Bernanke’s Bank: An Assessment
This past December, the U.S. Federal Reserve recorded its 100th anniversary. The law creating the Fed was passed on December 23, 1913 and the Fed became operative a year later. As the Fed was concluding its first century, its current chair, Ben Bernanke, also announced he would not continue in the role, which he has occupied since 2006. On February 1, 2014, Bernanke will step down from his role as Fed chair, replaced by his vice-chair, Janet Yellen, who was confirmed by the Senate in January and who has promised to continue his policies of quantitative easing (QE), near zero interest rates, and virtual free money for banks and investors for the foreseeable future.
QE is the policy the Fed created in 2009 in which the Fed prints money and then uses it to purchase bad assets from banks, shadow bank financial institutions, and wealthy individual investors. Zero interest policy refers to Fed practices by which it ensures that money is available to financial institutions at interest rates ranging from 0.1 percent to 0.75 percent—i.e. near zero—by means of Fed indirect monetary policy measures. The Fed further subsidizes the banks by allowing them to redeposit the money borrowed from the Fed, and pays the banks an interest rate higher than when it borrowed the money.
So how has the Fed performed over the past century? To what purpose? And on behalf of whose interests? More specifically, how has the Fed performed since 2006 under the leadership of Bernanke? To answer these questions it’s necessary to look back at the origins of the Fed prior to 1913—and its evolution thereafter.
Those origins reveal that the primary purpose and function of the Federal Reserve as envisioned by its creators has always been first and foremost bailing out the banks when periodic financial crises occur, as they have consistently and repeatedly for the century preceding, as well as following the Fed’s creation. Contrary to the focus of academic economists and the press, the Fed’s other functions of regulating the money supply or supervising the private banking system have always been of secondary import at best. The past century of the Fed shows that whenever the secondary functions occasionally collide with the Fed’s primary function of bailing out the banks, bailout (called “lender of last resort” in academic circles) has always prevailed over—and often at the direct expense of—the secondary functions of money supply regulation and/or banks’ supervision.
Purpose of the Fed: Bailouts
The Fed was the direct outcome of another major financial crash that occurred in 1907-08. At that time the dominant shadow banking institutions of the day—the financial Trusts—over-speculated in commodities, especially in metals and copper futures in particular.
The first decade of the 20th century was the age of new, rapidly expanding industries based on electrification and, of course, copper is the key material for electrical conductivity. Control copper supplies and one can control the markets—and stock prices—of numerous industries. In the first decade of the 20th century, therefore, a wing of financial speculators, centered on the Knickerbocker Trust Company and related Trusts in New York City, attempted to corner the copper market. They bought up much of copper supplies and future contracts, driving the price of copper and securities based on copper to astronomical heights. But the copper bubble then burst, bringing down the Knickerbocker and other trusts of the day. The Trusts were what we would today call shadow banks. They were the main and dominant shadow banks of the period. Their investors were very wealthy individuals, not average folks who today are typically referred to as retail depositors.
The Trusts only took deposits from the very rich who like to speculate with their money—i.e., to take big risks in expectation of big asset price appreciation that would result in big returns. That was what the Trusts were created for. The problem was the Trusts were integrated with the regular banks that had everyday retail depositors as well. The latter loaned significant sums to the former, which then invested on behalf of their super-rich Trust members.
When the copper market collapsed, so did the Trusts that had over-speculated to corner the copper market. So, in turn, did the banks that had loaned great sums to the Trusts in their high risk game.
The crisis then spread further. When it appeared to depositors that their banks may be exposed, they began pulling their money from the banks as well. An old fashioned bank run occurred, as it had on at least a half dozen similar occasions, for similar reasons, throughout the 19th century.
The panic in New York then spread to the stock market, where all varieties of investors, large and small, were buying stocks on margin—with borrowed money. When the contagion spilled over into collapsing stock prices, margin calls were made by stock broker-dealers demanding stock investors pay up to cover the losses. When they couldn’t, investors defaulted, the magnitude of which was great enough to begin defaults by the stock broker-dealers themselves. The crisis then spread from market to market.
In an attempt to halt the commodity, stock and other asset price deflation that was accelerating rapidly in the fall of 1907, J.P. Morgan (the person not the company) attempted to pool assets among the major New York banks to halt the growing run on the banks—commercial and shadow. They failed and the losses were far greater than the money they could raise from among his rich friends. The runs on the banks continued.
