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Reads (3-5-2010)

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Stiglitz, Nobel Prize-Winning Economist, Says Federal Reserve System ‘Corrupt’ – Huffington Post

Nobel Prize winner Joseph Stiglitz lashed out at the Federal Reserve system as so fraught with conflict of interest it could be characterized as corrupt. In a report from Huffington Post, Stiglitz point out the logical inconsistency of allowing the banking sector to choose it own regulators:

To Stiglitz, the core issue is that regional Fed banks, such as the New York Fed, have clear conflicts of interest — a result of the banks being partly governed by a board of directors that includes officers of the very banks they’re supposed to be overseeing.

The New York Fed, which was led by current Treasury Secretary Timothy Geithner during the time leading Wall Street firms like Citigroup, JPMorgan Chase, AIG, and Goldman Sachs were given hundreds of billions of dollars in taxpayer bailouts, presently has on its board of directors Jamie Dimon, the head of JPMorgan Chase. He’s been there for three years. He replaced former Citigroup chairman Sanford “Sandy” Weill.

“So, these are the guys who appointed the guy who bailed them out,” Stiglitz said. “Is that a conflict of interest?” he asked rhetorically.

“They would say, ‘no conflict of interest, we were just doing our job,'” he answered. “But you have to look at the conflicts of interest.”

A message left for a New York Fed spokeswoman after regular business hours was not returned.

“The reason you talk about governance is because in a democracy you want people to have confidence,” Stiglitz said. “This is a structure that will undermine confidence in a democracy.”

It is not clear from the report whether Stiglitz is ready to state that there is only the appearance of conflict, or an actual conflict of interest in this arrangement.

After the conference, Stiglitz said that his remarks on the Fed were “maybe a little hyperbole,” but then again made the case that if another country had presented a plan to reform its financial system, and included a regulatory regime that copied the makeup of the Federal Reserve system, “it would have been a big signal that something is wrong.”

His examples, however, provide evidence that the Federal Reserve is indeed a crony institution and should be broken up or subject to oversight. It is not as if Washington is not already substantially intervening in the sector. Dozens of failing banks have been forcibly merged in the past year – the highest in recent record. A number of too big too fail institutions are currently on life support at great public expense. Moreover the Fedweral Reserve is currently following a monetary policy that many believe will blow up in its face and result in further damage to the economy.

Stiglitz needs to stop playing his silly little populist games with the issue and press for dispossessing these leeches. There is no reason, short of Washington’s own interests, why the entire sector should not be nationalized and operated as a simple utility.

Food Stamp Participation Exceeds Katrina – Paper Economy

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is on the rise. In fact, household participation has been climbing so steadily that it has far surpassed the last peak set as a result of the immediate fallout following hurricane Katrina.

Is anyone else sick of this “Nascent Recovery” talk? – Mish Shedlock blog

Any minute now, the economy is going to take off. We promise! Our favorite Libertarian nutcase, Mish Shedlock, dissipates a little of the Wall Street-Washington happy talk fog with this funny piece showing that the economy has been just on the edge of nascent recovery since February, 2008. Recovery is just around the corner!

No, not that corner, the next corner.

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