Tag: ek Economics

I told you we would be revisiting L. Randall Wray’s third piece on Title Fraud, well he’s written a new piece for Bezinga that kind of concisely summarizes the problem-

Time to Audit the Remic Trusts

By L. Randall Wray, Benzinga Columnist

December 23, 2010 12:43 PM

We now know that the “mortgage backed” securities were not backed by mortgages. In reality they are unsecured debt. The “pooling and servicing agreements” (PSAs) that govern securitization require that the mortgage documents (including the wet ink notes as well as a clean chain of title) are transferred in a timely manner to the trustees. This was rarely and perhaps never done, because it was counter to the recommendation made by MERS (Mortgage Electronic Registry System). Instead, notes were either destroyed or held by the servicers to speed the foreclosures that were always envisioned as the end result of the mortgage origination process. Not only does this practice render the securities fraudulent but it also violates the federal tax laws that govern the REMICs-meaning back taxes are due.

But worse than all that, by breaking the chain of title and by destruction of documents, MERS and the servicers have jeopardized the entire system of property rights. Most, perhaps all, foreclosures have been fraudulent, which means that resales of the homes are also frauds. It goes without saying that the original mortgages were frauds from the very beginning-to complete the transformation to the ownership society it was necessary to ensure that by construction, default was inevitable. Either the homeowner would be unable to pay, or the servicer would “lose” the payments. By obscuring the chain of title, it would be impossible for the debtors or the courts to sort things out. Separating home owners from their property was necessary to ensure that we can create Bush’s ownership society. It is the modern form of the feudal foreclosures and seizures of peasant lands that concentrated ownership in the hands of agricultural capitalists-creating the first ownership society.

The scale of the problem is huge. Some estimate that as many as $6.4 trillion worth of home mortgages (33 million of them) are frauds, with destroyed or doctored documents. Probably all of the $1.4 trillion worth of private label residential mortgage “backed” securities violate the PSAs-so are actually unsecured debt. Three state supreme courts have already ruled that MERS cannot be the owner of mortgages, hence, has no standing in foreclosures. MERS contaminated 65 million mortgages-decoupling the mortgages from the notes and destroying the chain of title. A consortium of investors (including PIMCO, Black Rock, and Fannie and Freddie) that owns $600 billion of the private label securities are suing the banks to take them back. One investor action alone against Bank of America concerns $47 billion in fraudulent mortgages-enough to put a serious dent in its purported net worth of $230 billion (which is probably a vast overstatement resulting from cooking the books). A suit in California seeks $60-$120 billion in lost recording fees alone. All 50 states are investigating the servicers for fraud. The top five servicers (Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, GMAC-Ally) have 60% of the business and include the top four banks that account for 40% of the banking business.

REMICs–

Real Estate Mortgage Investment Conduits, or “REMICs,” (sometimes also called Collateralized mortgage obligations) are a type of special purpose vehicle used for the pooling of mortgage loans and issuance of mortgage-backed securities. They were introduced in 1987 and are defined under the United States Internal Revenue Code (Tax Reform Act of 1986), and are the typical vehicle of choice for the securitization of residential mortgages in the US.

More Wray-

Anatomy of Mortgage Fraud, Part III: MERS’S Role in Facilitating the Mother of All Frauds

L. Randall Wray, Huffington Post

Posted: December 16, 2010 09:29 AM

Enter MERS — another link in the food chain — created by the banks in 1997 in preparation for the boom and bust. MERS was set up to be a foreclosure mill. It would break the centuries-old custom that protected property rights by requiring every sale of property to be publicly recorded, and requiring that any creditor claiming a right to foreclose to demonstrate clear title, with an endorsed note in the creditor’s name and a record at the county office showing transfer of the property.

The banksters did not want to go through all that paperwork, and needed to subvert the transparency that would shine light on their crimes. Hence, they set up a fraudulent shell corporation that claimed to be the mortgagee; while the original sale would be recorded at the county office, subsequent sales and purchases of the mortgage would be recorded only by an “electronic handshake” between two “members” of MERS. Even that record was considered by the banksters to be purely voluntary — MERS did not require members to actually record transactions. If they found it more convenient to conceal the transfers, that was permitted.

