly or indirectly.

I don’t understand the argument that repatriation somehow ‘creates jobs’ and helps the economy.

I do understand the desire for corporations to support candidates on this issue, to the point of misrepresenting the ‘job creation’ aspect.

In fact, there’s new proposal coming out of Puerto Rico that appears to be a ‘back door’ route to unlimited repatriation for US corporations.

President Obama’s ‘Fairness’ Vision Would Bankrupt Nation

April 11 (IBD) — Economy: In two recent high-profile policy speeches, President Obama has struggled to make a case for his big-government, high-tax vision for the economy. But his comments reveal just how bankrupt his vision is.

Last I read, he’s actually reduced govt head count for maybe the first time in history, and spending as a % of GDP is up only because of transfer payments due to the recession, with taxes as a % of GDP reaching extremely low levels as well.

It’s ironic that President Obama would make two speeches this week in Florida about “fairness,” sandwiched as they were between $10,000-a-plate fundraising dinners. But that’s the level of hypocrisy coming from the White House these days.

To be polite, most of the comments Obama makes these days about the economy, taxes and, especially, “fairness” stretch all credibility. Hearing the large number of outright falsehoods and partial truths he uses to support his argument, it’s impossible not to believe it’s simply a ploy to get votes from those who envy the rich and the successful.

A full unpacking of Obama’s whoppers would require a much larger space than we have here. Here are just a few examples:

“I believe the free market is the greatest force for economic progress in human history.”

If he believed that, he would not have signed the $787 billion stimulus bill.

That helped the private sector and ‘free markets’ even though I didn’t like the details.

He wouldn’t have imposed onerous new green regulations on businesses.

Without federal pollution regulation the states get into a race to the bottom where whoever allows the most pollution gets the most businesses.

He wouldn’t have taken over the auto and banking industries.

Banking with FDIC deposit insurance makes banking a 90/10 public private partnership. And he didn’t take over banking in any case.

Nor would he seek massive new tax hikes on businesses, or use the frightening power of government — including thousands of new IRS agents to enforce ObamaCare — to pursue his utopian vision of “fairness.”

First, I’m against corporate taxes in general. But even so, he cut payroll taxes for business and the proposed increases were about closing loopholes. And Obamacare took 500 billion out of medicare to give to insurance companies- hardly pro govt/anti business.

If Obama truly believed in the free market,

And remember, there is no ‘free market’ as by definitions markets operate only within institutional structure including contract law and enforcement.

he’d eliminate Fannie Mae, Freddie Mac, the EPA, the Energy Department and many other federal departments and agencies that distort free markets.

All govt and all taxation necessarily distorts markets. All govt works on coercion. Nor are there competitive markets when there is limited competition and monopoly power, which means some form of govt regulation is required.

He would roll back thousands of costly, ineffective regulations that estimates say cost the U.S. $1.8 trillion a year.

I’d have to see the specifics, which the rest of this article makes me doubtful of.

“The gap between those at the very, very top and everybody else keeps growing wider and wider and wider and wider.”

In fact, the top 1% have a lower share of total household income than they did in 1920 — just after World War I.

So maybe 1920 was a particularly high year because of the war? Don’t know his point, except pointing to 1920 is a smokescreen to disguise the fact that the share of income has been rising dramatically for a long time.

Though the top 1% have recently boosted their share, that’s largely due to the tech boom of the 1980s, 1990s and 2000s, which made all Americans richer.

I thought it was the financial sector??? But even so, a tech boom doesn’t necessarily do that to income distribution. It doesn’t explain why the football coach earns $10 million while the professor who cured cancer gets $100,000. It’s all about institutional structure.

Even so, the so-called Gini Coefficient — the federal government’s own measure of income inequality — is today lower than it was during the Clinton era.

“At the beginning of the last decade, the wealthiest Americans got two huge tax cuts, in 2001 and 2003.”

The rich, with everyone else, did get their top tax rates cut. But the actual taxes they paid rose sharply.

Right, because their incomes rose that much more. This is out of context writing throughout, laced with lies of omission.

Don’t believe it? Just before those tax cuts were passed, the top 1% earned 18% of all adjusted gross income and paid 34% of all federal taxes.

Only because they conveniently don’t include FICA when they talk about taxes like this. But they do include it when it’s going up or down- tax cut or tax hike. And it’s something approaching half of all federal income taxes.

By 2009, the last full year for which there are data, the top 1% share of AGI had fallen to 17%, according to IRS data. But they paid 37% of all taxes.

Not including FICA

As for the bottom 50% of income earners: In 2009 they took home 13% of income but paid less than 3% of federal income taxes. And today, nearly half of all Americans don’t pay taxes at all.

Not including FICA which is 7.6% of income from dollar one, with a cap at something like $105,000. Including FICA it could be something like 30% paid by lower income earners.

In short, during the 2000s, top earners took home a smaller share of the income pie but paid a larger share of the taxes. Is that what Obama means by “fairness?”

Does leaving out FICA count as fairness?

As for the so-called Buffett Rule that Obama wants, it would impose a minimum tax of 30% on millionaires to make them pay their “fair share.” It’s premised on investor Warren Buffett’s assertion that he pays a lower tax rate than his secretary.

Nonsense. Those with incomes over $1 million pay about 30% in taxes on average, about twice the average for those with middle incomes, like Buffett’s assistant.

Not counting FICA.

Simply put, this is class warfare. The tax would only raise $47 billion over the next decade — a drop in the bucket compared to the $45 trillion in spending and $9.6 trillion in deficits under Obama’s budget.

And just under $1 trillion per year of FICA taxes

Unfortunately, by raising the capital gains tax from 15% to over 30%, it would kill millions of American jobs and send small business creation into a tailspin.

