Fed Chairman's Recommendation to the Downtrodden: 'Improve Education'

The Situation has Gotten Incredibly Worse

A lot of people were beginning to ask a lot of questions in early-2008 as energy prices continued their relentless rise (retail gasoline prices were climbing past $3.50 a gallon for the first time) and more subprime mortgage lending troubles were bubbling to the surface, apparently not "contained" as Fed Chairman Ben Bernanke opined the year before. James Grant probably put it best when he famously said, "Yes, the subprime problems are contained ... to planet Earth". In one of many memorable appearances on Capitol Hill that year, in this item from April 2nd, 2008, the Fed Chief sought to assure elected officials and financial markets that things weren't quite as bad as they seemed.

May 15, 2011

The Mess That Greenspan Made - At the Joint Economic Committee group therapy session today, Federal Reserve Chairman Ben Bernanke said that a recession was possible (which really means he’s pretty sure we’re already in one), Rep. Ron Paul (R-Texas) asked a four minute long question about “the business cycle” that nobody understood, Senator Ted Kennedy (D-Mass.) compared “unsafe financial products” to Chinese toys with lead paint, Sen Robert Bennett (R-Utah) talked about the Dutch Tulip mania, and Rep Loretta Sanchez (D-Calif.) fretted about her rapidly declining net worth now that both housing and stock prices are falling.

But, the real star of today’s Senate hearing was Representative Elijah Cummings (D-Maryland), who started off by reminding the Fed chief how awful a forecaster he’s been before pleading for somebody to do something to help his constituents.

Some highlights:

It was just five months ago that you testified before this very committee that the Federal Reserve had a very positive outlook on the economy. Unfortunately, since November of 2007, the situation appears to have gotten incredibly worse.

Foreclosures have risen, home values have fallen. Many of the people in my district and throughout this country are paying a lot more for food and gasoline. And they tell me that when you speak, a whole lot of people listen. There are people sitting around their televisions sets right now, trying to figure out if you’ll say something that will give them a sense of hope and give them a sense that things will get better. There are people who can’t even afford the gasoline to get to their jobs.
…
You’re the one that we depend on. You’re the superstar. And I’m very serious about that. So we come to you and say, “What is it?” I mean, I’m just asking you for three or four thing that you would love to see us do that would help this situation.

Let me tell you something. The people that listen to this — the people in my district — they’re trying to figure out how this is going to affect their gas prices. Or, at least their ability to pay for it. How is this going to affect their ability to pay their mortgages.

I mean, this is real. I’ve got people who are saying, they’re not driving much anymore. And you know what that means? When they don’t drive much anymore, a lot of those fast food places and shopping centers — they don’t get the business. So, I’m just wondering, what would you like to see us do? What would you recommend to us?

An honest answer would have been, “Tell your constituents to get used to a lower standard of living.”

But, instead, the Fed chairman pulled out the Federal Reserve trump card that can never be beaten by any elected official at any time. He told the Congressman that the U.S. government ought to improve education so we can better compete globally.

That usually ends the discussion.