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MERS deliberately undermined the legality of the loans and the records. Homeowners could no longer search the public records to find out who actually held their mortgage — the record would show MERS as owner, but MERS was a shell corporation with no real employees. It was not a servicer, so the homeowner could not make mortgage payments to the purported owner. As a result, checks were sent to the wrong servicers; servicers credited the wrong accounts; servicers claimed delinquencies on homeowners who never missed a payment, and piled late fees and delinquencies on the wrong borrowers; sheriffs were sent to break down the doors of the wrong houses, and threw belongings out on the street in front of homes on which there was no mortgage at all. MERS purposely created the mess, at the behest of banksters who do not want mere legal technicalities to get in the way of stealing homes. The undermining of the public records was not a mistake — it was MERS’s business model, created by the member banks.

And MERS helped banksters to defraud securities holders. Banks not only separated the mortgages from the notes, but they even destroyed the notes as they entered the mortgages into MERS’s electronic data base. MERS told servicers that it is “customary” practice to retain notes, not to endorse them over to REMIC trustees as required both by federal tax law and by the PSAs that govern the trusts. This made the securities a “nullity” — as the Supreme Court ruled over a hundred years ago — because a mortgage without a note is unenforceable in foreclosure. At best, the securities are unsecured debt, with no real property behind them.

In any case, the mortgages put into the trusts did not meet the representations made to investors — so even if the notes had been properly endorsed over to the trusts, the securities could be turned back to the banks. By creating a completely fraudulent electronic registry system — in which data would be entered only if banks found it convenient to do so, and in which data could be modified at any time by any member of MERS — MERS made it easy to conceal the securities frauds. Destruction or forgery of the paperwork was absolutely necessary to cover the trail of fraud from origination of the mortgage to securitization and finally to the inevitable foreclosure. Again, destruction of documents was not a mistake. It was the business model.

L. Randall Wray-

• Anatomy of Mortgage Fraud, Part I: MERS’s Smoking Gun 12/9/10
• Anatomy of Mortgage Fraud, Part II: The Mother of All Frauds 12/13/10
• Anatomy of Mortgage Fraud, Part III: MERS’S Role in Facilitating the Mother of All Frauds 12/16/10

Part 1- Ireland

Irish Ask How Much Is Too Much as Bank Rescue Trumps Austerity

By Joe Brennan and Dara Doyle, Bloomberg News

Sep 2, 2010 5:35 AM ET

Anglo Irish Bank Corp. said Aug. 31 it needs about 25 billion euros ($32.1 billion) in state funding, equivalent to about two-thirds of this year’s tax revenue. Standard & Poor’s, which last week cut the country’s credit rating to AA-, said the state may have to inject as much as 35 billion euros.

…

While Ireland provided the model for euro partners Spain and Greece in implementing tax increases and spending cuts, the bill for bailing out its banks is mounting. That’s left taxpayers, some enduring pay cuts of 13 percent, questioning the wisdom of the government and Dublin-based Anglo Irish’s management in keeping the lender alive.

“Ireland had been seen as leading the way for the rest of Europe in terms of austerity measures, but now the market isn’t too keen on this black box that’s been opened up by the banks,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “Investors don’t doubt the willingness of the Irish to accept the pain, but they are beginning to ask if the scale of the banking problem is just too big to handle.”

The government so far has injected almost 33 billion euros into banks and building societies, with two-thirds of that going to Anglo Irish. It has paid a further 13 billion euros for real- estate loans that were once worth 27.2 billion euros, the agency responsible for the debt said on Aug. 23.

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“At this point, the taxpayer has paid enough,” said Brian Lucey, associate professor of finance at Trinity College Dublin. “It’s time to consider strongly if the senior bondholders should bear some pain. The only group that should be totally protected should be the depositors.”

(h/t AmericaBlog)

Paul Krugman, Nobel Prize Winner in Economics– “Contrary to what you may have heard, there’s very little that’s baffling about our problems – at least not if you knew basic, old-fashioned macroeconomics. In fact, someone who learned economics from the original 1948 edition of Samuelson’s textbook would feel pretty much at home in today’s world. If economists seem totally at sea, it’s because they have carefully unlearned the old wisdom. If policy has failed, it’s because policy makers chose not to believe their own models.”

