Fed Chairman Bernanke's report to Congress

Ben Bernanke

Federal Reserve Chairman Ben Bernanke met today with Congressional leaders of the Financial Services Committee to report on the Federal Reserve's take on the state of the economy and Federal Reserve actions in that regard.

In an introductory statement Mr. Bernanke made it clear that the fiscal policy that legislators have chosen to take has been a detriment to the economic recovery.  In an effort to acknowledge the impact that a dysfunctional Congress has on the economy, he highlighted that tight fiscal policy will restrain economic growth.  He warned that political fights over raising the debt ceiling as has happened in the past would hamper the recovery.  Although a few of the Congressmen on the committee appeared to understand the importance Congress has in assisting in the recovery, it is still to be seen if Congressional Republicans take this guidance into consideration as they enter discussions about raising the debt ceiling, ending sequester or resurrecting the American Jobs Act.

Bernanke believes the economy is recovering at a moderate pace.  He cited the improvements in the housing market as contributing to economic gains and predicted this would continue to improve notwithstanding recent mortgage interest gains.

He believes the labor market is improving gradually and contributed a 0.1% drop in the unemployment rate to the Fed's policies of buying assets.  He admits that job growth has a long way to go to be considered satisfactory.  As I have stated in previous blogs, I question the impact that buying assets really has on the job market especially because it does nothing to increase demand for products and services.  It does have an important impact on the stock market as we have seen investors sell off stocks and bonds when Bernanke hinted that the asset purchase program was going to be discontinued.

Understanding the emotional nature of the stock market, Bernanke was careful not to repeat the mistake of hinting at a change in the asset program at the committee meeting.  He emphatically stated that the current asset purchase program will continue and monetary policy will be "accommodative" for the foreseeable future.  As of noon today the US markets appeared to be unaffected by Bernanke's comments.

In order to help prevent another Bush era financial collapse of the big banks, Fed policy is to prevent  collapse by increasing the requirement for cash reserves under what is called Basel III capital reforms.

 In summary, Bernanke explained three mechanisms that the Fed is using to support economic growth.  These are mortgage asset purchases, forward guidance on Fed plans for the federal fund rate target and Basel III capital reforms.

Based on the comments at the committee meeting, it appears obvious that the Fed needs a lot of help from Congress to revitalize the economy.  Bernanke's warning about Congressional actions around fiscal policy may have been his cry for help.

Why Republicans in Congress are Guilty of Conspiracy to Obstruct Justice

In 2010 Congress passed the Dodd-Frank Act which establishes the Consumer Financial Protection Bureau (CFPB) as the agency with enforcement power over the Financial industry.  This agency has an important role in preventing another financial disaster as created by a financial industry that enjoyed excessive liberation from regulations during the Bush administration.  The Act is now the law.  

Republicans, in their carefree joy for obstruction of all of President Obama's policies, have decided to take on the CFPB and the Dodd-Frank Act by preventing the approval of Richard Cordray as the CFPB Director.   You may ask, how is this conspiracy to obstruct justice?

We know that crimes were committed that caused the meltdown of financial markets prior to the 2008 crash.  The white collar criminals who committed those crimes are still free.  Although their criminal methods may have become dormant, there is still a public outcry that justice be done by finding and   incarcerating these criminals.  The CFPB is the agency that could make that happen, but their enforcement power is nullified without a Director.  It is the Republicans who are obstructing the actions of the CFPB.  

Congressional Republicans who have sent a letter to President Obama explaining their demands, admit that they are taking the action to reject the President's choice of a Director because they want to weaken CFPB's power.  In using their power to reject the Director, they have lied about their real intentions.  They don't disapprove of Richard Cordray.  They have stated that they will not approve of any Director until the powers of the CFPB as are legally established by the law are changed.  They have conspired to create this fraud against the CFPB and the United States with the admitted intention of obstructing it's legal authority.  This is conspiracy to obstruct and conspiracy to defraud.

The following is the legal explanation of "Conspiracy to Obstruct" (18 U.S.C. 371).

If two or more persons conspire either to commit any offense against the United States or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.

