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Dennis P. Lockhart, President and CEO of the Federal Reserve Bank of Atlanta, [here's his wiki] spoke at a New York Association for Business Economists luncheon on March 3, 2010. In his role, he also serves on the Federal Reserve’s chief monetary policy body, the Federal Open Market Committee (FOMC).
The speech was pro forma for such events. He talked about the economic recovery (sluggish), new financial regulation (as little as possible despite popular outrage), and long-term balancing (get rid of federal government and trade deficits, boost savings).
My question, the second of the Q&A: Do you know why the Federal Reserve is being granted more regulatory authority when it failed miserably in its regulatory role?
He tried to brush it off by stating that it was an opinion, not a question, but I persisted.
His answer will sound familiar because it contains just about every talking point on the subject rolled together.
• Mistakes were made.
• The FRB’s 3 roles of lender of last resort, monetary policy, and financial regulator are inseparable.
• FRB is only organization that can look horizontally across all types of financial institutions.
• Can’t start over with financial regulation.
• Looking forward, the FRB internal reforms will allow it to do a better job, especially to judge systemic risk from financial innovations.
I asked him to go into detail on FRB internal reforms, and the only thing he mentioned was do more stuff like the “stress test,” to which he attributed magical powers of having reassured the global financial system.
Well, at least someone said it to his face. There were some press in attendance, but I don’t know which organizations.
76 Comments
Thanks, eCAHN. Forcing these pretenders to continue to spout their outright lies in public lets them know that at least a few smart people are paying attention and know what they are really up to.
Keep up the good fight!
You’re welcome Jim.
I had a couple of other zingers for him, but I don’t want to be drummed out of the organization yet.
Related news (and I do hope you’ll run with it, eCAHN):
US taxpayers hit as TARP takes a new turn
“A small Midwestern bank has negotiated with the U.S. Treasury for taxpayers to essentially buy the bank’s shares at an above-market-value price, in an unusual transaction reflecting how the government’s bank investments are entering a new phase. ”
LINK.
What are you trying to do, start regulating bankers after they already committed to all of their investment strategies based on the knowledge that the captured government would not change up the game? How unreasonable of you. And . . . “excuse me, this is a senator’s only elevator, you loser!” One must wonder if even the next bubble bursting and the derivatives catching up with us will be enough to start somebody in government thinking about some way to take the economy back. Let us see, where do we think Chris Dodd will end up after his long “service” to the American people concludes?
It is as if they think they are smarter than the rest of us, when in fact they are actually very stupid. This one should probably be in prison.
Good job eCAHNomics! I would have asked him that since the Obama administration thinks that firing all teachers at failing schools is good then how come the bankers and the Federal regulators still have their jobs. Did anyone else there ask any challenging questions?
Go eCAHN! Keep us posted, please.
yes, they act as if our issues are besides the point when there are decidedly smart people saying the same things as us.
Appreciate your efforts eCahn; hope they continue.
Too bad you couldn’t throw at him this Stiglitz analysis: “”If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure,” Stiglitz said during a conference on financial reform in New York. “It’s time for us to reflect on our own structure today, and to say there are parts that can be improved.”
That would have been a better way to put it, but then probably neither Lockhart nor the audience probably had heard that an entire school’s worth of teachers had been fired. Such news might be beneath their dignity, which is somewhat inflated.
The PTB are soooo far away from looking at the world that way.
“This one?” Not “that one?”
Why don’t you do it as a diary just to call people’s attention to it. It is certainly worth highlighting.
I’m about as ‘optimistic’ as you are.
eCahn, you rock.
You know that all this is “complicated” and “sophisticated” so they wouldn’t expect you/us to understand…./s.
Got yer Kudlow brand barf bags? (via Big Picture.)
CNBC shoutfest re: regulation…
Here’s the highlight — Kudlow pretends to put a gun to his head.
FOOD FIGHT!!
“Everybody’s in trouble!”.
That about sums things up about the mess we’re in. The more things change, the more CNBC stays the same (Yakitty yak, don’t talk back!”
I think Mish is a putz, but this is pretty good…
I’m Sure Glad The Recession Ended
Sheeze, what is this… old home week? (From 2007)
How The Bush Economy Worked
from the comments…
Ah, eCAHN, thank you, from the bottom of my rotten dirty little heart.
You are a credit to the “best” aspects of the dismal science and, as well, a credit to the human species.
It is a rare club you belong to, eCAHN, and Mr. Lockhart is not a member, nor likely, in this lifetime, to become one.
Keep on keepin’ on …
Every chance ya get, and then, tell us about it.
;~DW
That’s why I don’t watch cnbc anymore. It’s pure garbage almost all the time.