You know, you can’t make a career in Academia by saying ‘problem solved’, it makes for very short papers, so there is a perverse incentive, especially in the Social “Sciences”, to disagree simply to be disagreeable and come up with insane theories about Pyramids being landing platforms for a race of parasite infested Galactic Overlords (I am of course talking about Stargate and not Scientology).

How has that Pyramid scheme worked out?

(L)et’s put politics aside and talk about what we’ve actually learned about economic policy over the past 20 months.

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One group – the group that got almost all the attention – declared that the stimulus was much too large, and would lead to disaster. If you were, say, reading The Wall Street Journal’s opinion pages in early 2009, you would have been repeatedly informed that the Obama plan would lead to skyrocketing interest rates and soaring inflation.

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So what actually happened? The administration’s optimistic forecast was wrong, but which group of pessimists was right about the reasons for that error?

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When in doubt, bet on the markets. The 10-year bond rate was over 3.7 percent when The Journal published that editorial; it’s under 2.7 percent now.

What about inflation? … Sure enough, key measures of inflation have fallen from more than 2 percent before the economic crisis to 1 percent or less now, and Japanese-style deflation is looking like a real possibility.

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The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it is applied. But it wasn’t applied on a sufficient scale. And we need another round.

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But politics determines who has the power, not who has the truth. The economic theory behind the Obama stimulus has passed the test of recent events with flying colors…

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So, as I said, here’s hoping that Mr. Obama goes big next week. If he does, he’ll have the facts on his side.

Unfortunately, as Atrios says any action at all at this point looks unlikely.  “Some big, new stimulus plan is not in the offing.”

So given the choice between going big and going home, the Obama Administration has decided to go home.

in Economics.

This is one of the untold tales of the mess we’re in. Contrary to what you may have heard, there’s very little that’s baffling about our problems – at least not if you knew basic, old-fashioned macroeconomics. In fact, someone who learned economics from the original 1948 edition of Samuelson’s textbook would feel pretty much at home in today’s world. If economists seem totally at sea, it’s because they have carefully unlearned the old wisdom. If policy has failed, it’s because policy makers chose not to believe their own models.

On the analytical front: many economists these days reject out of hand the Keynesian model, preferring to believe that a fall in supply rather than a fall in demand is what causes recessions. But there are clear implications of these rival approaches. If the slump reflects some kind of supply shock, the monetary and fiscal policies followed since the beginning of 2008 would have the effects predicted in a supply-constrained world: large expansion of the monetary base should have led to high inflation, large budget deficits should have driven interest rates way up. And as you may recall, a lot of people did make exactly that prediction. A Keynesian approach, on the other hand, said that inflation would fall and interest rates stay low as long as the economy remained depressed. Guess what happened?

On the policy front: there’s certainly a real debate over whether Obama could have gotten a bigger stimulus. What we do know, however, is that his top advisers did not frame the argument for a small stimulus compared with the projected slump purely in political terms. Instead, they argued that too big a plan would alarm the bond markets, and that anyway fiscal stimulus was only needed as an insurance policy. Neither of these arguments came from macroeconomic theory; they were doctrines invented on the fly. Samuelson 1948 would have said to provide a stimulus big enough to restore full employment – full stop.

Monday Business Edition

It’s slowly starting to dawn on Institutional Democrats that they’re going to lose big in November.  The consequences are very real.  Racist Radical Reagan Republicanism is a proven failure.  And Institutional Democrats?  They’re a failure too because they knew what to do and didn’t do it.

I’ll put my policy prescription right up front, the only thing that will save Democrats at this point is massive downsizing- Rahm Emanuel, David Axelrod, Gibbs, Geithner and Summers, Salazar and Duncan.  Do I want heads on pikes?  Figuratively, yes.  These highly paid strikeout kings and clubhouse malcontents have to go for the good of the team.

And if not I hope you’re happy with the crappy offices that come with minority status and one term Presidencies you corporatist whores.  Anyone who claims to care about “electoral victory” is a liar.