The following is the legal explanation of "Conspiracy to Defraud" 

Section 371 contains both a general conspiracy prohibition and a specific obstruction conspiracy prohibition in the form of a conspiracy to defraud proscription. The elements of conspiracy to defraud the United States are: (1) an agreement of two or more individuals; (2) to defraud the United States; and (3) an overt act by one of conspirators in furtherance of the scheme.  The "fraud covered by the statute ‘reaches any conspiracy for the purpose of impairing, obstructing or defeating the lawful functions of any department of Government” by “deceit, craft or trickery, or at least by means that are dishonest.” The scheme may be designed to deprive the United States of money or property, but it need not be so; a plot calculated to frustrate the functions of a governmental entity will suffice.

It is true that Congress has immunity from prosecution for acts they commit in the normal operation of their duties as legislators.  It does not protect them from committing crimes or violating existing laws.  A case could be made for this obstruction being a criminal act where the department they are obstructing is a federal agency and the actions these Republicans are taking is protecting criminals from prosecution and has done so now since 2010.  These Republicans have certainly over-stepped their normal authority and entered the realm of disobedience of law.

At the very least, every one of the 43 members of Congress who signed Mitch McConnell's conspiracy letter should be fined.  But wouldn't it be great if we could end this obstruction by putting them all in jail.  

How Republicans plan to transform the President's budget into the Paul Ryan budget

Republicans in Congress still can't seem to realize that their Party did not win the Presidency in 2012.  And by that I mean they still do not understand and do not represent the expectations of the American people.

One example of this is HR 444 REQUIRE A PLAN Act that was discussed today in the House.

Parenthetically the Act also adds the insulting attack remark erroneously directed towards the President, that it can also be called the "Require Presidential Leadership and No Deficit Act."  My guess is that the Republicans see leadership as making strong cuts into social programs to hurt the Americans who can least afford it and who most depend on it.  This would follow right in step with the Ryan budget and Republicans misguided thinking that revenue is off the table in budget talks.

Mr. Price

The Act introduced by Republican Mr. PRICE of Georgia (for himself, Mr. RYAN of Wisconsin, Ms. JENKINS, and Mr. SESSIONS) requires that, "if the President’s fiscal year 2014 budget does not achieve balance in a fiscal year covered by such budget, the President shall submit a supplemental unified budget by April 1, 2013, which identifies a fiscal year in which balance is achieved, and for other purposes."

It goes on to require that the supplemental budget include budget information required by US code but also include the Republicans wish list of items.  These are (a) An estimate of the fiscal year in which the supplemental budget is not expected to result in a deficit; (b) a detailed description of additional policies needed to accomplish no deficit; and (c) detailed description of the differences between the President's FY 2014 budget and the FY2014 supplemental budget requested.

There is no constituional requirement for a President to offer a budget which will balance by some future date.  Since the 1920's there have only been about three occassions where a budget actually did balance.  However Republicans appeared to be confused about the President's intentions.  They made it seem that this was a simple request that would help them understand where the President stands on balancing the budget.  But what are they really trying to do?

The reason that the Republicans imply they are proposing this Act is because the President's actions during his first term have shown he is not a good financial stewart.  The Act's section on "Findings" indicates that the President can't keep to his promises and has caused the deficit to rise during his term.  It's almost as if the President has authority over financial and budgetary policy and total control of the money that he was charged to spend and spent it unwisely.  Oh wait, that is the job of the Congress!

So what are the Republicans really trying to do by placing this Act into consideration?  I think they have a somewhat sinister plan in mind indeed.

CBO estimates of deficit causes

First, they are trying to create an image in the eyes of Americans that removes themselves from any blame they may have for the country's financial condition.  They won't admit  that it was their Party's administration that got us into the financial situation we are in and largely responsible for the deficit.  The graph at the left is the Congressional Budget Office's estimates of the factors leading to the deficit.  One can see that the largest contributors to our present deficit are the wars and Bush era tax cuts.  But deficits were not that important to Republicans when their guy was President.

Republicans pretend to be the only Party concerned with future generations who will be responsible for the deficit's payback.  While he was Mitt Romney's running partner, Paul Ryan's first budget plan would not balance the budget for thirty years.  And that one was considered harmful to the poor in society and the economy because of the magnitude of its cuts to social programs while at the same time cutting taxes for the rich.  Recently Ryan has been tasked by John Boehner to write a budget that will be balanced within ten years. Without considering revenue increases (as the Republicans believe), Ryan's new budget would start hurting people immediately.