Nice set of charts. However, some of the things he points to, even on his own charts, are clearly lagging indicators, i.e., the turn down after the overall economy, and turn up later. Disclosure: I worked with those kinds of charts all during my career.
Thanks DW.
And isn’t that the problem?
It sure is.
Looking at Mish’s Nikkei chart is kind of interesting… Look at what happened to Japan’s recovery during the 1999 build-up. Look familiar? Whoopie! Party dude!
Then, as the US equity bubble imploded, Japan entered its now famous deflationary spiral. Look closely at the Nikkei between 2000 and 2003. It fell from 20,800 to 7603. That’s a loss of over 60% in less than three years.
If we are just over 10 years behind Japan (calculated by lining up the peaks — Japan in 1990 and the US in 2000), that means the epic deflationary disaster that hit Japan ten years after its bubble popped is just a few months away — starting about the middle of June, plus or minus a few weeks. No guarantee, but that is my expectation. (I thought it would be April in prior comments but I’m updating it to June in this comment.
Can you say cash? (Or cash equivalents.) I don’t think gold will hold its value in a deflationary implosion. Cash will be King once again.
Reform is a topic much maligned but in the aftermath of the “worst depression evah”… it may just come about. In the next administration, that is…
Keep ‘em coming eCAHN!
Thanks, it is precisely people like Lockhart who make the next collapse inevitable. They may be high up in their profession but they simply don’t know what they are talking about. At best they are idiots. At worse, they are complicit agents of those who have and continue to loot the country. I used to think they were mainly the first. Now I think they are mostly the second.
The only time I visited Japan, combined biz & tourist trip, was 1994. To continue a meeting that the client wanted to go more than the alotted hour, we reconvened in the lobby of a Tokyo tower. The entire center of the 40 plus-or-minus structure was empty, with a giant mobile hanging in it. I used the ladies room, which had a computerized toilet: plastic covering on the seat automatically replaced itself with the flush, sensors detected when you stood up, other silly options. I came back to the table in the center where we were continuing the meeting with a big grin and described my experience and asked why there was so much empty space in such a high-price location (even after the bubble burst, the purported price of Tokyo square footage was astronomical, a fiction imposed by the absence of any real transactions to burst the thought bubble). The answer was: bubble building.
Look at these answers you can’t have good government if the people in charge of implementing the policy don’t want to do it.
Now how can we fire this guy and make him an example? I’m sorry Mr CEO of the Fed in Atlanta but Mopey and Not with the program is enough to get you fired from your job in the real world.
Heck what kind of a Jackape thinks the Stress Tests would reassure a crowd of Economists? much less Investors?
The Guy’s job is not to speak to Chicago Style Economists or Ron Paul Austrian School Morons the True Believers in Free Markets and No Government Regulation.
Rather his Job was to sell us the People who don’t believe him. The Guy failed Miserably.
How long before its fair to start comparing the Obama recovery withe FDR’s:)
All of the above would be my guess. They live in a self-reinforcing environment which dismisses criticism like mine as just-plain-angry-and-nothing-else. So that is the idiot part; dismissing valid criticism as emotion. The looting part is that things are fine with him and everyone else he knows, so how could that be bad? It’s endemic with powerful people in decaying societies. They are on top of the world, so all must be well.
You, of course, understand that’s not the way he looks at his job at all. He thinks he is helping to run the economy responsibly, and that the great unwashed must be kept in line, lest they muck it up. Quite different from the POV that the great unwashed are the backbone of the economy and the PTB are the ones who muck it up.
Repeal NAFTA in the news.
I think the Guy is a Lizard any challenge to his belief system he reacts like its a personal insult thus he tries to Dismiss your Question as Opinion. Which is a serious insult in Academic Circles. He was in his mind reacting to you in Kind at least as how his mind perceives things. ( Owh! trying to think like a Lizard hurts 2nd time this week that happened.)
Anyway however you could easily back your question with facts. He on the other hand would have a hard time justifying the Fed’s Record.
So he scrambled with the excuses its obvious given the quality of his excuses he was Not Prepared.
I speculate that he has a Cognitive Dissonance about the whole subject. But as the Head of the Fed in Atlanta how can he avoid thinking about it?
Just who are guys like him in economic circles blaming for the economy and for the weak recovery?
Very interesting. Write it up as a diary to call people’s attention to it, since it won’t get MSM coverage. According to Taylor’s wiki, he’s a Blue Dog, but it sounds like he may be beginning to break free.
I think that the ‘mistakes were made’ part explains how he thinks about it. To his credit, he did not say ‘who could have anticipated housing prices would fall.’
