Tuesday, November 28, 2023

Tlaib Wants Fed Bailouts for Bankrupt Detroit, Corrupt Puerto Rico

‘What I believe is that that’s not a job for the Fed…’

Could Pelosi Pick 'Squad' Member as Next Oversight Committee Chair?
Rashida Tlaib / IMAGE: Time via Youtube

(Ben Sellers, Liberty Headlines) Federal Reserve Chairman Jerome Powell once again dismissed a suggestion from socialist “Squad” members that they could pay for their their costly and wasteful proposals by having the bank print them more money.

The absurd idea, known as “modern monetary theory,” suggests that the government could print unlimited money to grow the economy, ignoring delicate issues like inflation and currency devaluation.

The theory was a centerpiece to the controversial Green New Deal proposed roughly a year ago by Rep. Alexandria Ocasio–Cortez, D-NY. Her bill, which some estimated would have a price tag in excess of $90 trillion, was unanimously defeated by the Senate and was never called to the House floor.

But in testimony before the House Financial Services Committee, Powell once again had to field questions from Rep. Rashida Tlaib, D-Mich., over whether the central bank had a role in funding her legislative priorities, reported The Detroit News.

While discussing the Fed’s ability to bail out financial institutions, Tlaib asked, “Do you not believe that the governments of Detroit and Puerto Rico also play a vital role that should be preserved even if financial crisis makes it hard for them to borrow money?”

Powell noted that the Federal Reserve’s role related exclusively to the organizations that were regulated by it, and it did not serve the same function as an appropriations committee.

“What I believe is that that’s not a job for the Fed,” he said. “The Fed has a particular role and particular authorities, and lending to state and local governments and supporting them when they’re in bankruptcy, that’s not part of our mandate.”

The false equivalency Tlaib asserted between troubled lenders who face defaults due to economic downturn and municipal governments that refuse to rein in their spending practices raised the specter of deeply divisive bailout decisions in the first year of President Barack Obama’s presidency.

The Fed did its part by maintaining near-zero interest rates for much of the Obama presidency and buying out securities in three major housing lenders.

Most regarded the government intervention as short-term solutions to a desperate financial landscape, deeming the institutions “too big to fail,” while encouraging further constraints that would prevent the recurrence.

Tlaib took the opposite approach, questioning why other failing institutions outside of commerce should not be entitled to their own bailouts.

That, however, is “not appropriate for us in the sense that it’s government finance,” Powell said. “That’s to be dealt with by fiscal authorities, rather than by the monetary authority.”

After Congress approved massive bank-bailouts in 2008 and 2009 for both public and private lenders—drawing ire across the political spectrum—Obama proceeded to pass massive stimulus-spending packages that he claimed included both “shovel ready” infrastructure projects and widely lambasted proposals like “cash for clunkers” to buy out old cars.

He also assisted in subsidizing the financially distressed General Motors, hoping to help revitalize Detroit, but leading many to decry what appeared to be the first seeds of socialism with its nationalization of the auto industry.

Despite the intervention, Detroit filed bankruptcy during the Obama administration and sought additional state and federal assistance to prevent the repayment plan from forcing it to sell items of cultural importance, such as works of art.

Tlaib, who represents part of Detroit, was elected in 2018. Although the city has, in some ways, recovered, its ties to the auto industry have continued to be a source of constant unease amid the threat of job reductions, a recent strike and a corruption scandal involving the United Auto Workers union.

Puerto Rico, the U.S. territory from which Ocasio–Cortez’s parents hailed, has face its own insolvency issues, largely related to government corruption and misappropriation of federal aid following a series of natural disasters.

After its six-year debt crisis, the island reached a settlement agreement this week for repaying $35 billion.

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