Obama and Bernanke: Perfect Together?

Republicans have more than a few reasons to be confused. They can begin to solve their political problems by understanding the greatest political paradox of our time.

The American people have elected a president who supposedly represents the best interests of hard working middle class Americans. Yet, this group that has suffered the most under Obama’s policies.

In addition, Joel Kotkin points out, even though those who voted for Obama thought that they were voting against the big money interests of Wall Street, the administration and the Federal Reserve are managing the financial system to favor Wall Street at the expense of Main Street.

Perhaps the Lord will forgive Americans for not knowing what they are doing, but it is difficult for a politician to explain to vast numbers of citizens that they have been duped.

In a recent column, Kotkin argued that the real maestro of the supposed economic recovery is the Chairman of the Federal Reserve, Ben Bernanke. Obama’s progressive rhetoric is, Kotkin says, Bernanke’s “beard.”

Bernanke’s policies have been a boon for the largest financial institutions, but they have hurt smaller community banks and small businesses.

In Kotkin’s words:

To many presidential idolaters, this era will be known as the Age of Obama. But, in reality, we live in what may best be called the Age of Bernanke. Essentially, Obamaism increasingly serves as a front for the big-money interests who benefit from the Federal Reserve's largesse and interest rate policies; progressive rhetoric serves as the beard for royalist results.

Overall, the impacts of ultralow interest rate, cash-machine policies of Fed Chairman Ben Bernanke trump everything else. The presidential stimulus was, at best, modestly effectively, and certainly did little to turn around the fortunes of most Americans or spark much economic growth. Unemployment remains stuck at around 8 percent and 8.5 million workers have exited the labor force.

But the Bernanke policies have succeeded in reshaping the economic landscape in ways that, while good for the plutocracy and Wall Street, are not particularly positive for the vast majority of Americans.

Who has lost out in the Obama-Bernanke Era? The poor, minorities, small business, the middle class and the young. They have lost jobs, opportunities and  wealth. Did they vote for Obama because they were afraid that Mitt Romney would fire Ben Bernanke?

For small business the outlook is bleak. Kotkin explains:

With demand and growth still weak, small business enters the new year with among the lowest expectations of any large economic sector. As Gallup points out, one in five small companies expects to lower its employee count, one in three expect to decrease capital spending and almost as many expect to be in more severe cash-flow troubles by the end of the year.

This decline of small-business sentiment constitutes arguably the biggest reason for our poor job-creation numbers. If small business had come out of the recession maintaining just the rate of start-ups generated in 2007, notes McKinsey, the U.S. economy would today have almost 2.5 million more jobs than it does.

Big banks can afford to comply with the blizzard of new regulations coming out of Washington.  Small community banks, the ones that lend to small local businesses, are suffering the most under the new regime.

Kotkin writes:

One source for this decline lies in the difficulties faced by smaller community banks, which tend to be those most likely to lend to entrepreneurial firms. Jeff Ball, chairman-elect of the California Bankers Association and founder of Whittier-based Friendly Hills Bank, suggests the Fed's policies – as well as growing regulatory policies – has led to an unprecedented concentration of financial assets in the hands of a few large "too big to fail banks" while the number of smaller community banks has been shrinking.

"Everywhere you turn there's a 'gotcha' from the regulators," Ball notes. "The big banks can deal with the regulations far more easily than the community banks. And because some banks are perceived as 'too big to fail,' there's easier access to credit, and they are perceived to be better to invest in."

Who has gotten rich off the new policies? The big banks and the major financial institutions. Remember all of those Occupy Wall Street protesters; they should have been demonstrating at the White House and the Federal Reserve. If they had a clue, they would have been.

Under the Bernanke-Obama regime Wall Street has done just fine, thank you:

The very people who were supposed to be the bête noires of the age of Obama: the large financial institutions. In 2013, the top four banks controlled more than 40 percent of the credit markets in the top 10 states, up by 10 percent from 2009 and roughly twice their share in 2000. At the same time, since the passage of the Dodd-Frank financial regulations, there are some 330 fewer small banks. Under the current regime, the oligopolization of the credit markets will continue apace, as much, or even more, than if Mitt Romney had won the presidency.

Wall Street has enjoyed the new regime:

Unlike smaller firms, or the middle class, the big financial institutions have feasted like pigs at the trough, with the six largest banks borrowing almost a half-trillion dollars from Uncle Ben Bernanke's printing press. While millions of Americans have lost homes and much of their net worth, there has been not a single high-level prosecution by the Obama administration of the grandees of the very financial giants at the heart of the mass misery.

Who else has gotten rich off of Obama-Bernanke? Why, federal government employees. As long as Bernanke keeps interest rates low, the federal government’s borrowing costs remain unnaturally low. That frees up more money to pay government employees higher salaries.

Kotkin is reminded of the last days of the Roman Empire:

All this is reminiscent of something out of the declining days of the Roman Empire. The masses get bread (food stamps) and circuses, with virtually all of Hollywood and much of the media ready to perform on cue. The majority, losers in the Bernanke economy, lack the will and, maybe, the attention span to realize what is happening to them.

"The Roman people are dying and laughing," the fifth-century Christian writer Salvian wrote. Like America today, entertainment-mad Rome suffered from a declining middle class, mass poverty and domination by a few wealthy patricians, propped up by a compliant government. Unless Americans of both left and right wake up to reality, our civilization could suffer a similar inexorable decline in the Age or Bernanke.

Let’s keep in mind, Joel Kotkin is a Democrat.