Oh, I might mention that on the subject of low-interest-rates-cause-bubbles, Lockhart opined that reasonable people disagreed.
Of course, reasonable people don’t disagree. Only unreasonable people think that low interest rates are not a prime cause of bubbles.
Cognitive Dissonance vs Logical thinking I assume the world should run based on the best ideas proven by argument and that everyone thinks like this is my first assumption when I look at any idea.
They however think they have Truth from God and despite Facts Belief will win! Also they are meant to rule because they are Chosen by God, and Smarter than us…No matter How Much the Facts Argue otherwise.
I’m adding this to my Authoritarian file.
A Fed CEO unprepared for what in this economy should be an obvious question suggests the Fed is not prepared or even looking for whats wrong in the Financial System.
Nope more Government Regulation is the big Shark he’s watching the ocean for. Not the dangers of unregulated Credit Default Swaps, the expected tanking of the Commercial Real Estate Market, Banks problems selling Mortgage Paper, the National Debt, Inflation. I’m sure I’m missing something.
But he and his crew made the mistakes. If my theory of Cognitive Dissonance is right he can’t keep saying that he has to blame someone other than himself. German Bankers and Business types before WW2 blamed the Jews this pattern is not a good one for us to be on.
We need to call out the guilty before they switch blame.
Doing my tea-insy part to call out the guilty.
So True!
If we’ve just had a “financial revolution” where the economic landscape is forever changed…
Let the revolution consume its own… or in other words…
“La révolution dévore ses enfants” or… “die Revolution ist wie Saturn, sie frißt ihre eignen Kinder.”
The revolution is consuming the revolters, not the PTB responsible for the problems.
My Bold so the Fed despite when pressed admitting Mistakes were Made no mention of who made the mistakes is not coming up with reforms to prevent future mistakes.
This reminds me of that time the Press asked Bush what the greatest mistake of his Presidency was and he could not think of a single mistake.
We think identifying and learning from mistakes is important.
They think admitting mistakes is weakness, never mind admitting them publicly even admitting them privately among economists is to much.
So of course they do nothing to prevent future mistakes.
Current theory is Lizards are solitary hunter types. However if a hunter doesn’t learn from mistakes he gets eaten quick.
I’m thinking the Lizards Unite around the familiar but somehow belief in the Solidarity of the Group got pushed to far and learning got pushed down as a result in other words Lizards have a Brain Defect.
After all Wolf packs learn from Mistakes. Wolf Packs challenge their Leaders constantly well I think that mostly happens around mating season.
Still the GOP Congress never said jack bad about Bush about anything. Obama started messing up we gave him what 5, 6 months grace period?
Both are accurate. ‘We’ are interested in moving to a better place. ‘They’ are interested in preserving & enhancing what ‘they’ have. From each POV, who could argue. Of course, ‘we’ understand their POV, but ‘they’ haven’t a clue about ‘ours.’
Tea-insy Funny you came with an honest I thought harmless basic question the guy should have been able to answer why he’s the CEO of the Atlanta Fed!
The fact that he his first response was to try and dismiss your question as Opinion a big insult for Academic types suggests he was scared.
Why the thought of him having to defend his and the Fed’s record he realized was a loser.
So he instead shifted gears and humiliated himself with whatever talking points he could throw at you.
Its Obvious him and his staff never thought that question would come up. Its Obvious he was not prepared for that question. eCHAN its a good basic question but its not Einstein.
Its Obvious the fact this guy can’t handle what should be an Obvious question scares me.
Call me the Helen Thomas of economists and I will die happy.
How about we add the proud of each side don’t listen. The GOP is still Proud and the Blue Dogs identify with them their oppressor Stockholm Syndrome.
Our Side doesn’t have enough Pride to Listen or make deals the Surrendercrats call Surrender making a deal.
They don’t listen unless your an equal in strength/confidence. Us we don’t listen unless you can defend your ideas from our best arguments.
Right now nothing is getting done because Obama is ruling like he is dealing with us. Instead the GOP will not listen unless he shows strength he has to beat them up to get respect.
Forget arguing with them although the debate was nice Obama needs to attack what they care about most Cash and Power.
Humiliate a few Big GOPers publicly and start taking away their cash. Obama should save the debates for us but of course him debating us on healthcare on TV.
The insurance companies do not want to see that.
eCHAN you are the Helen Thomas of Economists I don’t suppose this event was filmed? Got to get groceries its 45 degrees out and the temp is dropping quick.
Disagree. The progressives listen & provide intelligent rebuttal. But ‘they’ pay not attention.
Yes, that makes me even more revolting… said the peasant.
Now I will die happy. Good shopping, Things.
