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TheStreet Open House

Standing Strong for America in 2014

Federal Reserve

During the financial crisis, the Federal Reserve balked at bailing out General Motors (GM). The Fed could have bought the automaker's bad debt, just as it took bad mortgages off banks' books. Ben Bernanke pronounced assisting GM would be industrial policy, and limited the Fed to extraordinary measures to stabilize banks and credit markets. 

Obama used the Troubled Asset Relief Program -- the Treasury fund established by President Bush and Congress -- to rescue both GM and American International Group (AIG), an insurance company.

The next financial crisis could be defined by the sagging fortunes of health insurance companies under Obamacare and American companies who invested in China's allegedly recession-proof economy.

New Fed Chairman Janet Yellen is well known for her liberal political views, which in my view color her economics. In a crisis, she could see the limits of Fed policy discretion very differently than Bernanke.

If a health insurance crisis erupts, using the Fed's money printing machinery to bail out health insurance companies and Obamacare could put America on a path to inflation and corruption similar to Latin American nations during the 1970s and 80s.

It would be up to Republicans in the Senate to force hearings and compel Chairman Yellen to defend the dollar, not debase the currency.

Standing up to the failures of liberalism has never been politically easy. Republicans like Speaker Boehner and Congressman Ryan are rightly the targets of Tea Party criticism.

All along, at crisis moments like these, they have capitulated. Now standing strong for America is even more difficult, but if not now, when?




This article represents the opinion of a contributor and not necessarily that of The Street or its editorial staff.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.
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