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Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America - Hardcover

DiMartino Booth, Danielle

 
9780735211650: Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America
Hardcover
ISBN 10: 0735211655 ISBN 13: 9780735211650
Verlag: Portfolio, 2017

Inhaltsangabe

A Federal Reserve insider pulls back the curtain on the secretive institution that controls America’s economy

After correctly predicting the housing crash of 2008 and quitting her high-ranking Wall Street job, Danielle DiMartino Booth was surprised to find herself recruited as an analyst at the Federal Reserve Bank of Dallas, one of the regional centers of our complicated and widely misunderstood Federal Reserve System. She was shocked to discover just how much tunnel vision, arrogance, liberal dogma, and abuse of power drove the core policies of the Fed.

DiMartino Booth found a cabal of unelected academics who made decisions without the slightest understanding of the real world, just a slavish devo­tion to their theoretical models. Over the next nine years, she and her boss, Richard Fisher, tried to speak up about the dangers of Fed policies such as quanti­tative easing and deeply depressed interest rates. But as she puts it, “In a world rendered unsafe by banks that were too big to fail, we came to understand that the Fed was simply too big to fight.”

Now DiMartino Booth explains what really happened to our economy after the fateful date of December 8, 2008, when the Federal Open Market Committee approved a grand and unprecedented ex­periment: lowering interest rates to zero and flooding America with easy money. As she feared, millions of individuals, small businesses, and major corporations made rational choices that didn’t line up with the Fed’s “wealth effect” models. The result: eight years and counting of a sluggish “recovery” that barely feels like a recovery at all.

While easy money has kept Wall Street and the wealthy afloat and thriving, Main Street isn’t doing so well. Nearly half of men eighteen to thirty-four live with their parents, the highest level since the end of the Great Depression. Incomes are barely increasing for anyone not in the top ten percent of earners. And for those approaching or already in retirement, extremely low interest rates have caused their savings to stagnate. Millions have been left vulnerable and afraid.
Perhaps worst of all, when the next financial crisis arrives, the Fed will have no tools left for managing the panic that ensues. And then what?

DiMartino Booth pulls no punches in this exposé of the officials who run the Fed and the toxic culture they created. She blends her firsthand experiences with what she’s learned from dozens of high-powered market players, reams of financial data, and Fed docu­ments such as transcripts of FOMC meetings.

Whether you’ve been suspicious of the Fed for decades or barely know anything about it, as DiMartino Booth writes, “Every American must understand this extraordinarily powerful institution and how it affects his or her everyday life, and fight back.”

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Über die Autorin bzw. den Autor

Danielle DiMartino Booth is the founder of Money Strong, LLC, an economic consulting firm. She began her career in New York at Donaldson, Lufkin & Jenrette and Credit Suisse, where she worked fixed income and the public and private equity markets. After work­ing as a financial columnist at the Dallas Morning News, DiMartino Booth spent nine years as an adviser to Richard Fisher at the Federal Reserve Bank of Dallas. She lives in Dallas with her family.

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Chapter 1

"Groupstink"

Never in the field of monetary policy was so much gained by so few at the expense of so many.

-Michael Hartnett, Bank of America Merrill Lynch chief investment strategist, November 1, 2015

Early morning, December 16, 2008, with a drizzle of freezing rain falling, few would even glance at the line of inconspicuous Mercury Marquis sedans pulling up to Washington, DC's Fairmont Hotel. Emerging from the luxurious four-star establishment, their Foggy Bottom home eight times a year, are eleven little-known bureaucrats with their contingent of requisite subordinates.

There is no fanfare to mark the coming momentous decision they are to take on as they comfortably settle in for the ten-minute caravan to the neoclassical white marble edifice known as the Marriner S. Eccles Federal Reserve Board Building, located at Twentieth Street and Constitution Avenue NW.

Another half dozen of their peers had already left their homes in nearby Georgetown or some other Washington suburb and they too are making their way to the same address for the all-important 9 a.m. meeting.

Only one of these bureaucrats-the chairman, a mild-mannered former professor-might have been recognized in an American airport. The rest-unelected, immune to political pressure, mostly academics, and save one, inexperienced in the intricacies of running a major corporation, or even a small business-were virtually invisible outside the narrow world they inhabited despite the enormous power they wielded.

As these seventeen people arrived, they stowed their coats and umbrellas, grabbed a cup of coffee or tea, and mingled, the low hum of their conversation perhaps more subdued than on similar occasions. The day before, the first of the two-day affair, had been extraordinary in both the dire picture it painted of the American economy and the realization that they would have to take bold and unprecedented action.