Any tax hike can reduce aggregate demand. And not having income taxes and cap gains at the same rate merely causes income to shift to the lowest taxed category, and provide massive fees for the accounting firms and financial sector as well.

Who would that help?

“We tried (free market economics) for eight years before I took office. … We were told the same thing we’re being told now — this is going to lead to faster job growth, it’s going to lead to greater prosperity for everybody. Guess what? It didn’t.”

Obama has repeatedly suggested all the economy’s problems are due to President Bush.

But Bush, like Obama, entered office during a recession. Not only did he take over after the biggest stock market crash since the Depression, but the Fed had more than doubled interest rates, killing growth.

The Fed doubled rates from very low levels after the economy started growing from the combo Bush proactively expanding the deficit and from the up leg of the sub prime adventure. It ended with the shrinking of the deficit and the down leg of the sub prime adventure.

Worse, within eight months of entering office, the U.S. was hit with the 9/11 terrorist attacks — the first on the American homeland since World War II. Within the space of just 90 days, a million jobs were lost.

Jobs were lost because private sector credit expansion ended after being stretched past it’s limits during the late 90′s, with the govt budget surplus draining off hundreds of billions of dollars of net financial assets as well.

Obama’s right. President Bush did cut tax rates. What was the result? We had 52 straight months of job growth, with 8 million new jobs over six years.

Propelled by the larger deficit and the expansion phase of the sub prime adventure.

For Bush’s entire presidency, the unemployment rate averaged 5.3%. Under Obama, it’s not been below 8%.

Yes, because the deficit is too small, and both sides want to make it smaller. Good luck to us…

Real after-tax income per person rose more than 11% under Bush, while real GDP from 2000 to 2007 grew $2.1 trillion, or 17%. In 2007, the deficit fell to $162 billion — roughly 1% of GDP.

Yes, not large enough to support aggregate demand after support from the sub prime expansion phase ended.

Does Obama really want to compare himself to that? Since he’s entered office, we’ve lost 1.7 million jobs, and unemployment has averaged over 8%.

His deficits have averaged $1.4 trillion — about 8% of GDP, a record. On his watch, debt has soared from $10.7 trillion to $16 trillion. America now has more debt than the entire euro zone and Great Britain — combined.

And still not nearly enough to restore aggregate demand.

Under Obama spending has surged. The federal government now accounts for 25% of the economy, vs. the long-term average of 20%.

Due mainly to automatic counter cyclical transfer payments, not expanded regular spending.

Through his big-government policies, Obama took a bad recession and made sure our recovery would be the worst ever — and then blamed it on everyone but himself.

Meanwhile, get ready for “taxmageddon” — the $494 billion tax hike that hits in 2013 as the Bush tax cuts expire, something Obama is doing nothing about.

Wasn’t it the opposition trying to not allow the extension this year?

Our economy, in short, will never regain its old vitality until a new president is elected, and Obama’s top-down, government-centered policies are laid to rest.

I’ve been a harsh critic of Obama’s policies all along, but this is all a pile of intellectually dishonest propaganda.

• Austerity everywhere keeps domestic demand in check and export channels muted
• Non govt credit expansion pretty much stone cold dead in the US and Europe
• Rising oil energy prices subduing global aggregate demand
• US federal deficit just about enough to muddle through with modest GDP growth
• Rest of world public deficits also insufficient to close output gaps, including China which has calmed down considerably
• Zero rate policies/QE/etc. in the US, Japan, and Europe doing their thing to keep aggregate demand down and inflation low as monetary authorities continue to get that causation backwards
• All good for stocks and shareholders, not good for most people trying to work for a living
• Europe still in slow motion train wreck mode, with psi bond tax risk keeping investors at bay and ECB waiting for things to get bad enough before intervening

So still looking to me like a case of

‘Because we fear becoming the next Greece, we continue to turn ourselves into the next Japan’

The only way out at this point is a private sector credit expansion, which, in the US, traditionally comes from housing, but doesn’t seem to be happening this time. Past cycles have seen it come from the sub prime expansion phase, the .com/y2k boom, the S&L expansion phase, and the emerging market lending boom.

But this time we’re being more careful of ‘bubbles’ (just like Japan has done for the last two decades). So I don’t see much hope there.

Still watching for the euro bond tax idea to surface, which I see as the immediate possibility of systemic risk, but no real sign yet.

The President had repeated demonstrated that he’s the ‘hunter/killer’ type when it comes to foreign policy, so best to be prepared for what this policy might lead to.

>   
>   It’s absolutely clear that the president’s policy is to prevent Iran from having nuclear
>   weapons capability.
>   

Hillary Clinton told the US House Committee on Foreign Affairs, when asked whether the US would allow Iran to become a nuclear threshold state.

Comes back to the idea that resolving solvency issues in the euro zone doesn’t fix the economy.

And with negative growth the solvency math doesn’t work for any of the euro members.

And what’s with the ECB threatening to back away on liquidity support for the banking system?

So looks to me like the Greek resolution is not the end of the solvency issues, but that the focus simply moves on to the next weaker sister.

And, as previously discussed, the risk remains elevated that if Greece gets to haircut its obligations and gets funding, others will ask for the same, triggering a general, global, catastrophic financial meltdown.

My first order proposal remains an ECB distribution on a per capita basis to the euro member nations of maybe 10% of euro zone GDP per year to put the solvency issue behind them. Along with relaxed budget rules, maybe allowing deficits up to 6% of GDP annually, further supported by the ECB funding a transition job at a non disruptive wage to facilitate the transition from unemployment to private sector employment. I might also recommend deficits be increased by suspending VAT as a way to increase aggregate demand and lower prices at the same time.

Alternatively, the ECB could simply guarantee all national govt debt and rely on the growth and stability pact for fiscal discipline, which would probably require enhanced authorities.

