Posted on 07/14/2009 3:43:12 PM PDT by Entrepreneur
Democrats in Congress and the Obama White House are plotting to remove Federal Reserve Chairman Benjamin Bernanke and replace him with Obama's chief economic adviser, Larry Summers, at the end of his term next year, writes veteran bank analyst Richard X. Bove of Connecticut-based Rochdale Securities in a report to clients. Summers is the brainy Main Line native, ex-Harvard president, and ex-Treasury Secretary who's trying to re-regulate the financial institutions he helped deregulate under President Clinton, causing the current mess.
A shift to Summers "is likely to be bad for the American economy, its financial system, and the banks. A change of this nature could in fact stop the economic recovery," warns Bove.
Bernanke or Summers - what's the choice? "Mr. Bernanke has demonstrated a willingness to act to defend both the economy and the financial system. Conversely, Mr. Summers has written the bulk of the proposals to regulate the financial industry," and these "would dramatically restrict fund flow to the economy and thereby economic growth."
Bove credits Bernanke, former Treasury Secretary Henry Paulson and FDIC chief Sheila Bair with the "bold, innovative action" that fixed the banking system and prevented a full government takeover last year. Bush and Obama at that time "did nothing." Congress was "the proverbial deer in the headlights."
Yet "the same people who were incapable of acting when there was a clear need for action will now make the decision as to whether the man who helped save the system should be removed." Bove counts Treasury Secretary Timothy Geithner in that camp: "Mr. Geithner was the President of the New York Federal Reserve when the excesses of the system grew... He did nothing to stop these excesses... He was promoted shortly after" by Obama.
Bove says Summers is pushing reforms that would mark "a return to 1937," when the Fed "kill(ed) economic recovery" by tightening bank reserve requirements too early.
What about the accusation that Bernanke abused his power by forcing Bank of America to buy Merrill Lynch? "I am not sure that he did it, but I think he should have done it," Bove writes. "If Merill Lynch collapsed the same weekend that Lehman Brothers failed," where would we be today?
Bernanke's under pressure. He's scheduled to testify before U.S. Rep. Barney Frank, D-Mass., and his House Financial Services Committee next Tuesday, July 21. He'll likely be expected to show how the Fed plans to reverse the scary growth in the money supply without slowing the economy. He'll be arguing for his job, too.
While the recent monetary expansion scares the crud outta me, I think we would be much worse off economically without it. However, whether the Fed could manage to hold off inflation when the time is right is highly questionable.
Again, considering the idiot Geithner and the other Marxists in the administration, it's hard to say whether Bernanke is brilliantly playing a very bad hand or not. I do know that I have every faith that Larry Summers WILL screw things up and VERY VERY BADLY, which probably means his appointment is a cinch.
Just do an Andrew Jackson and kick these parasites out of America for good.
Ben has done about as good a job as anyone in his position, and under the circumstances - surrounded by either subversive economic ideologues or economic illiterates - could do.
Our worst enemies here are not the ignorant and simple... our worst enemies are the intelligent and corrupt - Henry Graham Greene
Hard to do worse than Bernanke.
Summers might do the wrong thing when it comes time to tighten, but like Bernanke, he does know better. My fear is that Obama will appoint some racial Marxist buddy to the post that knows absolutely nothing about economics, who will gun the money supply on demand prior to election season. Jus as Jimmy Carter appointed George Miller, but without the racial and leftist overtones.
I’m not a Bernake fan, never have been, but I shudder at what Barry would replace him with.
The main problem that I see with Summers as a Fed chairman would be not that he is economic lightweight - as you said, he is a real economist and he does know better - but that he will owe Obama and do everything to accommodate Obama and Dems and their reelection prospects.
Another issue would be that such obvious political appointment and politicization of the Fed would further undermine the Fed’s authority and prestige internationally, just at the time when the US dollar and fiscal monetary policies are suspect and can lead to unnecessary and harmful to US changes in financial and foreign policies of other countries.
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