Morgan then called on the U.S. Treasury for bailout assistance, since no central bank (i.e. Fed) existed yet. The U.S. Treasury loaned the Morgan consortium all but $5 million of the Treasury’s assets on hand. That stopped the runs on the banks and stabilized the financial crisis. However, it did little to bail out the rest of the real, non-financial economy, including consumers and workers.
Once bailed out, the banks then pulled in their credit lending horns, hoarded what liquidity they had been provided, and pretty much refused to lend to non-bank businesses that depended on bank loans to carry out their operations. The real economy contracted in a major recession in 1907-08. A short and shallow economic recovery followed in 1909. However a double dip recession followed that in 1910-12, followed by yet another brief and weak recovery in 1912, and still another recession after that—i.e. a triple dip over the course of the six years that followed the original financial crash of 1907-08.
During the period immediately after the 1907-08 crash, as World War I appeared on the horizon, bankers, capitalists, and politicians grew increasingly concerned that yet another financial crash might occur once the war started. In 1912, they quickly began writing federal legislation to create a central bank—the Federal Reserve—so that the Treasury and Congress would no longer have to bail out the banks directly again. Now the Fed would do it.
The Crash of 2007-08: Déjà vu 1907-08
The events just described are similar to the banking crisis of 2007-09. Just substitute Trusts in 1907 for Investment banks like Bear-Stearns and Lehman Brothers or Insurance giants like AIG, and copper futures for subprime mortgages, derivatives and asset backed securities. The big difference, however, was that there was no Fed in 1907-08, rather the U.S. Treasury served to bailout the banks. The problem in the latter case is that a Treasury-led bailout politicizes the process and requires an increase in the deficit and U.S. government debt. In the case of a Fed-managed bailout, the process is carried out “off the books” and the debt incurred is recorded on a separate set of books, the Fed’s. The process is, therefore, shielded in both a political and accounting sense when a central bank (Fed) bails out the private banking system.
Despite the bailout of the banks, the real economy in the aftermath of the 1907-08 financial crash only recovered briefly and poorly. This was because there was no corresponding fiscal stimulus to accompany the bank bailouts. In 1907-14 this combination of bank bailout with no fiscal stimulus resulted in three bouts of economic relapse and recession, until the massive fiscal stimulus by the government during the 1915-18 war years.
In 2007-13, the bank bailout was accompanied by a limited fiscal stimulus that lasted only 18 months. That resulted in a stop-go economic recovery averaging less than 2 percent GDP growth per year, while the banks and wealthy
investors recovered rapidly by 2010. Not only did the fiscal stimulus of 2009-10 dissipate by 2010, the process began in 2011 by which the insufficient fiscal stimulus was withdrawn in a series of federal government deficit-cutting deals.
The token stimulus of 2009-10 prevented a double dip recession thereafter, some economists argue. But contrary to this argument, if U.S. GDP estimates since 2009 were adjusted by the consumer price index, and not by the price index called the GDP deflator, then there would have been at least a double dip recession in first half of 2011 in the U.S. and even possibly a third dip at the end of 2012. In the first quarter of 2011, U.S. GDP declined by more than 2.0 percent. That was followed by a 0.4 percent growth in the following quarter—for a cumulative decline in GDP in the first half of 2011 by about 1 percent. In the fourth quarter of 2012, the economy experienced another 0.8 percent actual decline in GDP.
Notwithstanding the debate whether a double dip actually occurred in the U.S., in both cases—1907-13 and 2007-13—the financial system was bailed out, albeit by different institutions (Treasury vs. Fed); and in both cases the economic recovery was sub-par and extended in that trajectory for at least five years.
In both historical cases, other Fed functions—money supply management and supervising the banks to prevent crashes in the first place—have been of secondary importance from the very beginning. That has been true as well for much of the intervening years during the Fed’s first century.
In terms of money supply regulation, in 1913 the Fed was envisioned to change the money supply only rarely. Its only tool was the occasional adjustment of the reserves banks were required to keep on hand. The idea of using monetary tools like open market operations to regulate the money supply only came later, in the 1930s, when the Fed had already failed miserably at money supply creation to assist recovery from the depression. After 1933 the Fed was largely sidelined until the late 1950s. And beginning in the 1960s, and especially the 1980s onward, Fed money supply policies became increasingly in service to bank rescues and bail outs. So from the very beginning there has been a strong bias within the Fed not to regulate the money supply as a way to rebalance the economy. Whenever the banking system has been in crisis over the past century, the Fed has thrown concern about the money supply regulation out the window.