And rather than trying to bring Greece’s deficit down to current target levels, they could instead relax the growth and stability pact limits to something closer to full employment levels. And, again, I’d look into suspending VAT to both increase aggregate demand and lower prices.

Meanwhile, elsewhere in today’s world news:

The likes of Ford adding to pension funds makes the point of the increasing and ongoing demand leakages putting a damper on GDP.

And oil prices have now crept up enough to materially cut into aggregate demand as well.

Nor are banks adding to capital to meet expanding demand for credit, which remains anemic.

Headlines:

Data Suggests Euro Zone May Slide Back Into Recession
German Manufacturing Slows as New Export Orders Fall
China’s Factory Activity Shrinks for Fourth Month
ECB Preparing to Close Liquidity Floodgates
Ford Pours $3.8 Billion Into Pension Plan
Oil Could Turn to Headwind as Dow Flirts With 13,000
UBS to Issue More Loss-Absorbing Capital
Iran ‘Winning’ on Oil Sanctions: Top Trader
Greek Bailout Puts Focus Back on Credit Default Swaps
Iran Fuels Oil-Price Rally—And Prices Could Keep Rising

For immediate release:

Warren Mosler, candidate, Delegate to Congress, USVI

Christiansted, St. Croix-  Warren Mosler has released part I of his 3 part Action Plan for the USVI.  ”With closing of Hovensa, we face the catastrophic loss of thousands of jobs, a drop in population of perhaps 3,000 people, loss of an estimated $100 million of annual revenue for our government, untold private sector business closings, a substantial drop of enrollment in our schools, and many other negative social and economic consequences” said Mosler. ‘I have organized a three part Action Plan that I will be releasing–one part at a time as they are completed.  If we act now, we can mitigate some of the potential negative consequences and begin building a prosperous future for our Virgin Islands.”

Action Plan, USVI

Part I:  Hovensa Response
1.  I propose that we inform Hovensa that if they close the USVI will not permit anyone to reopen the refinery.  This will cause Hovensa to reconsider their decision to close the refinery.  However, and more important, if they do close, the possibility of the refinery reopening will impede the effort to bring new businesses to St. Croix.  That’s because there are many businesses that would not want to be located on a small island like St. Croix with the possibility that the refinery might resume operations.  Refineries make an island like St. Croix less valuable.  I’m sure, for example, no one would think a refinery opening on St. Thomas or St. John would add value to those islands.
2.  I propose that we require that the cleanup begin immediately, even with the oil storage facility in operation.  It is important for the territory’s recovery that the unused portion of the facility be brought back to its original condition as specified in the contract with the USVI government as soon as possible.
3.  I propose that we require that current employees of the refinery and residents of the USVI be given priority for the cleanup jobs.  This will provide a multiyear transition period for the qualifying Hovensa employees and the USVI.
4.  I propose that we determine whether there is any residual equipment at Hovensa that might be useful to the USVI and arrange for its purchase.  The prices should be very attractive.

Part II and Part III will be released over the next several days.

Contact:  Reginald Perry, 340 692 7710

My proposals remain:

1. A full FICA suspension:

The suspension of FICA paid by employees restores spending which supports output and employment.
The suspension of FICA paid by business helps keep costs down which in a competitive environment lowers prices for consumers.

2. $150 billion one time distribution by the federal govt to the states on a per capita basis to get them over the hump.

3. An $8/hr federally funded transition job for anyone willing and able to work to assist in the transition from unemployment to private sector employment.

Call me an inflation hawk if you want. But when the fiscal drag is removed with the FICA suspension and funds for the states I see risk of what will be seen as ‘unwelcome inflation’ causing Congress to put on the brakes long before unemployment gets below 5% without the $8/hr transition job in place, even with the help of the FICA suspension in lowering costs for business.

It’s my take that in an expansion the ‘employed labor buffer stock’ created by the $8/hr job offer will prove a superior price anchor to the current practice of using the current unemployment based buffer stock as our price anchor.

The federal government caused this mess for allowing changing credit conditions to cause its resulting over taxation to unemploy a lot more people than the government wanted to employ. So now the corrective policy is to suspend the FICA taxes, give the states the one time assistance they need to get over the hump the federal government policy created, and provide the transition job to help get those people that federal policy is causing to be unemployed back into private sector employment in a more orderly, more ‘non inflationary’ manner.

I’ve noticed the criticism the $8/hr proposal- aka the ‘Job Guarantee’- has been getting in the blogosphere, and it continues to be the case that none of it seems logically consistent to me, as seen from an MMT perspective. It seems the critics haven’t fully grasped the ramifications of the recognition of the currency as a (simple) public monopoly as outlined in Full Employment AND Price Stability and the other mandatory readings.

So yes, we can simply restore aggregate demand with the FICA suspension and funds for the states, but if I were running things I’d include the $8 transition job to improve the odds of both higher levels of real output and lower ‘inflation pressures’.

Also, this is not to say that I don’t support the funding of public infrastructure (broadly defined) for public purpose. In fact, I see that as THE reason for government in the first place, and it should be determined and fully funded as needed. I call that the ‘right size’ government, and, in general, it’s not the place for cyclical adjustments.

4. An energy policy to help keep energy consumption down as we expand GDP, particularly with regard to crude oil products.

Here my presumption is there’s more to life than burning our way to prosperity, with ‘whoever burns the most fuel wins.’

Perhaps more important than what happens if these proposals are followed is what happens if they are not, which is more likely going to be the case.

First, given current credit conditions, world demand, and the 0 rate policy and QE, it looks to me like the current federal deficit isn’t going to be large enough to allow anything better than muddling through we’ve seen over the last few years.