It’s Witch-Hunt Season

By PAUL KRUGMAN, The New York Times

Published: August 29, 2010

So what will happen if, as expected, Republicans win control of the House? We already know part of the answer: Politico reports that they’re gearing up for a repeat performance of the 1990s, with a “wave of committee investigations” – several of them over supposed scandals that we already know are completely phony. We can expect the G.O.P. to play chicken over the federal budget, too; I’d put even odds on a 1995-type government shutdown sometime over the next couple of years.

It will be an ugly scene, and it will be dangerous, too. The 1990s were a time of peace and prosperity; this is a time of neither. In particular, we’re still suffering the after-effects of the worst economic crisis since the 1930s, and we can’t afford to have a federal government paralyzed by an opposition with no interest in helping the president govern. But that’s what we’re likely to get.

If I were President Obama, I’d be doing all I could to head off this prospect, offering some major new initiatives on the economic front in particular, if only to shake up the political dynamic. But my guess is that the president will continue to play it safe, all the way into catastrophe.

Opposition Pay-offs

by Dave Anderson, 2010 August 29

The stimulus as passed in ARRA was necessary but insufficient.  It was too small at the topline number for the size of the output gap we actually faced (as the recession was deeper than the earlier data showed) and poorly designed with too much money going to AMT fixes and ineffective lump-sum tax-cuts.  The effective parts were pared back to please Sens. Collins, Snowe and Nelson.  And this was because the Republican Party realized they were the opposition and the job of the opposition is to oppose.  It also was because the Obama Administration likes to punch dirty fucking hippies, especially when they are right on the math and the political outcomes.

What Can Obama Really Do?

by Ian Welsh, 2010 August 29

The idea that Obama, or any President, is a powerless shrinking violet, helpless in the face of Congress is just an excuse.  Presidents have immense amounts of power: the question is whether or not they use that power, and if they do, what they use it for.

…

If Obama is not using that money and authority, the bottom line is it’s because he doesn’t want to.

Putting aside the question of what Obama could have accomplished already, if he wants to help everyday Americans, turn around Democratic approval ratings in time for the midterm elections, and leave behind him a legacy of achievement, he can still do it. If he wants to.

The Two Stories of This Terrible Economy, Yet Obama and the Dems Won’t Tell Theirs

Robert Reich, Friday, August 27, 2010

If Obama and the Democrats would connect these dots they’d have a story that would make Americans’ hair stand on end. We’re in this mess because of big business and Wall Street. Government is needed to get us out of it.

…

So why haven’t Obama and the Dems succeeded yet? Big business and Wall Street have used their money and political clout to stop government from doing as much as needs to be done.

The story is clear, and it has the virtue of being the truth. Why won’t Obama and the Democrats tell it? Is it because big business and Wall Street have the money and political clout even to prevent the story from being told?

Policy Options Dwindle as Economic Fears Grow

By PETER S. GOODMAN, The New York Times

Published: August 28, 2010

“There are many ways in which you can see us almost surely being in a Japan-style malaise,” said the Nobel-laureate economist Joseph Stiglitz, who has accused the Obama administration of underestimating the dangers weighing on the economy. “It’s just really hard to see what will bring us out.”

Japan’s years of pain were made worse by deflation – falling prices – an affliction that assailed the United States during the Great Depression and may be gathering force again. While falling prices can be good news for people in need of cars, housing and other wares, a sustained, broad drop discourages businesses from investing and hiring. Less work and lower wages translates into less spending power, which reinforces a predilection against hiring and investing – a downward spiral.

Deflation is both symptom and cause of an economy whose basic functioning has stalled. It reflects too many goods and services in the marketplace with not enough people able to buy them.

Banks’ Self-Dealing Super-Charged Financial Crisis

by Jake Bernstein  and Jesse Eisinger, ProPublica

Aug. 26, 10:09 p.m.

Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:

They created fake demand.

More Business News below.

