Ben Bernanke may in fact seem like the unassuming soft spoken professor who is well spoken and polite, and he is, but at the same time he is perhaps suffering from the greatest of the deadliest of sins, pride. I am translating pride into arrogance with Ben because it is essentially the same thing and the sin is identical. There is also no question that Ben suffers from the delusion that he s right and everyone else is wrong, which is how we can tell that he suffers from this disease of arrogance wich will be his ultimate downfall.
I am referring to an article I read this weekend from Reuters, which was reprinted on Bloomberg and various other news sources, where Ben announced that it was not the Federal Reserve’s wall of liquidity during the early 2000’s that caused the housing boom, and subsequent bust, but rather lack of regulation. First of all, he is wrong, because without the liquidity easy credit or the showdown securitization mortgage market simply would not have existed, that is obvious. What is not so obvious is the fact that his regulation argument is also an attack on himself. While Congress did encourage the GSE’s and banks to loosen credit standards, so did the Federal Reserve Bank and the Fed had some significant regulatory authority over these mortgages.
Am I the only one that finds it ironic that Ben, Man of the Year, Savior of the Economy, or whatever else we are calling him now, is the same guy saying that his wall of liquidity is not to blame and more regulation’s was the answer, when part of his job was to regulate the banks? Granted, the Fed’s job in regulating the banks is somewhat small, but are we forgetting Greenspan’s famous speech were he encouraged banks to get more inventive when it came to mortgage origination? This does not sound like getting tough with banks, in fact it sounds like it was a green light to do whatever you want to get homeowners into a house.
Essentially, the Fed gave its blessing to do whatever it took to get people to sign the dotted line on the mortgage application. Not only that, the Fed also provided the liquidity to encourage the lax lending standards. Having just one of those two things is bad, but both combined is disastrous, which we found out. However, our Savior still does not realize that it was the Fed at fault for this mess and I think I know why he is saying this now. He simply wants to be left alone. He figures with his reappointment a done deal, his Man of the Year award, and the magical 25% S&P 500 returns in the market people will get off his back as he built up some credibility, especially the audit the Fed people.
I honestly believe he thinks that his sins of the past can be forgiven because of his recent ‘accomplishments’ which were not really accomplishments. If anything Ben was merely picking up after himself, but with our money. To put everything into perspective on how Ben feels here is how the article ended, and what he thinks caused, I guess, the credit crisis:
“Bernanke pointed to adjustable-rate mortgages and overconfidence that house prices would continue to rise as the main culprits behind the catastrophic housing bubble.”
That is that I guess. He was partially right, but it was not just ARM’s that were the problem, not at all, it was a whole slew of mortgages that were problems. There were jumbo’s that trigger higher rates if the LTV slides below a certain value, there were sub-prime, there was the fact that the asset bubble from the Fed was not just in housing, but in commercial real estate and, well, everywhere. The question is why were people betting so heavily on housing prices to rise? Perhaps because the liquidity spigot was going full force for way too long and then when you went to turn it off the effort was meager at best. Regardless, the biggest problem now is with all types of mortgages, not just ARM’s and sub-prime.
The sheer arrogance of this man is just unbelievable though. The one thing about the deadly sins is that they are deadly and catch up to you, pride is always the one that kills the worst to. At first it was nice to see Ben apologize for the Fed’s role in the Great Depression, but how could we go from a guy who knows that his organization caused the Depression to him denying the Fed caused this problem. What happened over the last 4 years to Ben where he could state the obvious before only to deny it know? It makes no sense other than he suffers from the affliction of arrogance or pride. What I do know is what Ben is doing, long-term, will not work, because Ben has a terrible track record, and the Fed’s powers are on the verge of finally being reduced, which is a great thing as the system failed us greatly and it’s time for it to go.
No matter what Ben and Greenspan are to blame for a large portion of what happened. I am not saying that Congress is innocent, you know me better than that, and I am not saying that those who lied or bought houses they couldn’t afford are innocent either. However, legitimate fraud too place, even to reasonably intelligent people, the Fed let things happen that they should not have and Congress, well, Congress is just incompetent, what do you expect.
Mort Zuckerman was just on Power Lunch, clearly he was the smartest man on the show, but nevertheless his comments regarding the Audit the Fed Bill makes me wonder, is he retarded? He runs newspapers for a living so clearly, well you would think anyhow, he can read, but he obviously has never read the Audit the Fed Bill because he puts up the same paper defense as every other opponent to the bill does. He claims it will take away the ‘independence’ of the Fed and make it a political entity.
