Is U.S. Economic Policy Helping the Rich Get Richer?
Two of the best sessions at the Aspen Ideas Festival so far have been about the economy: Marketplace host Kai Ryssdal's discussion with economic Simon Johnson and former Republican Congressman Vin Weber; and Dallas Federal Reserve president Richard Fisher talking with Maria Bartiromo about whether the Fed can provide enough stimulus to save the U.S. economy.
The two conversations had a similar theme: the utter uselessness of Congress in times when the U.S. economy needs its lawmakers most. In Kai's memorable words, "Have you met the U.S. Congress? They couldn't find their backsides with both hands."
(True vituperation against Congress, by the way, is a theme that was perfected by Mark Twain: "Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.")
Similarly, Fisher strongly criticized the Congress for not taking up the gauntlet of fiscal reform. "Just grow up," he said during the talk, "Just get it done." He's worried that Congress is spending too much and leaving it all to Ben Bernanke and the Federal Reserve. He said in the Aspen interview that "if monetary policy makes up for ‘spend, spend, spend’ policies it’s 'the road to Weimar.'"
Most of all, Fisher wants Congress to stop depending on the Fed to fix everything with interest rates. "I think we've done a lot. In fact, I think we've done too much." He dislikes the fact that the Fed's duty to the economy is giving Congress an easy way out on fixing the U.S. budget. "If you're an elected official, printing money is easier than figuring how to pay bills."
It's hard to understand how surprising these comments are until you understand what it's like to hear Fisher deliver them. As a president of a regional Federal Reserve bank, it is his job to give his region - Dallas and the surrounding cities and states - a voice in the national conversation about the economy. He is one of many Fed presidents who make sure that the Fed's main voice in Washington isn't the only one that's heard, that the D.C. bubble is popped by regular updates from the land of oilmen and agriculture.
If you've never met him before, look at the picture above, which I took after his talk. Fisher is tall, silvery-haired and straight-backed as befits his education at Annapolis. Even in his casual Aspen togs- jeans and a blue button-down shirt- he looked like the former banker he once was- and any number of other prosperous businessmen that fill the streets of this city of the 1%. He is without question a capitalist: even leaving aside his start at Brown Brothers Harriman, he also mentioned his sympathy for business owners who say that regulation and taxes are preventing them from hiring more people.
But when Fisher speaks these days, he doesn't sound like a Steward of Capital he resembles. He sounds like a dissatisfied revolutionary, cognizant that outdated tools of law and finance can't fix the problems we're in, that "the whole world is in a process of having to modernize and reboot fiscal policy."
He's dismayed that the Fed is exercising too much power over the economy and wondering what the eventual effect will be, although he suspects it won't be good. He worries that we're encouraging our banks to be too big to fail; that low interest rates are subsidizing Wall Street at the expense of other Americans; that Congress is depending on the Fed's policies to distract attention from reckless budgeting in Washington. He seems pessimistic on the issue of the "fiscal cliff" that Congress is supposed to save us from this year. "I don't see any resolution here for quite some time," he told the attendees at Aspen about Congress's chances of fixing the fiscal cliff.
In fact, Fisher sounds like a much smarter, more educated version of many frustrated middle-class Americans who worry that the direction of American economy is, as he put it, "to make the rich richer."
"I get quite concerned when I hear someone who is a moneychanger say we [at the Fed] exist to put their interests first. We don't work for those people. We work for the American people."
His best quote about his worries of the growing wealth divide in the U.S.: "We're not helping the Homers and the Marges- we're helping the Mr. Burns."
In fact, Fisher suggested that he's concerned about the power of Wall Street, even now. He joked that the bond market - "bloody and brutal" - is now more powerful than the Pope.
Fisher's concerns center around America's big banks, which have only gotten bigger since the 2008 financial crisis. He advocates for "Glass Steagall 2.0" and says "breaking up the big banks is the least worst option." He has skin in the game: he says big banks are the biggest barrier to the effectiveness of the monetary policy being set by the Fed. He quoted the late economist Anna Schwartz, who maintained that the basic problem of markets is credibility of financial institutions.
Translation: the Fed can't use its tools to increase confidence in the economy as long as it's still hard to have confidence in our banks to do things right.
Fisher is an outsider voice at the Fed, currently overruled by the majority. But reasonable minds can disagree, and they should. His conversation at the Aspen Ideas Festival shows why our biggest institutions not only need to respond to critics, but to listen to them.