December 2010, Week 3


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Mon, 20 Dec 2010 20:09:46 -0500
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Senator Sanders's Socialism

By Nancy Folbre 

New York Times Economix 

December 20, 2010

Nancy Folbre is an economics professor at the
University of Massachusetts Amherst.

When the rumpled, plain-spoken Senator Bernie Sanders
of Vermont spoke virtually nonstop for more than eight
hours on Dec. 10 to explain his opposition to tax cuts
for the rich, he quickly became a YouTube and Twitter
celebrity. Harry Hamburg/Associated Press Senator
Bernie Sanders of Vermont, a sharp critic of the
Federal Reserve, forced its disclosure of details of
its lending and bailout practices.

A majority of Americans polled earlier this year by New
York Times/CBS News, Bloomberg News and USA
Today/Gallup also opposed these cuts, and many cheered
him on as he spoke.

President Obama's firm support for a compromise on the
tax cut - which Congress approved late Thursday night -
helped swing many voters back into approval, but the
debate publicized the issue of economic inequality.

Senator Sanders, who describes himself as a democratic
socialist, describes the United States economy as
"socialism for the rich."

Earlier in the year, he allied with Representative Ron
Paul, Republican of Texas, to win support for new
legislation requiring an unprecedented level of
disclosure of the Federal Reserve's specific emergency
lending activities.

With that process of disclosure now under way, Senator
Sanders can offer details from the Fed's "bailout
files" to substantiate his claim that the $700 billion
Troubled Asset Relief Program was pocket change
compared with the trillions of dollars in low-interest
loans the central bank provided both to American
corporations and foreign agencies.

No such assistance was offered to small businesses in
need of capital or homeowners going through

Senator Sanders's criticisms of the Fed go well beyond
the observation that it bailed out only institutions it
considered too big to fail. In a recent public letter
to the Fed chairman, Ben Bernanke, he points to major
conflicts of interest: Senior executives of General
Electric, JPMorgan Chase, Goldman Sachs, Banco Popular,
Sun Trust and Fifth Third Bank served as directors of
regional Federal Reserve Banks even as they doled out
funds to their firms.

The new information lends support to the concept of a
financial oligarchy detailed by my fellow Economix
blogger Simon Johnson and his co-author, James Kwak, in
"13 Bankers: The Wall Street Takeover and the Next
Financial Meltdown."

The specifics also provide a case study of regulatory
capture, in which a state agency created to act in the
public interest instead advances the commercial or
special interests it was charged with regulating.

Mainstream Republicans and Democrats have recently
squared off over the issue of who caused the financial
crisis - the government or the financial industry.
Republicans blame public efforts to increase
homeownership through the Community Reinvestment Act of
1977 and the subsidization of low-interest mortgages
through Fannie Mae and Freddie Mac. Democrats blame

If Senator Sanders is correct, the debate is misplaced,
because a government dominated by the financial
industry helped orchestrate both federal subsidies and

Many of our most influential policy makers spin through
revolving doors between government and private finance.
Hardly an eyebrow was raised this fall when the White
House budget director, Peter Orszag, left public
service to join Citibank's global banking division.

The Fed does not seem a bit embarrassed by the
bailout's double standard or uneven impact. Corporate
profits are up 28 percent from a year ago, but
unemployment edged up to 9.8 percent last month.

A widespread apprehension that government no longer
effectively represents the interests of ordinary people
has tipped populist rage to the right.

Senator Sanders has proved more adept than any of the
Democrats in tipping it the other way.

Copyright 2010 The New York Times Company 


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