It seems to me that with HR 444 and the previously passed HR 325 that temporarily raises the debt limit with stipulations for "No Budget/No Pay", Republicans are trying to force the President into cutting the social safety net, voucher-izing medicare and medicaid and making changes to social security that would not benefit the American worker.  All of these were Romney-Ryan policies that Americans rejected when they ended Romney's political career in the last election.

Ryan's Budget paves the path to
increased Prosperity for the wealthy

Republicans are really putting the cart before the horse if they think that the President can create a supplemental unified budget without Congress first acting on modifying the tax code and closing loop holes. The President cannot know the impact that new revenue will have to paying down the deficit  until Congress acts on tax law.  So once again Congress needs to understand that tax revenue must be considered and they have a more urgent role in addressing that than the President has to give them a supplemental unified budget.

Fortunately some Democrats understand that Republicans are trying to force a budget that looks like the Ryan budget and have added amendments to the Act to counteract this intention.  Unfortunately none of them was allowed during the actual rules committee session.

Mr McGovern of Massachusetts, a member of the committee made it clear that the members were only made aware of HR 444 on Thursday and the act was not entered until Friday last week.  He felt that there was not enough time to enter amendments.  He also made the point that the rules committee did not have any meetings, markups or open discussion around the need for the act and requested that it was entered into open rules.  That was voted down.

Mr Connelly of Virginia had submitted an amendment that prohibits "additional solutions" in the unified supplemental budget to include conversion of Medicare into a voucher program. However that amendment was not allowed.

Mr. Deutch of Florida submitted an amendment that removes social security from the definition of "Unified Budget" however that amendment was not allowed.

Jackson Lee of Texas submitted two amendments.  One protects the safety net of the most vulnerable in society.  It was not allowed.  The other proposes ending the estate and tax provisions so the applicable exclusion amount is allowed to revert to $1 million and the tax rate is allowed to be 55%.  It was not allowed. 

Chris Van Hollen from Maryland submitted an amendment to replace the entire sequester for 2013 which would cause deep cuts to domestic priorities and defense with a savings from specific policies that reflect a balanced approach to deficit reduction.  He wants to protect the most vulnerable and asks people making over $1 million to contribute more.  He wants to eliminate agriculture direct payments and cut subsidies to large oil companies.  Because he was not present due to his father's death, his substitute for sequester was voted down.

An amendment was submitted by Mark Takano of California which makes changes to the "Findings" section of the act.  He wants clarification that Congress holds responsibility for passing budgets and appropriating funds.  A responsibility that some Republicans have attempted to side-step.  That one was allowed.

Four Republican amendments were approved.  All of them require additional work from the Presdient to present more detail in the supplemental unified budget.

President Obama

As the President has stated publicly, like the Republicans, he also understands that the deficit should be brought under control.  Actions taken since his administration started have reduced the Bush deficit each year and the CBO expects that the deficit will be below $800 Billion by the end of 2013.

But in the President's case, his concern is that deficit reduction be done in a balanced approach with revenue increases and program cuts that do not harm the economy, that do not hurt Americans and are done fairly.

The divergence in the President's policies and Republican policies are fairly obvious to middle class Americans.

That's why he won the election.

You can have my gun when you can pry it from my psychotic lunatic hand and cold dead heart...or something like that

Ever wonder what kind of person would make a statement like the one used to show the fervor which gun advocates mimic when they are faced with legitimate regulations that would make public gun ownership safer?  "You can have my gun when you can pry it from my cold dead hand."  The visual you get from the statement obviously explains that the spokesperson is willing to die without ever giving up his or her gun.

Of course it was an important member of the advertising committee of the National Rifle Association who got the phrase started.  From there, Charlton Heston, that great patriot and holy man of the movies, serving as the President of the National Rifle Association, uttered these words in rebellion to that terrible American government who obviously wanted to take away guns from ordinary citizens so that they (the government) could become a militaristic dictatorial monarchy.  A little deluded, don't you think?

