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The decisions made by the next chair of the Federal Reserve will
have a powerful impact on the economic well-being of every person in
America.
While the largest financial institutions and corporations in
this country have been bailed out and are now back to making enormous profits
and rewarding their executives with outsized compensation packages, recovery
hasn’t gone so well for the rest of America. Middle class families have
continued to lose ground economically, the number of Americans living in poverty
is near an all-time high, and the gap between the very rich and everyone else is
growing wider.
The next Fed chair will have enormous power and influence
over our entire financial system and the direction of the economy. The Fed is
responsible not only for our country’s monetary policy, but it is also a key
regulator of financial institutions. In my view, the president’s nominee for Fed
chair must be committed to improving the lives of working Americans who are
still struggling through the worst economic crisis since the Great
Depression.Join me and our partners at Daily Kos and Democracy for America in
demanding that any Fed chair nominee answer the following four
questions:
Question 1: Do you believe that the Fed’s
top priority should be to fulfill its full employment mandate?
The U.S.
continues to face a major crisis in unemployment. When Wall Street was on the
verge of collapse, the Fed acted aggressively and with a fierce sense of urgency
to save the financial system. Will you act with the same sense of urgency to
combat the unemployment crisis in America today, and will you make clear what
specific actions you will take? What rate do you think is acceptable and should
be the Fed’s target?
Question 2: If you were to be
confirmed as chair of the Fed, would you work to break up “too-big-to-fail”
financial institutions so that they could no longer pose a catastrophic risk to
the economy?
The financial institutions that are too-big-to-fail played a
major role in undermining the American economy and driving our country into a
severe recession in 2008. Yet today the four biggest banks are 30 percent bigger
than they were then, and the six largest financial institutions now have assets
equivalent to two-thirds of our GDP. By any measure, “Too Big” has gotten
bigger. The risk they pose is clear. As Richard Fisher, President of the Federal
Reserve Bank of Dallas, said last year, “institutions that amplified and
prolonged the recent financial crisis remain a hindrance to full economic
recovery and to the very ideal of American capitalism … Achieving an economy
relatively free from financial crises requires us to have the fortitude to break
up the giant banks.”
Question 3: Do you believe that the
deregulation of Wall Street, including the repeal of the Glass-Steagall Act and
exempting derivatives from regulation, significantly contributed to the worst
financial crisis since the Great Depression?
The next chair of the
Federal Reserve will play an important leadership role in dealing with
too-big-to-fail banks and in shaping the rules that govern them, so it is
important to assess the Fed chair’s views toward deregulation, particularly
toward the massive deregulations of the 1980′s and 1990′s that permitted the
TBTF banks to take on huge risks. There is a lot more work to do in
implementation of the Dodd-Frank Act and to minimize the risk of future crises,
and the Fed will play a critical leadership role.
Question
4: What would you do to divert the $2 trillion in excess reserves that
financial institutions have parked at the Fed into more productive purposes,
such as helping small- and medium-sized businesses create jobs?
Five
years ago, the Fed bailed out the largest financial institutions in the country
but put no restrictions on the funds to make sure that lending increased for
small businesses. At the same time, the Fed began paying interest on excess
reserves, and the excess reserves parked at the Fed have skyrocketed as a result
rather than going into productive lending. The reality is that, despite promises
and intentions that the Fed’s efforts would help support small businesses, much
more work needs to get done to move money from Wall Street to Main
Street.
The next Fed chair will have an opportunity to get our economy
back on track and to help rebuild America’s middle class. But that will require
the right temperament and a willingness to take on Wall Street CEOs when
necessary. It is critical that the next Fed chair make a genuine, long-term
commitment to supporting those who don’t have armies of lobbyists and lawyers to
advance their interests in Washington -- working and middle-class
families.Please join me today in demanding that any Fed chair nominee
answer these four questions.
Thank you for all that you
do.
Sincerely,
Senator Bernie Sanders |
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