Matt Yglesias thinks the latest GDP number from Commerce -- 2.2 revised from the projected 2.8 figure -- should put Democrats on notice that the economy needs as much or more attention than health care reform. He acknowledges in his column at American Prospect that the Washington Post reports "it was still the fastest pace since the third quarter of 2007 and ended four straight quarters of decline in output. The resumption of growth in the July-September period probably ended the most brutal recession since the 1930s."
But the surge in unemployment has eased off only minimally so far.
I think that this, rather than anything related to health care, is the real political challenge heading into the midterms. I don’t think you can stand in a country where unemployment is stagnating above nine percent and say “the health care system will be much better in 2014!” Unfortunately for congress, there’s arguably a limited amount they can really do if the Fed doesn’t want to acknowledge that the path we’re currently on is a bad one.
The Fed! Ken Silverstein looks at a Washington Post piece on Bernanke a couple of days ago which may reflect Yglesias's concerns. Bernanke was giving a speech at the Chicago Fed in 2007, at a time when whole neighborhoods were already "pocked" with foreclosures.
The keynote speaker, Federal Reserve Chairman Ben S. Bernanke, assured the bankers and businessmen gathered at the Westin Hotel on Michigan Avenue that their prosperity was not threatened by the plight of borrowers struggling to repay high-cost subprime loans. Bernanke, who was in charge of regulating the nation’s largest banks, told the audience that these firms were not at risk. He said most were not even involved in subprime lending. And the broader economy, he concluded, would be fine.
Right, Ben. Welcome to your new term.
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Everyone is talking about that Washington Post article on the failures of the Fed. A key failing was the unwillingness of the Fed, for ideological reasons, to acknowledge the important of regulation. Here's an excerpt from Tim Fernholtz, also writing in American Prospect.
... Conceding that regulatory discretion does give a lot of opening for failures of this nature, the real automatic safeguards we need are robust dissolution powers. ... The "ultimate market discipline," as Elizabeth Warren calls it, is for large financial institutions to know they will be liquidated by regulators if they become insolvent due to insane risk-taking. Like the FDIC's authority to dismantle smaller banks, this happens more-or-less automatically as a bank fails and doesn't rely on regulators deciding what behaviors were permissible or not.