I revert to the cliche that we live in interesting times. That thougt does not increase my forecasting prowess however.
You’re the one I’d expect to posit the forward looking trajectory of this beast.
I’ve shot my wad… My cards are down. I’m all in on the triple D. Even gave entry and exit dates and magnitude.
What say you?
Watching for evidence on which to base opinion. I have an hypothesis (double-dip with no monetary policy tools left and little appetite to use the puny fiscal policy tools that still remain), but the incoming data look more like sluggish recovery continues and consumers are still fundamentally insatiable, so still the mainstay of the U.S. economy.
A fury of spending is all very well but without equitable wealth distribution spending will cease pretty quickly.
Consumer spending has exceeded what reasonable people would expect for decades. So keep an open mind as to how much longer it can happen.
Sounds like the best fit hypothesis for the data.
I’m more pessimistic because I believe in surprises. (In hindsight, surprises should have been expected.)
So what’s the surprise? National? International? Political? Economic?
Probably all the above… a strong credit aftershock dislodges the consumer’s willingness to spend and the weakened financial structure succumbs.
Rapidly.
A cascade of failures in bank and non-bank financial institutions following the termination of the Fed MBS purchase program. Commercial RE toxicity takes down insurers, pensions and regional banks. Muni’s lose their tax-exempt status. Republicans stage a coup. That’s just for openers…
Just wait ’till the cats and dogs lie down with one another!
Legitimately speaking, I think, all the risk is on the downside. For negative suprises that you mention, and that are not independent events, but are related to the fundamentals. And the fundamentals themselves (lack of growth in real wages for those who are employed, to name one) are very weak. But consumers have defied the fundamentals for a long time. As a forecasting matter, you need to wait for actual evidence that consumer ARE NOT buying before the pessimistic POV becomes the likely forecast.
IOW, temper your outlook with evidence.
That is why your sideways evaluation makes sense [under the present circumstances]. It strikes me as the most hopeful forecast given the weaknesses in the structure(s).
But I know what the ReBushLickens are thinking….
…. LOL! Obamageddon!
Yeah, well, laff it up you so-called Conservatives… It is your loss. That burning cinder at the bottom of the crater is the last shred of respect for the Grand Old Party.
The words “Republican” and “Trustworthy” parted ways several elections ago.
Unfortunately for our country, demand deflation poses a most serious threat. I accept that proclaiming demise for the American consumer is premature at this point, but the forces of deleveraging are ongoing and speak to the further curtailment of discretionary spending. No Bucks, no Buckeroo Banzai! Or something like that! Wait, what? No, really!
The evidence isn’t so much in the data, but in the structure of the financial system as a whole and the business purposes of those who control it.
I come on this issue as a practical forecaster, not an ideologue. Forecasting involves an hypothesis, against which actual data are tested. From my language, you should rightly conclude that I take this pursuit seriously.
The other forecasting issue is the ‘crying wolf’ pit. Timing is everything in forecasting. So if you forecast armeggadon too early, you lose credence (unless you’re a religious fundamentalist, in which case the forecast of armeggadon can’t happen too often and too early).
So let’s keep up the conversation wrt actual facts. I intend to present a credible forecast for the U.S. economy on a quarterly timing, and use other specific events to advance the discussion.
That’s why I’m a fan!
But it is not crying wolf that motivates me. It is understanding the interplay between economics and politics that compels me to watch the data flow [and make rash comments]… They surely interact on each other’s territory. But can that interplay be resolved? Can it be used for forecasting? Does one “drive” the other?
Dynamics evolve from forces that are observable (the data) as well as from influences that are not so easily discerned [the plumbing]. Ergo the flat-footed pundits of the CNBC ilk.
I like the idea that we are in an impulse response phenomenon that is inherently deterministic. That is why I don’t use synthetic models. That is why I am a true believer in the past as prologue when it comes to ringing the bell. It always sounds the same. (And it even cracks and breaks the same.)
Many good points. I have skills to respond to only a few. So consider my response not a denial of anything you’ve typed, but rather a straightforward attempt to pass along some of the lessons I’ve learned in my forecasting days.
The relationship between policy pronouncements and economic reality varies quite a lot. At the moment, I think the policy makers have a model in mind (sluggish recovery, the same as Lockhart espoused), and will feel comfortable as long as that is supported by the data. So far, so good, from their POV.
The way we can jump ahead of them is that we have a different model and will be more sensitive to data that supports the outlook of a weaker U.S. economy. But, to avoid being discredited, those on ‘our’ side should not jump the gun until actual data is supportive.
You are far too modest. Thanks for all you do.
