So long Larry Summers! In this game of eeny meeny miny moe, it appears that Obama's index finger will ultimately land on Janet Yellen to replace Bernanke as chairman of the Federal Reserve. Summers was Wall Street's choice, but he withdrew from consideration this week, citing potential obstacles in the Senate confirmation process. While I greeted that update favorably, Yellen isn't high on my list either.
Before Summers stepped aside, the authors of an article on Yahoo Finance asserted why Wall Street preferred Summers even though we shouldn't:
“Obama leans toward Summers not on the merits but because the Wall Street bankers want him. Summers is one of the boys, and the bankers know that Summers will do their bidding, at the expense of everybody else.”
The authors added that Summers advocated for financial deregulation and shot down legislation capping bankers' bonuses—including bonuses for the AIG unit that helped trigger the banking mess.
They went on to root for Yellen, citing her exemplary academic record and history with the Federal Reserve. “Yellen correctly foresaw the risks of the 2008 financial meltdown, while Summers famously missed it. She, not Summers, has hands-on experience running the Fed.”
Summers is out of the mix now, but the “logic” behind this article made my blood boil. Just because one candidate is lousy does not mean the other is any better.
Here is Yellen's highlight reel according to Jim Kuhnhenn at the Associated Press:
“Yellen has advocated tough regulations since her time at the San Francisco Fed. She is credited for issuing early warnings that the housing bubble and unregulated financial practices threatened the economy.
As the Fed's vice chairwoman she has called for additional financial system safeguards.”
Hmm… here's another way to look at Yellen's record: since joining the Federal Reserve's Board of Governors in October 2010 and becoming a permanent voting member of the Federal Open Market Committee (FOMC), she has never cast a dissenting vote against the monetary action recommended by Chairman Bernanke.
If the near collapse of the banking system was caused by deregulation and AIG's toxic loans—which she spoke out against—how competent a leader is Ms. Yellen? Did anyone heed her early warnings? No; and her inability to push her peers toward preventative measures is an indictment of an ineffective executive. In the business world, saying “I told you so” could get you fired. However, like so many things government, activity is mistaken for accomplishment. An effective executive makes sure he or she is heard and gets the job done.
Last month Sheraz Mian broke down the 2Q earnings reports of the S&P 500 companies in Zacks Earning Trends:
“Yes, the total earnings tally reached a new quarterly record in Q2 and the rest of the aggregate metrics like growth rates and beat ratios look respectable enough. But all of that was solely due to one sector only: Finance. … Finance results have been very strong, with total earnings for the companies that have reported results up an impressive +30% on +8.5% higher revenues. …
“Earnings growth was particularly strong at the large national and regional banks, with total earnings at the Major Banks industry, which includes 15 banks like J.P. Morgan and Bank of America.”
It looks like too big to fail banks are certainly succeeding. So, Yellen's hands-on experience running the Fed has accomplished full employment in the financial sector. Perhaps that's supposed to trickle down to the rest of us.
The Federal Reserve publishes a booklet titled, The Federal Reserve System, Purposes and Functions. It says that the Federal Reserve's duties fall into four general areas:
If any public company failed at its mission so miserably, the stockholders would throw out the entire management team. It is time for accountability.
While the Federal Reserve holds down interest rates and floods the banking system with money, it's destroying the retirement dreams of several generations. The Employee Benefit Research Organization reports that 25-27% of baby boomers and Generation Xers who would have had adequate retirement income—under return assumptions based on historical averages—will run out of money if today's low interest rates are permanent.
In short, we can't sit around and hope for trickle-down crumbs from the financial sector.
It all reminds me of AT&T's “reach out and touch someone” campaign from the '80s. Well, AT&T got too big for its britches and wanted to soften its image. The Justice Department broke it up shortly thereafter. Seems the monopoly was touching our wallets a bit too much.
How much more proof do we need? We are fed up with the Federal Reserve bailing out banks at the expense of everybody else. Seniors and savers have been sacrificed for the benefit of the banking system, and the Federal Reserve orchestrated it all.
We can't afford any more of Janet Yellen's so-called leadership. How about nominating someone who can keep her hands to herself and out of our wallets?
College football is in full swing. One of my pet peeves is when the big football powers put much smaller schools on their schedule to secure easy wins that yield higher national rankings. The smaller schools agree because they make tons of money in the process. Last weekend, the Akron Zips played the Michigan Wolverines in Ann Arbor. Akron lost 28-24, and the game went down to the final play—in front of 107,120 rabid fans. I'm sure many folks were pulling for the underdog—it would have served Michigan right.
It's not all bad for Akron: the week before, they beat James Madison 35-33 in front of a home crowd of 19,653.
We had an interesting weekend in central Florida. Late September and early October are generally the busiest months for hurricanes, as the ocean waters are still warm but the air is cooling. On Sunday our backyard thermometer read 100° F. When heavy wind and rain started, the temperature dropped 18 degrees within minutes. We're all keeping our fingers crossed. It's a good reminder to check the flood zone before you buy real estate; it can save you a lot of money on insurance.
Our friend Toots passed along a cute one for this old dog:
One day an old German Shepherd started chasing rabbits and before long, discovered he was lost. Wandering about, he noticed a young panther heading rapidly in his direction with the intention of having lunch.
The old German Shepherd thought, “Uh oh! I'm in deep trouble now!”
Noticing some bones on the ground close by, he immediately settled down to chew on them with his back to the approaching cat. Just as the panther was about to leap, the old German Shepherd exclaimed, “Boy, that was one delicious panther! I wonder if there are any more around here?”
Hearing this, the young panther halted his attack in mid-strike, a look of terror came over him, and he slunk away into the trees.
“Whew!” said the panther, “That was close! That old German Shepherd nearly had me!”
Meanwhile, a squirrel, who had watched the whole scene from a nearby tree, figured he could put this knowledge to good use and trade it for protection from the panther. So, off he went to spill the beans and strike a deal.
The young panther was furious at being made a fool of and said, “Here, squirrel, hop on my back and watch what I do to that conniving canine!”
Now, the old German Shepherd saw the panther coming with the squirrel on his back and thought, “What am I going to do now?” But instead of running, the dog sat down with his back to his attacker and pretended he hadn't seen them yet. Just when they get close enough to hear, the old German Shepherd said…
“Where's that squirrel? I sent him off an hour ago to bring me another panther!”
Don't mess with the old dogs! Age and skill always overcome youth.
Until next week…