As the Supreme Court shows every sign of throwing
out "Obamacare" and leaving 30 million Americans without health
insurance, another drama is being played out in the quiet corridors of
the Federal Reserve system that may affect even more of us.
Taxpayers will be on the hook for another giant Wall Street bailout,
and the economy won't be mended, unless the nation's biggest banks are
That's not just me talking, or the Occupier movement, or that wayward
executive who resigned from Goldman Sachs a few weeks ago. It's the
conclusion of the Dallas Federal Reserve, one of the most conservative
of the Fed's regional banks.
The lead essay in its just released annual report says a cartel of giant banks continues to hobble the recovery and poses an ongoing danger to the economy.
Wall Street's increasing power remains "difficult to control because
they have the lawyers and the money to resist the pressures of federal
regulation." The Dodd-Frank act that was supposed to control Wall Street
"leaves TBTF [too big to fail] entrenched."
The Dallas Fed goes on to argue that the Fed's easy money policy
can't be much help to the U.S. economy as long as Wall Street is "still
clogged with toxic assets accumulated in the boom years."
So what's the answer, according to the Dallas Fed? It's "breaking up the nation's biggest banks into smaller units."
Thud. That's the sound the report hitting the desks of Wall Street
executives. They and their Washington lobbyists are doing what they can
to make sure this report is discredited and buried.
When I spoke with one of the Street's major defenders in the Capitol
this morning he snorted, "Dallas represents small regional banks that are
jealous of Wall Street." When I reminded him the Dallas Fed was about
the most conservative of the regional banks and knew first-hand about
the dangers of under-regulated banks -- the Savings and Loan crisis
ripped through Texas like nowhere else -- he said "Dallas doesn't know
its [backside] from a prairie gopher hole."
So as Republicans make the repeal of "Obamacare" their primary
objective (and Alito, Scalia, Thomas, Roberts, and perhaps Kennedy
sharpen their knives) another drama is taking place at the Fed. The
question is whether Bernanke and company in Washington will heed the
warnings coming from its Dallas branch, and amplify the message.