Is he serious? The Fed has lobbyists which mean it already is political and when we are talking about auditing what the Fed is taking in for collateral, how they are arriving at interest rate decisions and basically removing the veil of secrecy it is not taking away their independence. Especially since the audits are 6 MONTHS AFTER the fact. I am sorry, 6 months after a decision is made does not mean Congress will have any impact on any decision Uncle Ben makes, period end of story.
Mr. Zuckerman also claims it will weaken the dollar, excuse me? Clearly the man is retarded because the dollar only strengthened last year because we were going to blow up. We were only going to blow up because the Fed screwed up so badly, end of story Mr. Zuckerman. Uncle Ben is going to print the USD out of existence because that is his plan, read my other posts, I know what he is trying to do and believe me he has Obama’s blessing to do it. However, like everything else Uncle Ben has tried to do he will fail and kill the USD.
Finally, Mr. Zuckerman, I guess you did not have history in your remedial classes in school, so let me fill you in on a few events. We had a chaotic system before hand, mostly with bank failures, but even those ‘panics,’ as they were called, were few and far between, i.e. the panic of 1907. The Fed was supposed to end those problems with the banking system, right? Let me answer that for you, yes it was. Well, need I remind you of the little thing called the Great Depression? We had massive bank failures and the Depression itself was caused by the Fed, just like the problems we have now.
In fact, since the Fed was created we have had more serious problems at an ever increasing rate than at any other time in our history, period. If you knew anything, Mr. Zuckerman, you would know that was 100% true. I admit that we need a lender of last resort, but that can easily be accomplished by the Treasury department, but having a simple solution or, more to the point, a public, open solution, is not in the banks best interests. So, Mr. Zuckerman, you clearly are on the side of the elites, not the peoples which is ironic since you peddle your product to the masses. Do us all a favor, stay behind a desk and keep your uninformed opinions to your freaking self you moron.
While I am convinced there is no pricing power for retailers and deflation is here to stay for the foreseeable future today’s PPI data was not encouraging. Of course, Steve Liesman has no idea how to look at the data and refuses to acknowledge that this data shows higher prices in any form. Whether you believe it or not, and I do not believe much in terms of government data anymore, this data shows higher prices.
However, Liesman does not seem to understand higher prices and ignores any inflationary numbers. He seems to think that zero interest rates is a great thing. He also claims, in the clip below, that all the data is getting much, much better, huh? Yes, the data is marginally better, but it is still bad news and Liesman just simply has no clue. After all, this is the same Steve Liesman who missed the Russia meltdown as it happened in front of him, only to take credit for calling it later when he took the Pulitzer later on. Mr. Liesman, I had respect for you 1 year ago, but now you are just a clown.
Santelli really hammers Liesman, rightfully so. Keep in mind this is the same morning show where they hammered Ron Paul for the audit the Fed Bill, which the media, most Liesman, has grossly distorted and framed as taking the Fed’s “independence” away. That is a joke and totally inaccurate as the bill merely removes secrecy away from the Fed, nothing more. Read the bill Mr. Liesman, you idiot.
Uncle Ben is fighting like no tomorrow to kill the Fed bill in the court of public opinion using the same tactics that the banks used last fall. Basically he is saying if you audit us you risk the entire financial health of the US economy. This is the equivalent of putting a gun to your own head and saying; “if you don’t let me go I fill pull the trigger!” You know what Ben, go for it because what you have done is far worse than the financial system imploding on itself all at once. Instead you opted to destroy our currency system so pull the trigger, you will not be missed.
It is beyond me how an audit 180 days AFTER an FOMC meeting would jeopardize the independence of the Fed in any way. I fail to see how the US taxpayer, the money the Fed is playing with, would be hurt by knowing what Ben is taking in as collateral at the discount window. I fail to see how asking for the Treasury Secretaries signature before issuing $500B in currency swaps would be a “bad thing.” However, Uncle Ben says otherwise and the end of his world is at hand, so I hope.
Even though the likes of Mishkin, Steve Liesman and a host of other idiotic economic commentator’s say the Fed will lose its independence and it will be politicized, I am sorry, but $1T in QE in MBS, and how much in treasury QE again, later and you are already politicized. In fact the mere appointment by the President of the United States makes pretty much makes the Chairmanship of the Fed a political position, kind of. The bottom line is that the Fed is a political machine, it has lobbyists for crying out loud!
What Uncle Ben does not want you to know is what he and his cronies have been doing for the past year and you know what? I am not sure even I want to know. What I do know is that since the secret creation of the Fed in 1913, read The Creatures of Jekyll Island, and the late night passage of the Federal Reserve Act with some 3 affirmative votes on it the US has had more crisis than at any point in our history and our dollar has lost 96% of its buying power. Those are facts the Fed denies, but they are true. What the Fed likes to point out are banking panics prior to its creation, but if we made the Treasury the lender of last resort problem solved.