State of the Economy

by Ian Welsh

2010 August 23

The key issues are that States and municipalities are essentially bankrupt, and that corporations aren’t hiring.  Corporations aren’t hiring because their profits are fine, and because they don’t see where the sustained growth would come from.  States and municipalities are having income issues because the incomes of median taxpayers have not recovered and the number of employed is not increasing (ignore the “unemployment rate”, what matters is how many people are employed and that hasn’t recovered worth a damn.)  Since States and municipalities have limited ability to borrow and can’t print money, in both cases, unlike the Feds, this means they must cut or raise taxes and in general States are ideologically opposed to raising taxes and municipalities don’t feel they can.  Housing prices remain depressed, which is the main source of money for municipalities.

Since there is no chance of a real stimulus being passed (and if there was, Obama would do it badly, like he did the last one) and since Obama refuses to spend the TARP money on the economy until it’s his reelection on the line rather than Congressional Dems, and since there’s no obvious source of new jobs in the US economy, I see little reason to expect the US economy to recover.  Even if the world economy somehow does, it will route around the US, since the US is a high cost domicile and there is no good reason to produce in the US.  In the old days you produced in the US because that was where the next big tech boom occured, the skills were there, and you needed in.  With the deliberate strangling of innovation in the US due to the oligopolization of the economy, the next tech boom (if there is one) is unlikely to occur in the US.

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None of this was necessary, but Obama chose to not just ask for too little money in his stimulus, but spent the money very badly even outside of the hugely useless tax cuts.  The money did not give the economy an obvious medium term direction: either a huge telecom build-out or an energy and conservation build-out, and the huge bailouts for financial firms created a more concentrated financial sector full of zombie banks with no intention to lend money.  The failure to create a workable cram down on housing prices which also rescued underwater home owners has left housing prices underwater and credit markets still sclerotic.  With the House either going Republican in the fall, or if it remains Democratic with the Democratic margin being controlled by hard-core Blue Dogs, even if Obama did buy a clue, there is little chance that a decent restructuring stimulus bill could get through Congress and the actions of regulatory bodies like the FCC, the Justice department, as well as Obama’s implicit recognition of the health oligopoly, make it clear that his administration has no intention of challenging, let alone dismantling, the oligopolies which are draining the life blood of the US polity.

Now That’s Rich

By PAUL KRUGMAN, The New York Times

Published: August 22, 2010

We need to pinch pennies these days. Don’t you know we have a budget deficit? For months that has been the word from Republicans and conservative Democrats, who have rejected every suggestion that we do more to avoid deep cuts in public services and help the ailing economy.

But these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.

What – you haven’t heard about this proposal? Actually, you have: I’m talking about demands that we make all of the Bush tax cuts, not just those for the middle class, permanent.

…

And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year. But that’s the least of it: the policy center’s estimates say that the majority of the tax cuts would go to the richest one-tenth of 1 percent. … And the average tax break for those lucky few – the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year – would be $3 million over the course of the next decade.

In Striking Shift, Small Investors Flee Stock Market

By GRAHAM BOWLEY, The New York Times

Published: August 21, 2010

One of the phenomena of the last several decades has been the rise of the individual investor. As Americans have become more responsible for their own retirement, they have poured money into stocks with such faith that half of the country’s households now own shares directly or through mutual funds, which are by far the most popular way Americans invest in stocks. So the turnabout is striking.

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The notion that stocks tend to be safe and profitable investments over time seems to have been dented in much the same way that a decline in home values and in job stability the last few years has altered Americans’ sense of financial security.

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But then came a grim reassessment of America’s economic prospects as unemployment remained stubbornly high and private sector job growth refused to take off.

Investors’ nerves were also frayed by the “flash crash” on May 6, when the Dow Jones industrial index fell 600 points in a matter of minutes. The authorities still do not know why.

Special BP Blowout Disaster Coverage

1 Gulf claims chief says no-sue rule was his idea

By HARRY R. WEBER, Associated Press Writer

Sun Aug 22, 4:09 pm ET

2 For Gulf tourism, problem is perception – not oil

By NOAKI SCHWARTZ, Associated Press Writer

Sun Aug 22, 1:51 pm ET

Outrageous?  We report…

“We the Parasites” Benefiting from HAMP

By: emptywheel Sunday August 22, 2010 7:58 pm

The guys in charge of our economy actually seem incapable of understanding who they work for-not to mention the additional problems their “qualified success” will cause. (What happens in a decade when large numbers of middle class kids can’t go to college because the government decided it was okay to subject their families to more misery during a foreclosure?)

