First, we see our government low-balling the expected returns for the Tarp investments in banks so that an additional tax on banks can be justified—including banks that never receive the investments and excluding nonbanks that did. Now proprietary trading is verboten even though there is no evidence that it had anything to do with the crisis. The same goes for hedge fund and private equity. Have we totally forgotten about the making and securitization of subprime mortgage loans? I would say the war on banks is getting curiouser and curiouser, but I’ve already used that line to describe this new wonderland.
Every politician wants to be perceived as a populist these days. They want to be perceived as anti-establishment, and I guess nothing is more identified with the establishment than the Federal Reserve. So, throwing Ben Bernanke—the guy who, along with Henry Paulson and Tim Geithner, saved the country from a second great depression—under the bus will be perceived to be good politics. I guess Geithner will be next. Taking irresponsible actions to atone for responsible actions is apparently the new norm for our leaders. Have they no shame?
Once upon a time, mainstream leaders tolerated populists nipping at their heals and pretty much ignored their irrational policy prescriptions. Of course, there was a time when populists had a policy prescription, such as a silver standard rather than a gold standard. I don’t see one now, other than to be against everything the government and the Fed try to do to stop the panic and restore health to the economy. “Just say no” makes a better slogan for teenage temptations than for economic policy. Thinking people would examine the issues and make distinctions between remedies that are reasonable and those that make no sense. Of course, thinking is suspect these days, a sign of softness.
Maybe bank bashing is the best way to encourage bank lending to support economic growth. Maybe tax increases are the best way to stimulate the economy. Maybe punishing Gentle Ben Bernanke for his good work will produce some good that I can’t conceive of. Maybe having government accountants second guessing monetary policy will improve policy. Maybe politicians following the mob will be taken for leadership. Maybe.