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WILLIAM GREIDER: Well, among other things that are missing from that story is that we had the rules and regulations, the agencies created some 80 years ago and afterwards to prevent this sort of catastrophe. And these same political players, Republicans and Democrats holding hands, stripped them away, eviscerated them. The same agencies these reformers want to put in power to prevent this from happening again. Starting with the Federal Reserve, the Securities Exchange Commission, other regulators, utterly failed in their duty to do that. Now, we're going to give them new power.
I'm offering a breath of skepticism toward this grand transformation of government. I don't want to be a cynic, but it feels more to me like trying to restore the old order that failed. And I mean by that these big mega banks that had been liberated by deregulation to do as they pleased and the other rules that were undermined. I think this President, and I'm a big fan of this President, but I think his first priority seems to be to recreate those institutions which, some of which are now insolvent, as healthy again.
And actually it's quite scary, because unless they set about to make much more fundamental changes, I fear we will, sure enough, get this back again.
BILL MOYERS: Were you thinking that when you watched Secretary Geithner yesterday? Thursday, when he presented this, what seems to be a sweeping reform of the regulatory system?
WILLIAM GREIDER: Well, in fairness to the Secretary, you can't really know until he fills in the blanks. And, of course, there were no-- like his earlier pronouncements, there weren't enough details to really actually know quite what he's doing. He said, I'm not going to decide who is in charge of the universe in protecting us from what they call systemic risk. I think it's pretty well understood in Washington that the Administration and the Treasury Secretary would like to give this to the Federal Reserve. The Federal Reserve, as many people know, is a sort of unique cloistered institution of government that is insulated from political accountability. And usually, quite secretive. That's for starters. And my accusation, not just in this book but previously is that it tipped its favor hard in favor of capitalism and against labor over the last 25-30 years. And became a kind of cheerleader, actually, under Allen Greenspan for the all the excesses and so called modernization that are now in ruin. So, just as a matter of logic, why would we want to give more power to a governing institution that was already supposed to defend the quote safety and soundness of the system.
BILL MOYERS: But if the Administration turns to the Fed for help, it means it does not have to go through Congress, right? Because the Fed is not regulation.
WILLIAM GREIDER: Well, that's, I mean, that's one of the attractive qualities about the Fed is that it is this black box of technocratic expertise. And it knows things the rest of us don't know. And it's very expert at what it does. And there's actually some truth to that quality. But it's a political institution. It makes public decisions for the rest of us. And so, to pretend that it's above all, that is nonsense from the beginning. If you're a member of Congress, particularly at this moment. And you're a bit cynical yourself. You want to get this monkey off your back. This financial mess, and all of the scandals that keep recurring from the way the bankers are using our money, keep piling up. So, they want a quick solution that says, let's give it to the Fed. The Central Bank is trusted. It's wise. We'll let them deal with all this stuff. This not new, of course, they did that 100 years ago when they created the Federal Reserve. 1913, it was a kind of compromise between labor and capital. And it said, we'll take the money question, about inflation, deflation, financial crisis, out of the popular debate. And we'll put it in this respected institution. And over a century it worked for some periods. And for other periods the Federal Reserve, because it is so close to the major banks, did what it could to help those financial institutions. And I say, bluntly, betrayed its public obligation.
BILL MOYERS: Which was?
WILLIAM GREIDER: Which was to run the economy in a balanced fashion, protect it against excesses, on both sides. And be an honest decision maker of money and credit supply. Which is the heart and soul of our system. And in the last year- if you look at what happened, you don't have to be an expert on monetary policy to see this. Step back and look at what happened in the last 25 years, 30 years. An explosion of credit and debt and a valuation of everything from the Dow Jones to these exotic financial instruments went through the roof, while the wages incomes of ordinary Americans flat, even falling, but basically stagnant.
BILL MOYERS: In other words, you're saying that the Fed, charged to curb excesses, did not curb those excesses?
WILLIAM GREIDER: That's right.
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