Second, potential volatility is as high as it’s ever been. Europe could muddle through with the ECB doing what it takes at the last minute to prevent a collapse, or doing what it takes proactively, or it could miss a beat and let it all unravel. Oil prices could double near term if Iran cuts production faster than the Saudis can replace it, or prices could collapse in time as production comes online from Iraq, the US, and other places forcing the Saudis to cut to levels where they can’t cut any more, and lose control of prices on the downside.

In other words, the risk of disruption and the range of outcomes remains elevated.

Mitt Romney’s Ridiculous Comparison of US to Greece

By John Carney

Dec 21 (CNBC) — I realize that Republicans want the United States to accumulate less debt. That’s a fine policy position to take. I’m somewhat sympathetic to the idea that debt can drag down the economy.

But there’s no need to start saying crazy things like the U.S. is about to become Italy or Greece if Obama is elected for another term. This simply isn’t in the cards.

The problems faced by Greece and Italy are nowhere near comparable to those faced by the United States. We have far more dynamic economies — and far lower tax rates — than those countries. More important, our government can indirectly self-finance by having the Federal Reserve buy Treasurys on the secondary market.

As we’ve seen, the Fed has an unlimited balance sheet, something that Greece and Italy do not enjoy.

Our government will never run out of money. Greece and Italy can definitely run out of money.

So it’s a shame to see Mitt Romney, the Republican frontrunner for president, spouting this nonsense.

From The Hill:

Mitt Romney said that the United States would experience a financial crisis similar to that of Greece or Italy if President Obama were elected to a second term, and hit rival Newt Gingrich’s plan for the federal judiciary as unconstitutional during an interview Monday night with Fox News’s Bill O’Reilly.

“I think we hit a Greece-like wall. I think before the end of his second term, if he were re-elected, there’s a very high risk that we would hit a financial crisis that Greece or Italy have faced,” Romney said.

This is worse than ignorant. It is actually malfeasant. Having one of the leading politicians in the country talk like this can only induce further economic panic.

(Hat tip: Warren Mosler)

In case you had any respect whatsoever for Romney’s understanding of monetary operations and fiscal policy.

In fact, no one has been invoking Greece since the S&P downgrade when interest rates went down, and pundits from both sides pointed out the difference is we ‘print our own money.’

Romney: US could face ‘financial crisis’ like Greece, Italy if Obama is reelected

By Justin Sink

Dec 20 — Mitt Romney said that the United States would experience a financial crisis similar to that of Greece or Italy if President Obama were elected to a second term, and hit rival Newt Gingrich’s plan for the federal judiciary as unconstitutional during an interview Monday night with Fox News’s Bill O’Reilly.

“I think we hit a Greece-like wall. I think before the end of his second term, if he were reelected, there’s a very high risk that we would hit a financial crisis that Greece or Italy have faced,” Romney said.

“I think it’s also very possible that we would continue to see very high levels of unemployment. I think you would see industry in this country, entrepreneurs, big and small, decide to go elsewhere, to take their investment dollars to other nations. This president has put together the most anti-investment, anti-growth and anti-job series of policies that I’ve seen since Jimmy Carter,” he added.

Shows the Republicans truly do fear the US becoming the next Greece,
as they begin to lean towards tax hikes.

Meanwhile, they continue keeping us on the road to Japan.
Or worse.
A lot worse.

Republicans Consider Breaking No-Tax Vow as Deadline Looms

By Brian Faler

November 15 (Bloomberg) — For Senator John Cornyn, it was the situation in Greece.

The Texas Republican said he is willing to back tax increases as part of a major deficit-reduction deal because he fears the European debt crisis could spread to the U.S.

“We’ve never been in this spot before,” said Cornyn, who also leads his party’s effort to elect more Republicans to the Senate. “We’re looking over at Europe and what’s happening in Greece and Italy — we risk having another huge financial crisis in this country, and we’ve got to try to solve the problem.”

He is one of a growing number of Republicans, many with otherwise impeccable anti-tax credentials, who say they are willing to raise taxes to reach a big deficit-reduction deal with Democrats.

That may help insulate them from charges of stubbornness if Congress’s bipartisan supercommittee doesn’t meet its Nov. 23 deadline to find a way to cut $1.5 trillion. For now, it’s helped shift Washington’s debate to how much, rather than whether, to raise taxes.

Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said he is encouraged by the shift even as Democrats scoff at a specific Republican proposal.

“It’s a step in the right direction for them to just rhetorically cross that line,” said Conrad.

‘Real Trouble’

Asked if Republicans were trying to set up a blame game should the supercommittee fail, Conrad said, “I hope not” because “if we aren’t beyond that, we are in real trouble.”

Democrats say the Republican deficit plan relies too heavily on spending cuts and would give the wealthy too much of a tax break. Some question whether its numbers add up.

At issue is a proposal by the supercommittee’s Republicans to trade permanent cuts in income tax rates, with the top rate dropping to as little as 28 percent, for new limits on deductions, exclusions and other tax breaks. They estimate that it would produce $300 billion to reduce the deficit.

The plan’s principal author is Senator Pat Toomey, a Pennsylvania Republican who previously led the Club for Growth, a Washington anti-tax group. House Speaker John Boehner, an Ohio Republican, today endorsed the proposal, calling it a “fair offer.”

Some conservative organizations are accusing Republicans of trying to hide tax increases through the Toomey plan.

Norquist Reaction

“Closing tax loopholes is all well and good,” said Americans for Tax Reform president Grover Norquist in an opinion article in Politico. “But doing so to raise revenues is just as much a tax hike as raising tax rates.” He added, “Any congressman who wants to keep his promise to voters to oppose tax increases” must oppose the plan.

