Econ­omy sta­ble but Wash­ing­ton lead­ers vari­able

The Korea Times - - OPINION - By Arthur I. Cyr Arthur I. Cyr is Clausen Dis­tin­guished Pro­fes­sor at Carthage Col­lege and au­thor of “Af­ter the Cold War.” Con­tact

“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, Ky. 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 ex­cep- tions, 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.

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