However, did we ever have a Great Depression before the Fed was created? Did we ever have these massive asset booms so close together, see junk bonds in the 1980’s, internet stocks 1990’s, mortgage crisis 2000’s, before the Fed? Did we ever have stagflation, see the 1970’s, before the Fed? Did we have our currency basically become worthless, except in times of war, see Revolutionary War Continental Notes, the Civil War Greenbacks, before the Fed? The answer to all those questions are NO.
I am not saying the Fed does not have a purpose, it is perfect for printing pieces of paper and wasting trillions of dollars per year, but I thought that was Congress’s job. The Federal Reserve system is old, antiquated and needs to be replaced now, not later. It operates in complete secrecy and is accountable to no one, think about that for a minute. It is more powerful and secretive than the CIA, but the CIA has oversight committees, but the Fed really does not. Yes, the Fed has superficial GAO audits now, but it is an operational audit, yes your operations work, that is the extent of the audit. Wow, I wish the IRS would be that lenient on me if I was audited, yeah, we see you made money and filed the proper paperwork, thanks! However, in real life that is not how things work and the Fed needs to be accountable for its actions.
After all, I have yet to hear Greenspan or Bernanke officially take responsibility for blowing up the economy yet. In fact, I still hear those wonderful words, “the sub-prime crisis is contained” and everything is fine. Either Bernanke is a complete moron or he just relies on old economic models that clearly do not work, either way the Fed deserves oversight. Considering this administration has taken it upon itself to declare itself the “transparent administration” and has also taken it upon itself to make most of the decisions for the American people , or risk imprisonment, why should the Fed not be held to the same standards as the rest of us?
Clearly they are no smarter than the rest of us as they missed the greatest asset bubble in the history of man hit them head on. Not only that, but their response was to expand the same policy that created that enormous asset bubble for “an extended period of time” or forever. In other words, they missed one huge bubble only to create an even larger bubble via the USD carry trade or dollar devaluation, take you pick, and they deserve no oversight? To make matters worse, if you read the Lehman bankruptcy documents you begin to see an ugly picture of the Fed, they were taking stocks as collateral at the discount window, stocks! That is against their charter and it is also no wonder why the market goes straight up if the Fed is taking stocks as collateral at the discount window.
This leads to a bigger question, what other junk is the Fed taking at the window? CDO’s, derivatives, options, junk bonds or what? We don’t know. Considering we, the US citizen, is backstopping their reckless behavior so JP Morgan and Goldman can receive billions in bonuses, we deserve to know what is going on. After all, the American people are the ones suffering, not Wall Street or Uncle Ben who are all gainfully employed and living off of our generosity via our annual tax bill. We are the ones who end up bearing the responsibility for all the executive decisions made in secret, or in public by our wonderful elected officials, so we deserve to know what is going on. You, Uncle Ben, have done your damage to us, so while we may not like what we see and while you may end up embarrassed at what we find, so what. You should have thought about that before you secretly bailed out all those insolvent banks and began destroying our dollar for fun.
While the Fed has continually said it is going to slow down its purchases of mortgage backed securities and eventually stop altogether sometime in the near future, it is not. During the first week of October the New York Fed reported that it has purchased another $20B worth of these securities which is driving mortgage rates down to 4.87%.
The Fed has said it will be stopping this program or slowing it down, but it certainly does not look like it to me. It is also clear that without the Fed’s intervention and the tax credit the housing market would be DOA, which is not a good sign for what CNBC has called a robust economic recovery. The FHA is in trouble and is reported to need, sometime in the future, a $54B bailout unless it raises its down payment minimum from 3.5% to 5%, what a stretch, but the FHA says this is unnecessary.
Something just doesn’t sit right with this situation. Clearly the Fed is doing something against what it has publically stated and one of the big issues I have is how bad are these mortgage backed securities? As many of you know, the Fed is not legally allowed to take credit risk, so are they knowingly buying bad debt with these mortgage backed securities with all the bailout reports coming out? Not only that, but with all of these off balance sheet items, what’s on them and what else are they taking for collateral? Is there more credit risk that we don’t know about?
If we have one question about what the Fed is doing that is simply one question too many. They publicly stated they will slow down mortgage backed security purchases and here we see they are keeping essentially the same velocity of buying. What is going on? Audit the Federal Reserve already, enough is enough! View the New York mortgage backed securities transactions HERE
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