US Federal Reserve chairman calls for austerity plan

[Hannah Bell]

27 February 2010

In two days of testimony before the banking committees of the House of Representatives and Senate this week, Federal Reserve Board Chairman Ben Bernanke called for the Obama administration and Congress to agree on a plan to sharply reduce the US budget deficit over the next decade.

Bernanke delivered the Federal Reserve’s “Semiannual Monetary Policy Report to Congress” to the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday...

Under questioning from Republican legislators, Bernanke said the current budget projections of the Obama administration were “unsustainable” and implied that major cuts in social programs and taxes on consumption would be required.

He said the structural deficit for 2013 to 2020 would have to be cut from estimated levels of 4 to 7 percent of gross domestic product to below 3 percent...

Banks and big investors want the Fed to keep the federal funds rate —the interest on overnight inter-bank loans — at the current level of zero to 0.25 percent as long as possible. The extraordinarily low rate, which has been maintained since the height of the financial crisis in December 2008, provides a virtually unlimited supply of cheap credit to major banks and finance houses, enabling them to make huge profits by speculating on stocks, bonds, currencies and commodities.

At the same time, the financial elite wishes to avoid having to pay for the inevitable consequences of debt and asset bubbles, skyrocketing government deficits, and the bankrupting of the state as a result of the bailout of the banks. It wants to place the full burden on the working class through historic reductions in basic social programs such as Medicare and Social Security, new taxes on consumption, long-term high unemployment and continuous wage-cutting...

Neither the Fed, nor the Obama administration, nor Congress is proposing any serious reform of the banking system. A Democratic bill passed last year by the House of Representatives would impose only token restrictions on derivatives trading, while establishing a permanent mechanism for the government to use public funds to undergird the financial markets by winding down “too-big-to-fail” financial firms threatened with collapse...

No politician from either party at either of the hearings challenged Bernanke’s statements on bank regulatory reform or bankers’ pay. As MarketWatch reported Wednesday, “The tone of the House hearing was overwhelmingly cordial toward Bernanke.” At the Senate hearing on Thursday, committee chairman Dodd thanked Bernanke for saving the banking system and told the Fed chairman he was “impressed by your leadership.”

http://www.wsws.org/articles/2010/feb2010/bern-f27.shtml

[Zenlitened]

1. Tax the rich. Cut military spending. Problem solved.

Mr. Bernanke, your services are no longer needed.

:think:

Now let's leave that alternate reality, and join our ongoing national clusterfuck, already in progress...