That next sleety morning, they met again, determined to take action to prop up a faltering Wall Street, hopelessly mired in the greatest financial crisis since the Great Depression. Even as they convened, the wreckage of the previous three months still burned around them. Credit markets had seized up and fears for the fate of the economy were mounting.

With a few exceptions, virtually all of those at the meeting were PhD economists who had earned doctorates at MIT, Yale, Harvard, Princeton, and other top American universities. They met under the auspices of the Federal Open Market Committee (FOMC), the decision-making body of the Federal Reserve System. They believed a lifetime of study in economic theory and monetary policy had given them unique insight to steer policy for the most powerful central bank in the world, the lender of last resort for failing Wall Street banks, and the U.S. government's last line of defense against utter financial chaos.

Created in 1913 after the Panic of 1907, the Federal Reserve was founded to keep the public's faith in the buying power of the U.S. dollar. After failing miserably in the 1930s, the Fed aimed to be more responsive. This led the institution to find discipline in the rising macroeconomic models championed by top monetary theorists. During the ensuing "Quiet Period" in American banking, deposit insurance prevented panics, the Fed controlled interest rates and manipulated the money supply, and though occasional disruptions flared, like the failure of Continental Illinois National Bank and Trust Company in 1984, no systemic risk erupted for seventy years. The Fed had tamed the volatile U.S. economy.

Until September 2008, when all hell broke loose in a worldwide panic that completely blindsided and, embarrassed the Federal Reserve. The Fed had used billions of dollars in taxpayer funds to bail out Wall Street fat cats. Everyone blamed the Fed.

Just before 9 a.m., the door to the chairman's office opened. Federal Reserve Chairman Ben Bernanke took his place in an armchair at the center of a massive oval table. The members of the FOMC found their designated places around the table; aides sat in chairs or couches against the wall. With staff, the room contained fifty or sixty people, far more than normal for this momentous occasion.

In front of each FOMC member was a microphone to record their words for posterity. To a casual observer, the content of their conversation would be obscured by economic jargon.

This day, their essential task was to vote on whether to take the "fed funds" rate-the interest rate at which banks lent money to each other in the overnight market-to the zero bound. The history-making low rate would ripple throughout the economy, affecting the price to borrow for businesses and consumers alike.

Bernanke was calm but insistent. His lifetime of study of the Great Depression indicated this was the only way. His sheer depth of knowledge about the Fed's mishandling of that tragic period was undoubtedly intimidating.

By the end of the meeting, the vote was unanimous. The FOMC officially adopted a zero-interest-rate policy in the hopes that companies teetering on the brink of insolvency would keep the lights on, keep employees on their payrolls, and keep consumers spending. It would even pay banks interest on deposits.

Free cash. We'll even pay you to take it!

As they gathered their belongings, everyone shook hands, all very collegial despite the sometimes vigorous discussion. They journeyed back to their nice homes in the toniest neighborhoods of America's richest cities: New York, Boston, Philadelphia, Chicago, Dallas, San Francisco, Washington, DC.

They returned to their lofty perches, some at the Eccles Building, others to the executive floors of Federal Reserve District Bank buildings, safely cushioned from the decision they had just made. Most of them were wealthy or had hefty defined benefit pensions. Their investments were socked away in blind trusts. They would feel no pain in their ivory towers.

It took a few months, but the Fed's mouth-to-mouth resuscitation brought gasping investment banks and hedge funds and giant corporations back to life. Wall Street rejoiced.

But the Fed's academic models never addressed one basic question: What happens to everyone else?

In the decade following that fateful day, everyday Americans began to suffer the aftereffects of the Fed's decision. By 2016, the interest rate still sat at the zero bound and the Fed's balance sheet had ballooned to $4.5 trillion, thanks to the Fed's "quantitative easing" (QE), the label given its continuing purchases of Treasuries and mortgage-backed securities.

To what end? All around are signs of an economy frozen in motion thanks to the Fed's bizarre manipulations of monetary policy, all intended to keep the economy afloat.

The direct damage inflicted on our citizenry begins with our youngest minds and scales up to every living generation in our country's midst.

The journey could begin anywhere, but let's start in Erie, Pennsylvania, an area of the country that was struggling even before 2008. The Fed's high interest rates in the 1980s killed its steel and auto industries. The zero bound has dealt the region another devastarting blow. Now, in an Erie elementary school students are given stapled copies of "Everyday Mathematics" instead of an actual textbook....

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Verlag
Portfolio
Erscheinungsdatum
2017
Sprache
Englisch
ISBN 10 
0735211655
ISBN 13 
9780735211650
Einband
Gebundene Ausgabe
Anzahl der Seiten
336
Kontakt zum Hersteller
Nicht verfügbar
Verantwortliche Person
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