Many Republican lawmakers are also unhappy with the proposal. “We don’t have a tax problem — we have a spending problem,” said Senator Jim DeMint, a South Carolina Republican. “For us to get lulled into ‘how much to raise taxes’ in this thing is foolish.”

Senator Orrin Hatch, the top Republican on the tax-writing Finance Committee, said, “Some of these loopholes really aren’t loopholes.” He called them “important policy provisions, like the home interest mortgage deduction.”

Republican supporters of the plan say they are trying to lock in lower income-tax rates that will otherwise jump if, as is currently scheduled, the tax cuts enacted in President George W. Bush’s administration expire at the end of next year. President Barack Obama opposes extending the Bush-era cuts for those earning more than $250,000, and Republicans are unlikely in the 2012 elections to win the Senate votes they would need to keep the tax cuts in effect.

‘Biggest Tax Increase’

“What we’re trying to do is avoid the biggest tax increase in the history of the country,” Senator Charles Grassley, an Iowa Republican, said of Toomey’s plan.

Toomey declined to comment other than to point to a Nov. 10 Wall Street Journal editorial quoting him as calling his proposal a “bitter pill” that is “justified to prevent the tax increase that’s coming.”

A number of Republicans are playing down anti-tax pledges they signed with Norquist’s group. “We take an oath to uphold the Constitution” and “that trumps any and every consideration,” said Cornyn.

“I didn’t know I was signing a marriage vow,” said Representative Mike Simpson of Idaho, one of 40 House Republicans who recently signed a letter signaling willingness to raise taxes as part of a major deficit-cutting deal.

Shifting Opinion

Senator Lamar Alexander of Tennessee, the chamber’s third- ranking Republican, said he saw a sign of shifting opinion when three of the supercommittee Republican members — Toomey, Rob Portman of Ohio and Arizona’s Jon Kyl — briefed Senate colleagues on their plan and no one complained.

“For Pat Toomey and Portman and Kyl to come in and tell a whole roomful of Republicans that ‘we’ve put $250 billion of tax increases on the table’ and not get a murmur of dissent is remarkable,” said Alexander.

Senator Saxby Chambliss, a Georgia Republican, said his party’s lawmakers should consider bigger tax increases if it would lead to a larger debt-reduction deal, because the political price they would pay will essentially be the same.

“You’re going to be criticized by the same people irrespective of what the number is,” said Chambliss.

Dear Senator Sanders,

Thank you for your attention to this matter!
My comments appear below:

The Veil of Secrecy at the Fed Has Been Lifted, Now It’s Time for Change

By Senator Bernie Sanders

November 2 (Huffington Post) — As a result of the greed, recklessness, and illegal behavior on Wall Street, the American people have experienced the worst economic crisis since the Great Depression.

Not to mention the institutional structure that rewarded said behavior, and, more important, the failure of government to respond in a timely manner with policy to ensure the financial crisis didn’t spill over to the real economy.

Millions of Americans, through no fault of their own, have lost their jobs, homes, life savings, and ability to send their kids to college. Small businesses have been unable to get the credit they need to expand their businesses, and credit is still extremely tight. Wages as a share of national income are now at the lowest level since the Great Depression, and the number of Americans living in poverty is at an all-time high.

Yes, it’s all a sad disgrace.

Meanwhile, when small-business owners were being turned down for loans at private banks and millions of Americans were being kicked out of their homes, the Federal Reserve provided the largest taxpayer-financed bailout in the history of the world to Wall Street and too-big-to-fail institutions, with virtually no strings attached.

Only partially true. For the most part the institutions did fail, as shareholder equity was largely lost. Failure means investors lose, and the assets of the failed institution sold or otherwise transferred to others.

But yes, some shareholders and bonds holders (and executives) who should have lost were protected.

Over two years ago, I asked Ben Bernanke, the chairman of the Federal Reserve, a few simple questions that I thought the American people had a right to know: Who got money through the Fed bailout? How much did they receive? What were the terms of this assistance?

Incredibly, the chairman of the Fed refused to answer these fundamental questions about how trillions of taxpayer dollars were being spent.

The American people are finally getting answers to these questions thanks to an amendment I included in the Dodd-Frank financial reform bill which required the Government Accountability Office (GAO) to audit and investigate conflicts of interest at the Fed. Those answers raise grave questions about the Federal Reserve and how it operates — and whose interests it serves.

As a result of these GAO reports, we learned that the Federal Reserve provided a jaw-dropping $16 trillion in total financial assistance to every major financial institution in the country as well as a number of corporations, wealthy individuals and central banks throughout the world.

Yes, however, while I haven’t seen the detail, that figure likely includes liquidity provision to FDIC insured banks which is an entirely separate matter and not rightly a ‘bailout’.

The US banking system (rightly) works to serve public purpose by insuring deposits and bank liquidity in general. And history continues to ‘prove’ banking in general can work no other way.

And once government has secured the banking system’s ability to fund itself, regulation and supervision is then applied to ensure banks are solvent as defined by the regulations put in place by Congress, and that all of their activities are in compliance with Congressional direction as well.

The regulators are further responsible to appropriately discipline banks that fail to comply with Congressional standards.

Therefore, the issue here is not with the liquidity provision by the Fed, but with the regulators and supervisors who oversee what the banks do with their insured, tax payer supported funding.

In other words, the liability side of banking is not the place for market discipline. Discipline comes from regulation and supervision of bank assets, capital, and management.

The GAO also revealed that many of the people who serve as directors of the 12 Federal Reserve Banks come from the exact same financial institutions that the Fed is in charge of regulating. Further, the GAO found that at least 18 current and former Fed board members were affiliated with banks and companies that received emergency loans from the Federal Reserve during the financial crisis. In other words, the people “regulating” the banks were the exact same people who were being “regulated.” Talk about the fox guarding the hen house!