Or, they don’t give a shit that this program asks homeowners to pay over and over for their mistakes, all to make sure the banksters never have to pay for their own.

Which is the other problem with this attitude. The alternative to HAMP, of course, is cram-down, in which the banksters have to cut the principle owed to them to what was probably more realistic value in the first place. Every time cram-down gets dismissed, the person dismissing it as an option mobilizes the language of morality, the need to make homeowners pay for buying more home than they could afford (assuming, always, they haven’t been laid off because the banksters ruined the economy or run into medical debt). But there seems to be no language of morality to describe the price banksters should have to pay by failing to do any real due diligence on loans or for accepting transparently bogus assessments of value. Heck, even the banksters get the equivalent of cram-down without a big morality play.

Treasury’s attitude about HAMP is not just evidence they’ve lost all track of who they work for and where the benefits of the economy are supposed to be delivered, but it also suggests that these Treasury folks have lost the most basic notion of capitalism, that if businessmen never pay for bad decisions, they’ll continue to make bad decisions.

We are governed by motherfucking idiots.

Or amoral greedheads, take your pick; but even the Nazi supporting Henry Ford understood you have to have someone to sell cars to.

Except we don’t sell cars anymore.  What we sell is Ponzi scams, pyramid schemes, and multi-level marketing and all the shouters on CNBC think they got in at the top, but they’re really just bottom feeders like the rest of us.

Perhaps the coming Hindenberg Crash will convince them.

Or maybe they really are stupid.

Forget a Double Dip. We’re Still in One Long Big Dipper.

Robert Reich

Saturday, August 14, 2010

The central problem is lack of demand – and that’s what has to be tackled.

Three of the four sources of demand have stopped working. (1) Consumers can’t and won’t buy because they’re still under a huge debt load, can’t get more credit, are afraid of losing their jobs (or already have), depend on two wage earners at least one of whom is working part-time and pulling in less, or have to save. (2) Businesses won’t invest and spend on creating more jobs if they don’t see consumers willing to buy more. (3) Exports are stalled because the dollar is so high they cost too much, much of the rest of the world is still struggling with recession, and American firms can make things for sale abroad more cheaply abroad.

That leaves only one remaining source of demand – government. We need a giant jobs program to hire people and put money in their pockets that they’ll spend and thereby create more jobs. Put ideology aside and recognize this fact. If it makes you more comfortable call it the National Defense Jobs Act. Call it the WPA. Call it Chopped Liver. Whatever, we have to get the great army of the unemployed and underemployed working again.

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If we let the deficit hawks and government haters dominate this debate, as they have, the Big Dipper will continue for years. The Great Depression lasted twelve.

Attacking Social Security

By PAUL KRUGMAN, The New York Times

Published: August 15, 2010

So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count – because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget – while future Social Security deficits are unacceptable – because hey, the program has to stand on its own.

It would be easy to dismiss this bait-and-switch as obvious nonsense, except for one thing: many influential people – including Alan Simpson, co-chairman of the president’s deficit commission – are peddling this nonsense.

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What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution. But they receive crucial support from Washington insiders, for whom a declared willingness to cut Social Security has long served as a badge of fiscal seriousness, never mind the arithmetic.

1 China overshadows Japan economy as growth slows

by David Watkins, AFP

52 mins ago

Paralysis at the Fed

By PAUL KRUGMAN, The New York Times

Published: August 12, 2010

Ten years ago, one of America’s leading economists delivered a stinging critique of the Bank of Japan, Japan’s equivalent of the Federal Reserve, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” With only a few changes in wording, the critique applies to the Fed today.

At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates – the usual tool of monetary policy – were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.

That was malfeasance, declared the eminent U.S. economist: “Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He rebuked officials hiding “behind minor institutional or technical difficulties in order to avoid taking action.”

Who was that tough-talking economist? Ben Bernanke, now the chairman of the Federal Reserve. So why is the Bernanke Fed being just as passive now as the Bank of Japan was a decade ago?