.
(ABC News) – The government’s response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.
The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.
“Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car,” Barofsky wrote.
Barofsky also said his office is investigating 77 cases of possible criminal and civil fraud, including crimes of tax evasion, insider trading, mortgage lending and payment collection, false statements and public corruption.
Much of Barofsky’s report focused on the government’s growing role in the housing market, which he said has increased the risk of another housing bubble.
Over the past year, the federal government has spent hundreds of billions propping up the housing market. About 90 percent of home loans are backed by government controlled entities, mainly Fannie Mae, Freddie Mac and the Federal Housing Administration.
The Federal Reserve is spending $1.25 trillion to hold down mortgage rates, and millions of homeowners have refinanced at lower rates.
.
Bernanke is student of Greenspan and got us into this economic mess because of unregulated capitalism. Their concern is to save big corporations, not the elements for mainstreet recovery and avoid poverty, destitution and unemployment. FDR worked on policy to bring hope and a future for the workforce. Of course, after the SCOTUS ruling, the next ‘democratic’ election will be decided by corporate money and not the people of the United States.
FDR had to cope with a recession within the depression in 1937, cut spending and imposed a big increase in Social Security taxes. He reversed course in the spring of 1938 with a big increase in spending for economic recovery. World War II did the rest, see also The Employment Act of 1946 [pdf].
While Barack Obama’s economics team hammers out its $800 billion fiscal stimulus plan, the commentariat is battling over the effectiveness of what some consider the prototype stimulus package, the New Deal.* The suppressed (and problematic) conclusion to all this punditry seems to be: Because government spending under the New Deal helped/didn’t help to end the Great Depression, the Obama stimulus plan will/won’t help to end the current recession.
The first sense considers the New Deal as a stimulus program to revive the economy; the second considers it as a welfare program to aid the poor. The two notions are far from equivalent. My reading of the literature suggests that the New Deal did little as an economic stimulus, but it did provide welfare benefits.
≈ Cross-posted from BooMan’s fp story — Some Thoughts on Obama and FDR ≈
"But I will not let myself be reduced to silence.".
Once in office, FDR set to work immediately. His “New Deal,” it turned out, involved regulation and reform of the banking system, massive government spending to “prime the pump” by restarting the economy and putting people back to work, and the creation of a social services network to support those who had fallen on hard times.
Between 8 March and 16 June, in what later became known as the “First Hundred Days,” Congress followed Roosevelt’s lead by passing an incredible fifteen separate bills which, together, formed the basis of the New Deal. Several of the programs created during those three and a half months are still around in the federal government today. Some of Roosevelt’s most notable actions during the Hundred Days were:
● A national bank holiday: The day after his inauguration, FDR declared a “bank holiday,” closing all banks in the country to prevent a collapse of the banking system. With the banks closed, Roosevelt took measures to restore the public’s confidence in the financial systems; when the banks reopened a week later, the panic was over.
● Ending the gold standard: To avoid deflation, FDR quickly suspended the gold standard. This meant that U.S. dollars no longer had to be backed up by gold reserves, which also meant that the government could print–and spend–more money to “prime the pump” of the economy.
● Glass-Steagall Act: The Glass-Steagall Act imposed regulations on the banking industry that guided it for over fifty years, until it was repealed in 1999. The law separated commercial from investment banking, forced banks to get out of the business of financial investment, banned the use of bank deposits in speculation. It also created the FDIC. The effect of the law was to give greater stability to the banking system.
● FDIC: The Federal Deposit Insurance Commission backed all bank deposits up to $2500, meaning that most bank customers no longer had to worry that a bank failure would wipe out their life savings. The agency continues to insure American deposits today.
● Read on …
"But I will not let myself be reduced to silence."