“Glad gold is safe.”
That is what Treasury Secretary Steve Mnuchin tweeted after he and his designer-dressed wife visited the United States gold supply at Fort Knox, Kentucky. Senate Majority Leader Mitch McConnell (R-KY) joined them and others at the scene. Everyone was at a prime location for eclipse viewing.
Staff spokespeople now forcefully deny reports the Washington power players watched from the top of the building that holds the gold. Instead, they demurely remained on the ground. The story probably would not have gone public, but Mnuchin’s wife Louise Linton posted a photo on Instagram, with extensive details about the expensive clothing she wore. A taxpayer who complained received a sneering condescending reply.
That Instagram account now is unavailable to the public. The government receives reimbursement when Mnuchin’s wife travels with him on official business, his office declares.
No doubt experiencing the eclipse from a particularly desirable location encourages policy insight. Nonetheless, conspiracy extremists who believe the symbols on the dollar bill have dark occult significance, and fear our gold supply does not really exist, have lots of fodder for the future. Who knows what pagan rituals may have taken place at Fort Knox?
Meanwhile further west, adults have met at Jackson Hole Wyoming for a traditional annual conference on economic policy challenges facing the U.S. and the world at large. The Federal Reserve Bank of Kansas City has organized the event since 1978.
Fed Chair Janet Yellen addressed the Volcker Rule, a topic of particular importance. She stated support for the measure, though also indicated some flexibility in enforcement may now be in order. Her term ends in February, and President Donald Trump is critical of her leadership.
In 2013, U.S. financial regulators approved the Volcker Rule, despite intense opposition from powerful banking lobbyists. This confirmed the profound sustained efforts of Paul Volcker, who served as Chairman of the President’s Economic Recovery Advisory Board during President Barack Obama’s first term.
The reform returns the U.S. to separation between commercial banking and the risky activities involving trade in complex financial derivatives. The reform contains exceptions, including limited direct investments for clients and in defined forms of hedging.
The devilish nature of the details involved, along with the legions of bank lobbyists mobilized in opposition, resulted in an exceptionally long review process. Opponents continue to attack the important regulation.
During the Great Depression, the path-breaking Glass-Steagall legislation accomplished what Volcker proposed. The New Deal reforms also secured individual savers by establishing the Federal Deposit Insurance Corporation (FDIC). A strong regulatory hand was extremely popular in that desperate time. In 1999, President Bill Clinton and Federal Reserve Board Chairman Alan Greenspan presided over Congressional repeal of Glass-Steagall, setting the stage for the devastating excess that in turn created the severe recession.
Observes of Volcker’s initiative initially were pessimistic about success. The extremely long road to passage and implementation does validate that concern. However, during the first weeks alone many banks scrambled aggressively to divest collateralized debt obligations and other risky forms of casino banking.
Volcker held strong cards, including public support for re-regulation. Members of the Chartered Financial Analysts Institute showed 68 percent supported reform.
Underestimating durable Paul Volcker remains unwise, underscored by his lengthy career. He held Treasury Department posts in the Kennedy and Nixon administrations. Later as head of the Fed, he broke the back of devastating inflation.
Trump administration officials urge repeal the Volcker Rule. Opposing this now is vital.
— Arthur I. Cyr is Clausen Distinguished Professor at Carthage College and author of “After the Cold War.” Contact at firstname.lastname@example.org.
Arthur I. Cyr: Economy stable Washington leaders variable
“Glad gold is safe.”