Where GOP, Occupy agree

By William D. Cohan

We all know politics makes strange bedfellows. But how about this odd combination: the Occupy Wall Street protesters and Republican presidential hopefuls?

As hard as it may be to believe, these two otherwise opposed groups seem simpatico in their disdain for the Federal Reserve System.

It would be hard to beat the Federal Reserve Bank of New York - a stolid, Italian Renaissance behemoth just north of Wall Street itself - as a symbol of American capitalism. It's also a fine place to stage a rally, as protesters were planning to do, because the New York police won't let Occupy Wall Street anywhere near Wall Street these days; their encampment at Zuccotti Park is several blocks from the New York Stock Exchange.

In 2008, the New York Fed was the site of any number of nail-biting weekend meetings between Tim Geithner, then head of the bank and now secretary of the Treasury; Hank Paulson, his predecessor at Treasury; and Ben Bernanke, chairman of the Federal Reserve Board of Governors. They made the momentous decisions to rescue Bear Stearns and then to save the rest of Wall Street, except for Lehman Bros., which they let fail.

"The Federal Reserve Bank is another problem that's added to our melting pot of problems," the anonymous organizers of the rally wrote on the Occupy Federal Reserve Facebook page. They continued, with less than 100 percent accuracy: "It controls and regulates all our money, and the increasingly high tax rates YOU are paying is what we owe them! And they aren't even Federal; The US Federal Reserve Bank is privately owned. We will never get out of debt unless we stop them!"

At least the movement is realistic in its goals for the gathering. "We of course realize we can't stop such a big bank in one rally," the Web page notes. "But this is to inspire people to speak out. We are part of the WALL ST rally. Be a part of the next big thing. Let your voice be heard!"

It is doubtful that any of the Republican presidential candidates would show up for such a rally, but if their criticism of the Federal Reserve and Bernanke is to be believed, they might be welcomed with open arms.

For instance, when former Massachusetts Gov. Mitt Romney was asked at a recent debate whether he would have bailed out Wall Street if he had been in the shoes of Geithner, Paulson, or Bernanke, he conceded that he probably would have done so, because the economy was on "the precipice" of a "complete meltdown," and "action had to be taken."

However, Romney quickly pivoted on the bailouts: "Was it perfect? No. Was it well-implemented? No, not particularly. Were there some institutions that should not have been bailed out? Absolutely. Should they have used the funds to bail out General Motors and Chrysler? No, that was the wrong source for that funding."

Asked whether he agreed with former House Speaker Newt Gingrich that both Geithner and Bernanke should be fired, Romney said he did. "I wouldn't keep Ben Bernanke in office," he replied, and then declined to say whom he would select instead.

Nor was Bernanke going to get any sympathy that night from Rep. Ron Paul, who wrote a book called End the Fed and has been pushing Congress to demand that the Fed be audited as every other federal agency is. (The Fed has resisted such an audit, citing markets and the need for confidentiality.)

Paul asked Herman Cain, who was a governor of the Kansas City Fed during the 1990s, whether he would support a Fed audit. Cain said he would, then went into his own tirade against "this" Fed. "I don't agree with the actions of this Federal Reserve," he said. "I don't agree with the actions that have been undertaken by Ben Bernanke."

Cain's model for a Fed chairman is Alan Greenspan, who kept interest rates very low in the mid-2000s, encouraging investors to take more and more risks to find higher yields - not unlike what Bernanke is doing today. "The way Alan Greenspan oversaw the Fed, and the way he coordinated with all of the Federal Reserve banks - I think that it worked fine back in the early 1990s," Cain said.

For his part, Paul correctly identified Greenspan's crucial role in encouraging what became the financial crisis, and warned that Bernanke was up to the same tricks, only worse. "He's inflating twice as fast as Greenspan was," Paul said.

Paul was exactly right in describing the Fed's problem under Bernanke. By continuing to give Wall Street free money that can immediately be invested in U.S. Treasury securities at a hefty spread, the Fed chairman has favored the bottom lines of the big banks at the expense of the new generation of Americans on Main Street, who had discovered the importance of saving. While Wall Street gets rich off the Fed's free money, savers get close to zero interest and are forced to look for riskier and riskier investments to find higher yields.

This is a repeat of the problem Greenspan helped foment last decade. We all know how that turned out.

Although the chances of the Fed's being abolished any time soon hover between slim and remote, it is encouraging to see that at least on this issue, the Zuccotti Park crowd and conservative Republicans see eye to eye. Maybe there is hope after all.