Similarly, when the Fed was formed in 1913 there was essentially no real bank supervision function. The Fed was led by the bankers themselves who were the directors and governors of the Fed and made all its operational decisions. It is an oxymoron to say that the function of the Fed was has always been to supervise the banks. The banks were the Fed and to a great extent are still the power behind the throne of monetary policy. If the Fed had actually supervised the banks, there would have been no financial excess in the 1920s that led to the subsequent stock market crash of 1929 and no four annual banking crashes that followed between 1929-1933. Nor would there have financial mini-crises in 1966, 1970 and 1974. Nor S&L and junk bond crises of the 1980s; or the Asian Meltdown and dot.com bubble of the 1990s; or the Housing bubble and crash of 2003-08. Whenever the Fed has successfully bailed out the banks since the 1960s, in the post-bailout period the Fed has never subsequently implemented a policy of true banking regulation, but only the appearance of it. That applies also today, to the post-2010 new rules under the Dodd-Frank financial regulation law and role given to the Fed to supervise the banks.
Fed Fulfills Its Primary Function
Since 2009 the Federal Reserve, chaired by Bernanke, has been true to the Fed’s primary historical function, bailing out the banks. It has abandoned any semblance of money supply regulation since 2008 by pumping tens of trillions of dollars into the banks and investors to keep them afloat. And has established a false façade, a potemkin village, of new measures that purport to represent banking supervision.
In fact, Bernanke has gone well beyond the Fed’s original charter. Since 2008, the Fed has spent more than $1 trillion to bail out foreign central and private banks, and trillions more to bail out global shadow banks—i.e. hedge funds, private equity firms, investment banks, real estate investment trusts, broker-dealers, mutual funds, private asset banks, finance companies, insurance companies, SIVs, and so on ad infinitum. Finally, using its QE programs, it has been bailing out individual investors by purchasing their various bad assets, especially subprime mortgage bonds. In other words, under Bernanke’s Fed the bailouts have expanded both in scope and magnitude.
The Fed’s QE program has already exceeded $4 trillion and will likely add at least another $600 billion in 2014, and still more beyond 2014. QE directly bails out high net worth individual investors and their shadow bank institutions. Other Fed programs, called special auctions, have provided still more trillions of bailout dollars to banks and shadow banks. The special auctions bailout the banks and shadow banks, which manage much of the super wealthy investors’ assets, and, in turn, pass through financial capital gains to those same investors.
In addition to the special auctions and QE since 2008, the Fed has also effectively lowered interest rates to essentially zero at which the banks can borrow money. It has kept those rates at that level for nearly five years now, promising to continue the zero bound interest rates for at least another two years. The Fed has even allowed the banks that borrow its essentially free money to redeposit the borrowed money back with the Fed again. In turn, the Fed pays them interest on the free money until they decide where to reinvest it.
QE, auctions, ensuring near zero rates, and paying interest on nearly free money together have resulted somewhere between $15-$20 trillion being provided by the Fed to bankers and shadow bankers—U.S. and foreign—as well as very high net worth individual investors globally.
A far less, but still significant, sum of $2-$3 trillion in the U.S. was provided to non-bank companies in the form of tax cuts, subsidies, and government spending. This number, moreover, does not include the so-called fiscal cliff deal of January 1, 2013, which allowed another $4 trillion of the Bush tax cuts of the last decade to continue through 2023—about 80 percent of which accrues to wealthy households and businesses, according to several estimates. So $15 to $20 trillion total to bail out bankers and investors, and another $4-$5 trillion bailouts in the form of tax cuts to non-bank businesses and their investors.
The deficit social spending cuts since 2011, in contrast, pale in comparison to the direct Fed bailouts of banks, shadow banks, and investors, and the Congressional bailouts of non-bank businesses. Hardly any fight occurred in Congress, or was raised by the President, over the $15 to $20 multi-trillion dollar bank-shadow bank-investor bailouts. In contrast, the two wings of the single capitalist party—the Republicans and Democrats—have fought like cats and dogs over tax hikes for the rich and social program spending cuts for the rest of America.
