Resurrecting Greenspan:

[kevinmc]

Hillary Joins the Vast, Rightwing Financial Conspiracy

By MICHAEL HUDSON

On Monday, March 24, presumably representing Wall Street--as any New York senator must do in view of its dominant financial role in the state's political campaigns--Hillary Clinton proposed that Congress show its bipartisan spirit by appointing an "emergency working group on foreclosures," to be led by none other than Alan Greenspan and earlier Federal Reserve Chairman Paul Volcker, and Clinton Treasury Secretary Robert Rubin. Her idea was for them to come up with a plan to alleviate the subprime and financial crisis. This seems like calling in arsonists to help put out the fire that they and their own constituency had set in the first place. Their lifelong interest, after all, had been to promote deregulation and special tax favoritism for their Wall Street constituency, highlighted by repeal of Glass-Steagall in 1999 under Pres. Clinton. Representing the banking sector and Wall Street (and hence being essentially Republicans in spirit), they were precisely the lobbyists most in favor of anti-labor, pro-creditor policies.

Even the Wall Street Journal expressed surprise. Jon Hilsenrath noted the seeming irony: "In August 1999, as the tech-stock bubble was worsening, Alan Greenspan stood before central-banking colleagues in Jackson Hole, Wyo., and argued it wasn't the central bank's job to prevent asset bubbles. All it could do was clean up the mess after the bubble had burst." On the contrary, the commentator noted, the Fed could have slowed the bubble by raising interest rates and boosting margin requirements on stock trading during the tech bubble. Mr. Greenspan could have heeded the advice of Fed Governor Ed Gramlich to slow and regulate subprime mortgage lending. Instead, Mr. Greenspan's--and Mr. Paulson's--idea was simply to clean up the bubble's debt aftermath by bailing out Wall Street.

Mrs. Clinton's logic, she explained on March 24, was simply that Mr. Greenspan had a "calming influence." Republican Presidential nominee John McCain certainly seemed glad to propose him to head a commission to overhaul the tax code. Barack Obama's spokesman Bill Burton said that her selection of Mr. Greenspan to head her working group featured "the same people who helped to create these problems or have a direct financial industry stake in the outcome." Sen. Obama himself said that her crypto-Republican plan lacked credibility in view of the heavy campaign donations she received from Wall Street financial lobbyists. (As of mid-April he had raised an almost identical sum from this source.)

Elaborating her views three days later, Sen. Clinton made it seem as if it were the job of the financial victims--the mortgage debtors--to solve the mortgage crisis. "In today's economy, trouble that starts on Wall Street often ends up on Main Street ... When there's a run on mortgage-backed securities and the bottom falls out for investment banks, the bottom falls out for families who see the value of their homes--their greatest source of wealth--decline." To cure the problem, she endorsed the spirit of Mr. Paulson's Wall Street bailout, including having the Federal Housing Administration, Fannie Mae and Freddie Mac "buy, restructure and resell these underwater mortgages." This is a far cry from debt forgiveness.

In her debate with Barack Obama on April 16, Senator Clinton once again heaped praise on Mr. Greenspan's "bipartisan" commission that nearly doubled the tax rates that workers had to give up out of their paychecks. A token income-tax cut was offset by F.I.C.A. withholding that, for many workers, now exceeds their income-tax liability. And what certainly must be the most unmitigated gall rivaling even her notorious Yugoslavia-under-sniper-fire gaffe, Mrs. Clinton rejected Senator Obama's policy of raising the F.I.C.A. Withholding rate above the present $97,000 level, all the way up to hedge fund managers making billions of dollars per year. Mrs. Clinton said explicitly that there were more progressive ways to resolve the Social Security and Medicare tax problem. The exchange has to be read to be believed.............more....


Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JPMorgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world's first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinich's Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, [e-mail]

[notesdev]

1. In hindsight

Greenspan was an utter disaster as Fed Chairman.

It's astonishing that he was so respected for so long.