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Tuesday, April 20, 2010

The Reich Stuff

Mitch McConnell lies a lot. It should be no surprise that, when he claimed that Robert Reich agreed with him, he was lying. However, the lie was much closer to the truth than I imagined.

I hand the mike over to Reich

I did write in one of my recent posts that the bill "preserves the possibility that the Fed could launch another bank bailout." That has nothing to do with the liquidation fund. It concerns a different provision of the Dodd bill that gives the Federal Reserve Board authority to open its discount window to healthy banks under its purview in order to protect taxpayers from loss during a major destabilizing event, like the popping of another large speculative bubble. Giving the Fed this authority is an open invitation to the biggest banks to create a destabilizing event in the first place, which is what Wall Street's giants did the last time when they created the giant speculative bubble in home mortgages and related derivatives.

I'd say Mr Reich has managed to reach an almost McConnellesque level of integrity. Look you can't give the Fed something which it already has. The Fed has pretty much unlimited authority to make loans in an emergency. Reich knows this, of course, that's why way back when he had some integrity he wrote "preserves" not "gives."

It is obvious that this is not a new power granted by the Dodd bill. The Fed used this authority in 2008. I mean it did loan quite a bit didn't it, and it loaned to Investment banks.

And what's this about "As long as the Fed can open its discount window only to the biggest Wall Street banks," ?!? What the hell is he typing about ? The only way it makes any sense is if Reich contrasts "the biggest Wall Street banks" with "smaller Wall Street banks:" The window is open for depositary institutions. I mean what the hell is a central bank discount window anyway ? The only thing that Reich might be thinking which isn't plainly absurd is that the window will not be open for small investment banks. Such as ? Last I heard, there were no investment banks left in the USA as both surviving investment banks reorganized themselves as bank holding companies so that they would have access to the Fed without a crisis.

Reich is denouncing the bill because it doesn't do something which he thinks it should do. Under current law, the Fed can do what it pleases in a crisis now. The bill doesn't put enough limits on the Fed. It surely removes no limits. There are no limits to remove.

Excuse my language but Robert Reich is like Jane Hamsher. He is ferociously attacking a bill because it doesn't go as far as he wants it to *and* he is endorsing Republican talking points to attack it. He did no harm this time, because McConnell is sloppy as well as dishonest and told a lie when the truth would have served his purposes. He just had to bring up Reich in the context of the bill as a whole not the liquidation fund.

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