Finance Capital’s Shadow Banks
Of all the financial sectors, the shadow banks and their investors have been the especially big beneficiaries of the Fed bailout since 2008. Today the global shadow banking sector has an estimated $71 trillion in financial assets, which is up from $60 trillion in 2007 just before the recent crisis erupted, according to multiple reports in the Financial Times in 2013.
If one assumes the U.S. sector of global shadow banking represents, at minimum, 35 percent of the $71 trillion total, then U.S. shadow banks hold about $25 trillion of that $71 trillion. That $25 trillion today compares to an estimate made in May 2009 by the financial research firm, RGE Monitor, of approximately $10.5 trillion held in 2007 by U.S shadow banks. U.S. shadow banks have thus more than doubled their assets since the crisis began in 2008. Not bad for a post-crash recovery.
In contrast, the traditional (non-shadow) quasi-regulated commercial banks, i.e. JP Morgan, Barclays, Wells Fargo, HSBC, Deutchebank, UBS, Credit Suisse, and so on, have also more than recovered. In 2007, U.S. commercial banks’ asset total was estimated at about $10 trillion (RGE Monitor). But, according to a January 2, 2014 report by SNL Financial, a business data firm, traditional (non-shadow) U.S. commercial banks now hold a total of $14.6 trillion in assets. So they have increased their assets by nearly 50 percent in the past 5 years.
Two conclusions follow from this. First, the U.S. commercial banks have fully recovered all their asset losses and then some since the financial crash. Second, the shadow banks have been the big winners and gainers despite the crash, more than doubling their assets—even though the 2008 financial crash originated within the shadow bank system itself (Bear-Stearns, Lehman Brothers, AIG, GMAC, Merrill-Lynch, Fannie Mae, etc.). The Shadow Banking sector of global finance capital has become increasingly influential and powerful in recent decades, and continues so in the wake of the 2008-09 crash.
The shadow sector Trusts were at the center of the 1907-08 crash. Their relative influence waned in the World War I period. But by the 1920s the shadow banking system had recovered and began to rapidly expand once again, in new forms (era of the rise of the investment banks and broker-dealers), and engaged in excessive financial speculation once more. Shadow banks went into relative remission again in the depression and World War II years, then began expanding again in the 1960s-1970s. The speculative investing binge followed in the 1980s and 1990s, culminating in a series of growing financial crises in the U.S. and globally: in the late 1980s in the U.S. in the savings and loan, junk bond, and stock markets; in the 1990s in the collapse in Japan, in northern Europe banks, in Latin American and Asian financial meltdowns, in the dotcom boom and bust 1998-2000, and in the housing bubbles worldwide in the last decade. Financial instability and busts have not only begun appearing more frequently but also globally and spreading beyond individual banks and regional financial markets to become increasingly globalized and generalized. With their expansion has come more financial asset bubbles, instability, and the risk of greater and more frequent financial crashes.
Finance Capitalists’ Global Assets
Economists and the business-dominated media like to talk about crises by using terms like the markets. The markets say this or say that, as if they were actual persons. This de-personified choice of concepts serves to hide the fact that there is no such thing as the markets, per se. The markets are not some objectified thing, they are comprised of people, financial investors, dominated by finance capitalists worth more than $100 million in investable assets. Elsewhere this writer has called this group of investors, their show banking institutions, and the proliferating global highly liquid financial markets in which they speculate, the Global Money Parade (see Epic Recession: Prelude to Global Depression, Pluto Books, 2010).
The investors that constitute the markets are the elite core of finance capitalists. They are sometimes referred to as very high net worth investors, or even ultra high net worth investors. The arbitrary distinction between the two—very high and ultra—who together represent the elite layer of finance capitalists as a group, is typically a cut off of $5-$30 million in readily available, i.e. liquid investable assets (VHNWs) vs. more than $30 million (UHNWs).
According to a study in 2013 by Capgemini, a global business consultancy, VHNWs globally increased their investable wealth in 2012 alone by more than $4 trillion, to $46.2 trillion. Another report in 2013 by the big Euro bank, UBS, indicated the total wealth held by the UHNW wealthiest 200,000 investors in the world amounted to $28 trillion. About 70,500 of the 200,000 are located in the U.S., according to the UBS study with another 58,000 in Europe, and 44,500 in Asia. Growth of this group’s assets is projected to continue, at a minimum, $4 trillion by every year.
