Ward on Words

WSJ covers the emerging green shoots of the economy - the unemployment rate is dropping, as are the new claims for unemployment. Kinda looking like THIS drop in unemployment is for real, not just the "fuzzy math" that comes by not counting people who've given up all hope of ever getting a job. Can it be that years after Ben Bernanke so optimistically groomed us for "green shoots," they're finally popping up at last?! Well, according to the WSJ, the Fed's not doing a jig just yet: "The Federal Reserve, charged with maintaining stable prices and maximum employment, has remained cautious." Strange to see such caution from an organization that proclaimed the arrival of [the false] spring back in March 2009...

Yves Smith at Naked Capitalism has issued a crowd-sourcing call for questions we'd like Ben Bernanke to answer at the first ever press conference by a Fed chairman. Here are somethings I'd like to know... 1) How much has the Federal Reserve spent on acquiring toxic assets from banks since their collapse? 2) How has absorbing the toxic assets of banks helped the residents of Main Street? 3) What benefit does the US gain from having investment banks considered "bank holding companies"? 4) How has becoming a "bank holding company" changed the behaviors of investment banks in ways that have created stability for the US economy? Or has it simply allowed them to continue to engage in risky business activities backed by the full faith of the US government? 5) Does the fear of inflation lead the Fed to develop policies that discourage wage increases? 6) Do you see a time in the near future when the banks in our financial sector will be force to deal wit...

That's why rebranding "too big to fail" (TBTF) institutions as "systemically important" doesn't really change the fact that they are still TBTF. In fact, due to consolidation and bankruptcies, these institutions are even bigger and more "systemically important" than in 2008. I had never heard of "TBTF" until the crash of 2008, but apparently, the phrase had been bandied about at least since the 1984 collapse of Chicago's Continental Bank, a failure that motivated Ronald Reagan to abandon his free market principles and bail out the bank. I myself prefer VoxEu's characterization of these institutions as "systemically risky." Let's use language that does not cloud the reality of our financial sector today. Is a "preowned" car any different than "used"? That's why I like "systemically risky." It does not obfuscate the fact that our financial system is as rickety (or even more ricke...