Yes, this is a serious matter. On the one hand you want directors with direct banking experience, while on the other you strive to avoid conflicts of interest.

The emergency response from the Fed appears to have created two systems of government in America: one for Wall Street, and another for everyone else. While the rich and powerful were “too big to fail” and were given an endless supply of cheap credit, ordinary Americans, by the tens of millions, were allowed to fail.

The Fed necessarily sets the cost of funds for the economy through its designated agents, the nations Fed member banks. It was the Fed’s belief that, in general, a lower cost of funds for the banking system, presumably to be passed through to the economy, was in the best interest of ‘ordinary Americans.’ And note that the lower cost of funds from the Fed does not necessarily help bank earnings and profits, as it reduces the interest banks earn on their capital and on excess funds banks have that consumers keep in their checking accounts.

However, there was more that Congress could have done to keep homeowners from failing, beginning with making an appropriate fiscal adjustment in 2008 as the financial crisis intensified, and in passing regulations regarding foreclosure practices.

Additionally, it should also be recognized that the Fed is, functionally, an agent of Congress, subject to immediate Congressional command. That is, the Congress has the power to direct the Fed in real time and is thereby also responsible for failures of Fed policy.

They lost their homes. They lost their jobs. They lost their life savings. And, they lost their hope for the future. This is not what American democracy is supposed to look like. It is time for change at the Fed — real change.

I blame this almost entirely on the failure of Congress to make the immediate and appropriate fiscal adjustments in 2008 that would have sustained employment and output even as the financial crisis took its toll on the shareholder equity of the financial sector.

Congress also failed to act with regard to issues surrounding the foreclosure process that have worked against public purpose.

Among the GAO’s key findings is that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the GAO, the Fed actually provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

The GAO has detailed instance after instance of top executives of corporations and financial institutions using their influence as Federal Reserve directors to financially benefit their firms, and, in at least one instance, themselves.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

This demands thorough investigation, and in any case the conflict of interest should have been publicly revealed at the time.

Getting this type of disclosure was not easy. Wall Street and the Federal Reserve fought it every step of the way. But, as difficult as it was to lift the veil of secrecy at the Fed, it will be even harder to reform the Fed so that it serves the needs of all Americans, and not just Wall Street. But, that is exactly what we have to do.

Yes, I have always supported full transparency.

To get this process started, I have asked some of the leading economists in this country to serve on an advisory committee to provide Congress with legislative options to reform the Federal Reserve.

Here are some of the questions that I have asked this advisory committee to explore:

1. How can we structurally reform the Fed to make our nation’s central bank a more democratic institution responsive to the needs of ordinary Americans, end conflicts of interest, and increase transparency? What are the best practices that central banks in other countries have developed that we can learn from? Compared with central banks in Europe, Canada, and Australia, the GAO found that the Federal Reserve does not do a good job in disclosing potential conflicts of interest and other essential elements of transparency.

Yes, full transparency in ‘real time’ would serve public purpose.

2. At a time when 16.5 percent of our people are unemployed or under-employed, how can we strengthen the Federal Reserve’s full-employment mandate and ensure that the Fed conducts monetary policy to achieve maximum employment? When Wall Street was on the verge of collapse, the Federal Reserve acted with a fierce sense of urgency to save the financial system. We need the Fed to act with the same boldness to combat the unemployment crisis.

Unfortunately employment and output is not a function of what’s called ‘monetary policy’ so what is needed from the Fed is full support of an active fiscal policy focused on employment and price stability.

3. The Federal Reserve has a responsibility to ensure the safety and soundness of financial institutions and to contain systemic risks in financial markets. Given that the top six financial institutions in the country now have assets equivalent to 65 percent of our GDP, more than $9 trillion, is there any reason why this extraordinary concentration of ownership should not be broken up? Should a bank that is “too big to fail” be allowed to exist?

Larger size should be permitted only to the extent that it results in lower fees for the consumer. The regulators can require institutions that wish to grow be allowed to do so only in return for lower banking fees.

4. The Federal Reserve has the responsibility to protect the credit rights of consumers. At a time when credit card issuers are charging millions of Americans interest rates between 25 percent or more, should policy options be established to ensure that the Federal Reserve and the Consumer Financial Protection Bureau protect consumers against predatory lending, usury, and exorbitant fees in the financial services industry?

Banks are public/private partnerships chartered by government for the further purpose of supporting a financial infrastructure that serves public purpose.

The banks are government agents and should be addressed accordingly, always keeping in mind the mission is to support public purpose.

In this case, because banks are government agents, the question is that of public purpose served by credit cards and related fees, and not the general ‘right’ of shareholders to make profits.

Once public purpose has been established, the effective use of private capital to price risk in the context of a profit motive should then be addressed.

5. At a time when the dream of homeownership has turned into the nightmare of foreclosure for too many Americans, what role should the Federal Reserve be playing in providing relief to homeowners who are underwater on their mortgages, combating the foreclosure crisis, and making housing more affordable?

Again, it begins with a discussion of public purpose, where Congress must decide what, with regard to housing, best serves public purpose. The will of Congress can then be expressed by the institutional structure of its Federal banking system.

Options available, for example, include the option of ordering that appraisals and income statements not be factors in refinancing loans originated by Federal institutions including banks and the Federal housing agencies. At the time of origination the lenders calculated their returns based on mortgages being refinanced as rates came down, assuming all borrowers would be eligible for refinancing. The financial crisis and subsequent failure of policy to sustain employment and output has given lenders an unexpected ‘bonus’ through a ‘technicality’ that allows them to refuse requests for refinancing at lower rates due to lower appraisals and lower incomes.