Wall St. Journal and Financial Times analysts in the business press, commenting on the above reports, have remarked that “the flood of central bank money is behind most of this growth in wealth, rather than fresh entrepreneurial success or economic growth.”
In other words, it is the Fed and other central banks worldwide, to a lesser extent, that together are responsible to a significant extent for the massive increase in investable financial assets that has taken place through the bail out of financial institutions—commercial and shadow alike—and their VHNW and UHNW investors. The tens of trillions of dollars that have been pumped into these elite investors and their financial institutions since 2008 ends up being reinvested, not in businesses that produce real goods and services (and therefore jobs and incomes), but primarily in financial markets once again—i.e. into global stock markets, junk bond markets, into derivative markets of all kinds, into foreign exchange trading, emerging market funds, select real estate markets like China, U.S. farmland prices, leveraged buyouts, mergers and acquisitions, into buying up Eurozone periphery sovereign debt, and so on. The Fed provides the free money, which the very wealthy and their institutions then use to speculate even further in various financial asset markets worldwide. They do so because the profitability from financial asset investment is far greater, turns over faster, and is often less risky than investing long term in real, mom and pop businesses.
The money flows from the Fed (and other central banks in Europe, Japan and elsewhere), to the high net worth investors and their financial institutions, and eventually into these global financial markets. The outcome since 2008 has been accelerating financial asset prices—i.e. re-emerging today once again as financial bubbles—in stocks, bonds, real estate, etc. Meanwhile, all this is taking place as the U.S. and world economy have been experiencing crisis and historic slowing of real investment and sub-par economic recovery.
In other words, the global money parade is at the heart of the problem of growing financial bubbles and, indirectly as well, the slowing of real investment, job creation, incomes for the many, and economic recovery.
Feeding the Banking Beast
Bernanke’s Fed has played a key role since 2008 in accelerating the growth and expansion of this Global Money Parade by having pumped tens of trillions more in liquidity into it since 2008. Liquidity which has fueled a rapid return to excessive speculative financial investment worldwide since 2009 and that will continue to do so—inevitably producing even more financial asset price bubbles, eventually another major financial crash, and thereafter subsequent banking system bailouts once again.
Although Bernanke did not begin this process of feeding the banking beast with ever more liquidity, Bernanke’s Fed has added to the forces behind it more so than even his Federal Reserve predecessor, Alan Greenspan. Mimicking the Fed’s actions since 2008, other central banks worldwide—from the Banks of England and Eurozone to the Bank of Japan—have also been working overtime pumping excess liquidity into the global financial system, adding to the trend of central banks creating the next round of financial bubbles and crashes in the not-distant future. The weak links today in the global banking system are in the Eurozone and in Asia, where the People’s Bank of China, i.e. the central bank of China, continues to struggle to extricate its local real estate and property markets from the global shadow banking system and the property-real estate asset price bubbles that global shadow bankers and ultra high net worth investors are creating in China today. The Eurozone banks also continue as a source of potential severe financial instability. Select emerging market countries—like Turkey, Brazil, South Africa, Indonesia and even India may soon join the weak link list in 2014 as well.
The point is that, when assessing the Bernanke Fed’s performance, it is essential to recognize that Bernanke, like other Fed chairs before him, have helped create—and continue to create—the financial conditions and instability that has led—and continues to lead—to repeated financial crashes. Their primary function—i.e. bailing out the banks—is ironically required time and again to contain the same financial instability it helped create. The solution to the financial crisis—massive doses of more money and liquidity—became the basis for the next financial crisis.
The Fed’s Secondary Functions
Academic economists argue that the Fed’s real primary function is regulating the money supply—not bailing out the banks. The latter are accidental excesses of economic history, not due to the internal logic of the global finance capital system. The same economists argue as well that the Fed’s supervision of the banking system is equally primary. However, the historical record shows something quite different for both points.