Oh well, thank you very much for your compliment. But I remain merely a pain-in-the-PTB-butt, in my very minor way.
Probably one reason he was being so cavalier withyour questions was that you are a “girl”. Inflated egos such as his tend to have that problem.
Frankly think my female gender was not an issue. I was at his table, though across from him so didn’t talk with him before his speech. In any event, I was very much in his face in Q and A. My being female might have contributed to Lockhart’s dismissive attitude, but I was there, and I doubt it. I think he dismissed me because I outlouded a we-should-not-mention-it.
Then you should have told him to stick his coffee up his nose and breath deeply!
IMHO, from HIS POV, you added insult to injury because you not only pointed out the elephant in the living room, but clearly indicated that you had no intention of volunteering to clean up the telltale “mess”it unceremoniously left behind.
Reply to eChAN at 45
Disagree. The progressives listen & provide intelligent rebuttal. But ‘they’ pay not attention.
Ok listen is the wrong word I need a new word but they do pay attention and evaluate not our facts instead they size us up for a fight.
If the Surrendercrats the Blue dogs won’t fight they reason why give in at all.
To negotiate with them in good faith you must first convince them at an emotional level that you will fight.
Then they ask themselves can we win if they can’t then we can negotiate with them. Assuming the blood lust of Hate Media hasn’t pumped the Adrenaline Junkies are not pumped for a fight no matter what.
Thats the GOP plan push there base to the anger place they don’t listen to anyone.
Anyway to convince them to listen we must understand them and they listen to emotions and in the Lizard Brain mode they are in thanks to Hate Media they are not listening to nice emotions like Love and Friendship like Obama offers they want a fight.
So we have to give them one we must break them publicly. Think of how discredited the German American Bund got and the Eugenics movement after we declared war on Germany.
The Next time a Glen Beck Crazy kills a bunch of people we declare Fox News a terror supporter inciting people to violence with lies.
Does free speech protect lies yes but lies that are designed to cause violence? Other countries have Hate Speech laws.
We need to look into this.
I originally got on board with the Lake because nobody else was fighting the GOP. The Surrendercrats were letting Bush take away our freedom’s, ruin the economy, lose the wars etc etc. You can have Ideas and Passion it does not have to be one or the other.
My Comic Book Dealer says the George Bush comic is not selling is that evidence the economy is bad or Bush turned off the Youth vote for the GOP?
Polling among voters might support that I think your right our problem is Obama with his constant surrenders is making our supporters depressed.
The GOP bet is that if they do nothing then the economy will crater and then like Hitler did they can take over the country.
To bad the same set of circumstances also gave us Stalin and FDR.
Given that GOP approval ratings are lower than ours despite months of 10% unemployment I don’t think another banking collapse will turn us all into Goosestepping Nazi’s.
The GOP needs another approach and so does Obama his approval will not go up if the economy tanks again.
We need to think of how we can change Obama demanding Rahm, Geithner, Summers and Helicopter Ben resign is a start.
We need people working in government who believe in it.
Another reason I stay on the Lake is all the weird thoughts all the different views like Dominoes falling in all different directions take me. I know I’m off topic but you have given me insight into other Things.
And breaking Things into Pieces so I can understand them better is my gift.
Well my actual gift is Breaking AnythingThings shovels, tools, cars arguments what are the limits? Crisis Tests True Morality.
Interesting thoughts give me insight to apply strength and test things the Destroyer seeks to test Shiva/Athena:)
And yes you are Interesting.
Thats probably the best complement I can give next to Friend…which I should say more.
I argue with you a bunch to test your ideas why your ideas if true and if they can survive argument then they interest me the conclusions the ideas I get arising from those thought …well I can use them to test the limits of Things:)
Well done eCAHN. But, I have to say, economists aren’t the most sturdy of ‘scientists’. Taking them down with a well-placed question isn’t so hard.
Still, kudos for the p.r. effects. Showing up the Establishment is almost always worth doing.
Thank you. I know I had an easy target but that’s no reason not to take aim, now is it? *g*
ecahn, haven’t been around the lake as much, busy times in my personal life, will read this diary and dialogue with everyone later in the day
I always love your writing ecahn, can’t wait to sit down and read this one
Thanks, ecahn, for a great post and for a great question. It made me shiver to hear what Lockhart had to say to you and his cavalier attitude. Basically, I do know that such as Lockhart live in an “altered state,” where they are so removed from the commoners, that they really truly don’t “get it” and frankly, my dear, don’t give a damn.
But that such as Lockhart has this important position, and yet, pull the curtain away, and this is where he’s at. Bullshit bingo!
Thanks again for doing what you did. Keep up the good work and keep us posted.