6. At a time when the United States has the most inequitable distribution of wealth and income of any major country, and the greatest gap between the very rich and everyone else since 1928, what policies can be established at the Federal Reserve which reduces income and wealth inequality in the U.S?

The root causes begin with Federal policy that has resulted in an unprecedented transfer of wealth to the financial sector at the expense of the real sectors. This can easily and immediately be reversed, which would serve to substantially reverse the trend income distribution.

Sincerely,

Warren Mosler

The news flow from last week was so voluminous it was nearly impossible to process. For good measure I want to start today’s commentary with a simple recap of what happened.

On the negative side -

· Greece called a referendum and threw bailout plans up in the air taking Greek 2yrs from 70% to 90% or +2000bps.
· Italian 10yr debt collapsed 40bps with spreads to Germany out 70bps. The moves were far larger in the 2yr sector.
· France 10y debt widened 25bps to Germany. At one point spreads were almost 40 wider.
· Italian PMI and Spanish employment data were miserable.
· German factory orders plunged 4.3 percent on the month.
· The planned EFSF bond for 3bio was pulled.
· Itraxx financials were +34 while subs were +45.
· Draghi predicted a recession for Europe along with disinflation.
· The G20 was flop – there was no agreement on IMF involvement in Europe.
· The US super committee deadline is 17 days away with no clear agreement.
· The 8th largest US bankruptcy in history took place.
· US 10yr and 30yr rallied 28bps, Spoos were -2.5%, the Dax was -6% and EURUSD was -3%.
· German CDS was up 16bps on the week.

On the positive side -

· The Fed showed its hand with tightening dissents now gone and an easing dissent in place.

Too bad what they call ‘easing’ at best has been shown to do nothing.

· The Fed’s significant downside risk language remained intact.

Downside risks sound like bad news to me.

· In the press conference Ben teed up QE3 in MBS space.

Which at best have been shown to do little or nothing for the macro economy.

· US payrolls, claims, vehicle sales and productivity came in better than expected.

And the real output gap if anything widened.

· S&P earnings are coming in at +18% y/y with implied corporate profits at +23 percent q/q a.r.

Reinforces the notion that it’s a good for stocks, bad for people economy.

· Mortgage speeds were much faster than expectations suggesting some easing refi pressures.

And savers holding those securities saw their incomes cut faster than expected.

· The ECB cut 25bps and indicated a dovish forward looking stance.

Which reduced euro interest income for the non govt sectors

· CME Margins were reduced.

Just means volatility was down some.

· There was a massive USDJPY intervention which may be a precursor to a Swiss style Japanese policy easing.

Which, for the US, means reduced costs of imports from Japan, which works against US exports, which should be a good thing for the US as it means for the size govt we have, taxes could be lowered to sustain demand, but becomes a bad thing as our leadership believes the US Federal deficit to be too large and so instead we get higher unemployment.

· The Swiss have indicated they want an even weaker CHF – possibly EURCHF 1.40.

When this makes a list of ‘positives’ you know the positives are pretty sorry

· The Aussies cut rates 25bps

Cutting net interest income for the economy.

More of the blind leading the blind. The one thing they all agree on, at great expense to global well being, is the budget deficits are all too large and the need for shared sacrifice and all that.

No chance for anything constructive to come out of any of this.

And these masters of their money machines don’t even know how to inflate, as they all desperately try to inflate with their versions of quantitative easing, which, functionally, is just another demand draining tax.

*DJ Merkel, Obama Discussed How To Boost EFSF Firepower Without ECB
*DJ Obama To Merkel: We Are Totally Invested In Your Success – Source
*DJ Geithner, Schaeuble May Meet To Discuss IMF Role In Euro Crisis -Source

While the symptoms get continuous attention as they get threatening enough, the underlying cause-the austerity- does not.

The euro zone, like most of the world, is failing to meet its further economic objectives because of a lack of aggregate demand.

And in the euro zone, the fundamental problem is that the member nations, as credit sensitive ‘currency users’ are necessarily pro cyclical in a downturn, much like the US states, and therefore incapable of independently meeting their further economic objectives.

So even as the euro zone struggles to address it’s solvency crisis that threatens the union itself as well as at least part of what remains of the global financial architecture, the underlying shortage of euro net financial assets continues to undermine output and employment, with GDP growth now forecast to fall to 0 with a chance of going negative in the current quarter.

What this means is that without adopting an alternative to the current policy of applying enhanced austerity as the means of addressing the solvency issue, it all remains in a very ugly downward spiral with social collapse far less than impossible.

So yes, the solvency issue can continue to be managed by the ECB, the issuer of the euro, continuing to buy national government debt as needed. But that doesn’t add net euro financial assets to the economy. It merely shifts financial assets held by the economy from the debt of the national governments to deposits at the ECB. So it does nothing with regards to output, employment, inflation, etc. as recent history has shown.

In fact, nothing the world’s central banks do adds net financial assets to their economies. And much of what they do actually removes net financial assets from their economies, making things worse. Note that last year the Fed turned over some $79 billion in profits to the Treasury. Those profits came from the economy, having been removed from the economy by the Fed’s policy of quantitative easing, which the old text books rightly used to call a tax.

And meanwhile, the imposed austerity that accompanies the bond purchases does directly alter output and employment- for the worse.

Additionally, for all practical purposes, there is universal global support for austerity as the means supporting global output and employment.

So even if the euro zone gets the solvency issue right, with the ECB writing the check to remove all funding constraints, the ongoing austerity will continue to depress the real economies.

The obvious hasn’t been making the headlines:

A no vote means a lot more immediate austerity than a yes vote.

A no vote means Greece can’t borrow at all, and therefore govt. checks will only clear if Greece immediately cuts back to where it is only spending tax revenue.

