Arrogance at its Greatest
Posted by Ray on January 3, 2010 under Main | 
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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.
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