One can hardly argue that money supply regulation has been central since 2008, given the tens of trillions of liquidity (i.e. money) the Fed has pumped into the banks. Defenders of the Fed argue this was necessary to prevent a collapse of the banks and was, therefore, justified. But consistent, excess money supply injections by the Fed predate the recent crisis that erupted in 2008. In fact, the Fed has been feeding the shadow and commercial banks more and more money for decades now—a fact that no doubt exacerbated the 2008 financial crash. For example, since the mid-1960s the Fed has pumped money into the system:
- In 1966, to prevent a bank crisis involving new certificates of deposit financial asset speculation
- In 1970, to prevent a crisis involving commercial paper
- In 1974, to rescue the Real Estate Investment Trusts
- In the 1980s, to deal with the dual financial market crises involving the savings and loan sector, the junk bond markets,
and the 500 point stock market crash of 1987
- In the 1980s and 1990s, to protect bank losses involving sovereign debt crises in Latin America; again during the Asian Meltdown of 1998
- In 1999-2000, feeding the dot.com tech bubble
- In 2003-06, creating the housing bubble
- In between, every time there was a recession, more money was given to get bankers
to lend to non-bank businesses. And more money still to ensure that Nixon was elected in 1972 and George W. Bush in 2004.
If the Fed’s function is to regulate the money supply, then its history for nearly the past half century has been to largely ignore that regulation and, instead, to continually and repeatedly pump money into the financial system to assist the global expansion of the banks and/or to restore bank losses when a threat of crisis, or real crisis, occurs.
Bernanke has maintained publicly time and again that the purpose of the money supply surges on his watch was to ensure that a moderate inflation rate of 2 percent occurred, to stimulate the real economy, and to create jobs. However, the rate of inflation in the U.S. economy has been steadily declining the past three years, now below 1 percent.
The Fed is further away from its inflation target goal than it was when it began its current policies in 2009. There are still more than 20 million U.S. workers without jobs, not counting the 5 million who have left the labor force since 2008. As for GDP and economic growth, the U.S. average growth rate the past three years has been slowing, to around a 1.7-1.8 percent average—well below half that for a normal recovery. All that despite a $15-$20 trillion bailout of the banks and a wide open money spigot for the past five years.
Academics who insist the Fed’s primary function is the regulation of money supply, not bank bailouts, alternatively argue the Fed’s main responsibility is supervising the banking system. They point to the 2010 Dodd-Frank financial regulation law that has given Bernanke’s Fed more bank supervisory authority than it has ever had.
The shadow banking system is now under Fed supervision, they point out. In addition, the Fed conducts periodic bank stress tests. It has a new Capital Analysis and Review Process to ensure banks hold sufficient capital. Big banks are designated as SIFIs (Systematically Important Financial Institutions) that are subject to more scrutiny than ever before.
However, most of this is political spin for public consumption. The big banks are bigger than ever. The stress tests are carefully structured events to raise public confidence in the banks, to buy their stocks and not withdraw their deposits. Bank capital requirements are far too minimal to make a difference in another financial panic. The Dodd-Frank law has exempted most of derivatives trading from regulation, and in no way stops banks and shadow banks from setting up operations abroad and continue risky speculative practices, as before 2007-08. In short, bank supervision is largely in name only—and will grow weaker, not stronger, over time.
History shows repeatedly that in the wake of a financial crash a brief period of limited bank supervision occurs. Old forms of shadow banks are brought under the regulatory-Fed supervision umbrella. But new institutions are eventually created outside the umbrella. New highly liquid speculative markets form and new financial instruments to sell them in are created to get around the regulatory framework. Finance capital and its excesses cannot be regulated or supervised effectively in the long run, since supervision is defined and implemented by institutions (the Fed, Congress, agencies, etc.) that are managed and controlled by the same financial-banking interests. The token new bank supervision authority given to Bernanke’s Fed in 2010 has already begun, in 2014, to unravel.
Conclusion: Making Bankers Wealthier
The Bernanke Fed’s performance has been very much like previous Fed regimes. Bernanke’s Fed has performed superbly as a lender of last resort, bailing out the banks, shadow banks, and very high net worth investors. In so doing, it has fed the banking beast even more liquidity that can only result down the road in another round of financial instability and crisis. The secondary function of money supply management has never been disregarded more than by Bernanke’s Fed, while bank supervision—a token effort since 2010—is already in retreat.
The Bernanke Fed has performed remarkably well—for bankers, shadow bankers, and super wealthy investors. Its highest marks are for bank bailout. Expect mostly more of the same for Bernanke’s successor, Janet Yellen, who succeeds him this February. The basic function and primary purpose of the Fed—i.e. bank bailout—has not changed throughout its first century.
Jack Rasmus is the author of the books, Obama’s Economy: Recovery for the Few, 2012, and Epic Recession: Prelude to Global Depression, 2010, both from Pluto Press. He hosts the weekly radio show on the Progressive Radio Network. His website is www.kyklosproductions.com.