A yes vote means Greece can continue to spend quite a bit more than tax revenues, to the tune of the check from the benefactors.

And with no one in government at any level having any kind of a plan to leave the euro, and no idea how to manage a new currency in any case, that option continues to have no political support.

So the choices are:
Yes, we accept a relatively modest deficit cut as per the EU proposal.
No, we prefer to go cold turkey to a balanced budget and a seriously draconian cut.

Meanwhile, tick, tick, tick, the entire euro economy continues to slow, and continuously nudge up the entire region’s budget deficit, as they all work their way towards the same fate as Greece.

And, tick, tick, tick, the US deficit reduction process moves forward, with multi trillion dollar reductions already proposed by both parties.

Greek Vote Threatens Bailout

By Alkman Granitsas, Marcus Walker, and Costas Paris

November 1 (WSJ) — ATHENS—Greek Prime Minister George Papandreou stunned Europe by announcing a referendum on his country’s latest bailout—a high-stakes gamble that could undermine the international effort to preserve the euro.

A “yes” vote in the referendum could deflate the massive street protests and strikes that threaten to paralyze Greece as it tries to enact a brutal austerity program to earn rescue loans from the euro zone and the International Monetary Fund.

He’ll be back…The way things are going there is no alternative, a point market forces continue to make.

And no amount of tea from China, at any price, would be sufficient given current institutional structure and policy.

And more discussion on whether Greece should be allowed to default, even as haircut talk rises to 60%, and as the notion of ‘voluntary’ comes under further discussion. After all, if they don’t have to pay their debts, why should any other member nation have to pay its debts? etc.

Sarkozy yields on ECB crisis role, pressure on Italy

By Julien Toyer and Andreas Rinke

October 24 (Reuters) — European Union leaders made some progress towards a strategy to fight the euro zone’s sovereign debt crisis on Sunday, nearing agreement on bank recapitalization and on how to leverage their rescue fund to try to stop bond market contagion.

But final decisions were deferred until a second summit on Wednesday and sharp differences remain over the size of losses private holders of Greek government bonds will have to accept.

French President Nicolas Sarkozy backed down in the face of implacable German opposition to his desire to use unlimited European Central Bank funds to fight the crisis.

Instead, the euro zone may turn to emerging economies such as China and Brazil for help in underpinning its sickly bond market.

Top Economists to Advise Sanders on Fed Reform

October 20, 2011

WASHINGTON, Oct. 20 – Nobel Prize-winning economist Joseph Stiglitz and other nationally-renowned economists agreed today to serve on a panel of experts to help Sen. Bernie Sanders (I-Vt.) draft legislation to reform the Federal Reserve.

Sanders announced formation of his expert advisory panel in the wake of a damning report that faulted apparent conflicts of interest by bank-picked board members at the 12 regional Fed banks.

Top executives from Goldman Sachs, J.P. Morgan Chase, General Electric and other firms sat on the boards of regional Federal Reserve banks while their firms benefited from the central bank’s policies during the financial crisis, the Government Accountability Office investigation found. The dual roles created an appearance of a conflict of interest, according to the GAO.

After the report was issued Wednesday, Sanders said he would work with top economists to develop legislation to restructure the Fed and tighten rules on conflicts of interest, ensure that the Fed fulfills its full-employment mandate, increase transparency, protect consumers and reduce income inequality.

Sanders’ panel of experts includes:

Joseph Stiglitz, the 2001 winner of the Nobel Prize. The economics professor at Columbia University is a former chief economist for the World Bank.

Jeffrey Sachs, director of The Earth Institute and an economics professor at Columbia University. He also is special advisor to United Nations Secretary-General Ban Ki-moon.

Lawrence Mishel, president of the Economic Policy Institute, the premier research organization focused on U.S. living standards and labor markets.

William Black, associate professor of economics and law at the University of Missouri, Kansas City. He worked with the Federal Home Loan Bank Board, the Federal Savings and Loan Insurance Corporation and the Office of Thrift Supervision.

Nomi Prins, a senior fellow at Demos, was a managing director at Goldman Sachs, a senior manager at Bear Stearns in London, a senior strategist at Lehman Brothers, and an analyst at the Chase Manhattan Bank (now JPM Chase)

Jane D’Arista, an Economic Policy Institute research associate, has written on the history of U.S. monetary policy and financial regulation, The former Boston University School of Law professor previously served as a staff economist for Congress.

Tim Canova, professor of economics and law and co-director of the Center for Global Law & Development at the Chapman University School of Law in Orange, Calif. He was an early critic of financial deregulation and warned of the dangers of the bubble economy.

Robert Johnson, senior fellow and director of the Project on Global Finance at the Roosevelt Institute. He was chief economist of the Senate Banking Committee and a senior economist for the Senate Budget Committee.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. He was a senior economist at the Economic Policy Institute, a consultant for the World Bank and the Joint Economic Committee of the U.S. Congress.

Gerald Epstein, chair of the economics department at the University of Massachusetts at Amherst. Epstein also is the co-director of the Political Economy Research Institute.

Robert Pollin, co-director of the Political Economy Research Institute and economics professor at the University of Massachusetts-Amherst. He has worked with the Joint Economic Committee and the U.S. Competitiveness Policy Council.

Stephanie Kelton, assistant professor at the University of Missouri, Kansas City and a research scholar at the Center for Full Employment and Price Stability.

James K. Galbraith, professor of government at the Lyndon B. Johnson School of Public Affairs. He served in several positions on the staff of the U.S. Congress, including Executive Director of the Joint Economic Committee.

The need for major reforms at the Federal Reserve was driven home by the GAO findings announced Wednesday and in an earlier report issued on July 21. Both unprecedented audits of the Federal Reserve were required by a Sanders’ amendment to last year’s Wall Street reform law.