Have you seen the lunatics like Alex Jones who have come out as a leader for gun advocacy on the Piers Morgan show?  How about James Yeager, the CEO of Tactical Response?  He is not just a gun advocate, he is also a civil war advocate and is willing and ready to start killing people as soon as the government does anything to reduce his access to guns. (Of course just yesterday he pulled a Mitt Romney and reversed his position by saying it was not the right time yet for such actions.)

In an effort to sell more guns, the NRA found a way to raise gun ownership to a level equal to patriotism.   In so doing, it gave a lot of people who could not, to that point in time explain their fascination with guns, a worthy reason for having them.  They are patriots.  Just like the founding fathers who created the second amendment.

Now don't get me wrong.  I don't think that all gun owners are psychotic lunatics.  Only those who think the United States Government, with all its checks and balances, it's constitution, being a government of, for and by the people, would ever consider of its own volition, turning into a militaristic dictatorial monarchy.

Reasonable gun owners exist everywhere and recent polling shows that a large majority of American citizens want some sort of gun controls legislated by the United States government.  So why does the Republican Party leadership appear to be as adamant as the lunatic gun owners in their statements against gun regulation?  Why does the Republican leadership do anything anymore?  Who knows?  I warned you about them in earlier blogs.  Rand Paul has recently come out against gun control, calling the administration a monarchy if they think they can control guns.  Another Republican accuses President Obama of exceeding his constitutional rights making him impeachable if he uses his Presidential power of Executive Order to initiate gun control.

Is the concern over the so-called entitlements of the second amendment so important that we should allow psychotic idiots guns?  Should we not require background checks on individuals who want to buy guns and ammo?  Do gun owners require automatic weapons used in the military for maximum kills?  Should we allow all guns to be sold to anyone?  It would seem to me that if the purpose of arming citizens is to protect them from their own government, then we should allow anti-tank and anti-aircraft guns to be sold.  Why not a nuclear bomb for every family so they can retaliate in case the government goes nuclear on its own citizens?  Perhaps the Republicans can legislate government subsidies to allow private wealthy persons to purchase their own air force.

And I say "so-called" entitlements because there is still confusion about the true meaning of the second amendment.   I believe an interpretation of the second amendment that does not extend individuals rights to guns.  The amendment as adopted by Congress states:

"A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed."

Supreme Court Building

From the moment the 2nd Amendment was enacted until 2008, the Supreme Court ruled in a number of cases, that the 2nd Amendment did not protect individual gun ownership.  With the arrival of the NRA and conservative Supreme Court judges influenced by them, in 2008 the Supreme Court completely reversed their prior rulings in a case called District of Columbia v Heller.  So the current law of the land is that the 2nd Amendment does protect an individual's gun rights.  I believe the modern Supreme Court of Antonin Scalia was wrong and I believe they were influenced by the campaigning of the NRA.

The first words of the Amendment's text "a well regulated militia" show the focus of the amendment's creators.  A militia is an organized group of armed individuals with a paramilitary purpose, intended to physically defend the people under their jurisdiction.  When our early fragile government was first created, there was concern that the Loyalists or some other group loyal to the King of England might rise up to take the country back for the British.  The second amendment creates the establishment of a militia to help prevent that from happening.  Since the subject of the second amendment is the militia, we can assume that the "right of the people to keep and bear arms" stated in the latter part of the amendment is meant to define the right to such a militia and not individual gun ownership rights.  I believe that this was how the founding fathers intended it to be.  Only if every member of the citizenry was a member of the militia, could the second amendment imply that they would all have the right to guns.  I don't believe the creators thought that all members of the citizenry would be members of a militia.

Even if I am wrong or if the creators intended for the second amendment to grant individuals rights to guns, it leaves open how the states should regulate the whole process.  We still need to define who should be allowed to possess guns and which guns they should be allowed to possess.  So regulations of this type at least, should not be considered infringement.

The NRA represents weapons manufacturers.  Weapons manufacturers are large corporations that operate wholly on the profit motive.  As a general rule, corporate America strongly fights against anything that might affect their profits.  The deaths of innocent children might have been avoided if gun regulations had already been in place that prevented a lunatic from getting hold of a military type weapon.  Gun regulation will help.  Let's not make it necessary for others to die so that the weapons manufacturers can prosper.