By Alan Fein
Former Fed Chairman Alan Greenspan says the economic recovery is in a “pause” that feels like the economy could be reversing previous gains but with unemployment running high, people should take note that banks and larger corporations are improving.
“We’re in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession,” Greenspan said on NBC’s “Meet the Press.”
When asked about the animosity between Wall Street and the White House, Greenspan said “I’ve never seen anything like this before, I can’t answer that question.” Yet Mayor Michael Bloomberg, who also appeared on today’s Show, put it more bluntly as a growing number of Americans are dissatisfied with the way things are going.
“The public is upset. If they haven’t lost their job, they know somebody who has, if they haven’t lost their home, they know somebody who has,” said Bloomberg. “What do you do, when something’s wrong – you blame someone else.”
“Its government’s job to fix it,” he explained. “Politicians want to stay in office, they look for somebody else to blame. It’s much too simplistic to say the banks did everything wrong.”
“Our problem is that we have a very distorted economy,” Bernanke stated. “High income individuals have added $800 billion to their 401k’s, large corporations and banks are in excellent shape. The rest of the economy – small business, small banks and a very significant amount of the labor force aren’t doing so well. That is pulling the economy apart.”
The former Fed Chief felt the confusion was in the way we examine the economy, not whether jobs, government or large or small businesses were doing better. “The ‘average’ of those two are what we are looking at, but they fundamentally different,” he explained.
When asked if the housing crisis could grow worse and generate a ‘double-dip recession’ Greenspan said, “it is possible, IF home prices go down.”
Greenspan felt that housing prices had flattened out, though he cautioned that there were a large number of mortgages that could fall into foreclosure and if they did, home prices would once again fall. “It would create a problem,” said Greenspan. “Its touch and go.”
Mayor Bloomberg and Democratic Pennsylvania Governor Ed Randell, who also appeared on “Meet The Press” Sunday, both agreed that stimulus funding by the government didn’t do enough and should have more been focused on creating jobs through infrastructure spending.
“We should be investing in things that stimulate the economy, we have to do both and we can do both,” said Gov. Randell.
Both Gov. Randell and Bloomberg agreed that infrastructure spending would do more to put Americans back to work.
Bloomberg noted that $500 tax rebates went to buy flat panel TVs from China and much of the first round funding to states went to their own budget shortfalls than it did to generate jobs.
“We should be investing more money in our infrastructure spending now, we need it,” said Randell. “And its the best job creater.”
Bloomberg noted that in the 1930s, the money went to infrastructure. “Bridges, roads and buildings, those where all built with money spent on infrastructure,” he stated. “This stimulus bill didn’t exactly help our economy, No body’s been directing this money to creating jobs, they used it pay pet projects,” said Bloomberg.
“There is nothing out there that I can see that’s being done to alter this level of unemployment,” stated Greenspan.
On Financial Reform
“Meet The Press” moderator David Gregory asked the panel of things were different today than before and if financial reform would actually make things different.
Bloomberg noted that “the devil’s in the details” in referring to a 200-page bill that very few people have ever read that is based on how the legislation turns over the responsibility to the Fed and the SEC to write regulation without thinking about it before Congress passed the bill.
“This is a dream piece of legislation for lobbyists and lawyers – and no body knows the answer to your question,” the Mayor of New York said.
When asked about the animosity between government and business, Greenspan noted that “I’ve never seen anything like this” in referring to the recession. “Its got to do with the ‘schism in society,’ which is becoming ever-more destructive,” said Greenspan. “We’ve gotta change it.”
“We’ve got to stop looking for villains,” said Bloomberg. “Government needs to promote American commerce and finance around the world. Always pointing fingers and finding fault with everybody, we need to find solutions.”
Randell stated that, “better regulation is good for the business community and that’s something we need to get together on.”