Lowenstein On Bernanke
Don't miss this profile by Roger Lowenstein that will appear in this weekend's New York Times magazine section.
Related, is this sort of thing from a senior member of Congress (and, frighteningly, a member of both Appropriations and Budget) supposed to indicate that policymakers are up to the task of crafting a "stimulus" plan that will do more good than harm?
Longer post to come over the weekend, hopefully.
Related, is this sort of thing from a senior member of Congress (and, frighteningly, a member of both Appropriations and Budget) supposed to indicate that policymakers are up to the task of crafting a "stimulus" plan that will do more good than harm?
Longer post to come over the weekend, hopefully.
posted by The Cunning Realist at Friday, January 18, 2008
6 Comments:
Marcy...She is from the next district over. She is very dumb. Which actually makes her a pretty decent congresscritter. She's really too stupid to come up with anything too dangerous on her own. She just follows the party line and mouths empty platitudes that the masses like. Amusing though...As a mere political observer, the first thing I do is look at the backgrounds of these people. You can almost predict the decisions they make in advance if you understand their backgrounds. Dumb Marcy had no idea who she was talking to...as you can tell she had some empty platitude lined up to embarass Paulson and make it look like she was being tough on the bad member of the CEO club. When she realized she had the wrong man...well...she had didn't know what to say. Yup...that's Marcy.
To believe that Bernanke "failed to foresee that the sudden rise in homeowner defaults would have such far-reaching effects," as he was quoted in Lowensteins's profile in the Times, is to believe in fairy tales, or to believe that Bernanke, with access to exponentially more insider information than you or I, is as blind as a bat. One would have to believe that he was totally unaware that the notional value of the OTC credit derivatives market had explosively grown to upwards of $51 Trillion by June, 2007.
Such a belief is, frankly, impossible. How could I, without a single friend at Citigroup, Merrill, Goldman Sachs, or at any private equity firm or hedge fund know something that the fed chairman does not?
The enormous and unregulated secondary market in borrowed money was a weapon of mass destruction waiting to explode, and explode it has. The lack of transparency in the market, coupled with a bogus ratings system, means that participants in the wagering often have very little way of fully ascertaining the real value of the securities involved or the ability of their partners in trades to handle the potential losses.
Bernanke must have known all this. The real question is why he didn't say anything. By remaining silent, he allowed a bad situation to get much, much worse. Now, he is bailing out the gamblers as much as he can, and it's fairly disgusting. Clinton and Greenspan, with Bernanke's support, created this mess, by overturning Glass-Steagall and using the air from one bubble to blow up another. It is impossible to believe that Greenspan did not see the danger. He simply chose to ignore it. If people were lying to the Fed about their practice of bundling sub-prime junk with more secure loans into exotic credit derivatives, Bernanke has good reason to be mad. If so, why is he bailing them out?
Furthermore, Bernanke's statement in May that "the effect of the troubles in the sub-prime sector on the broader housing market will likely be limited" was so preposterously ill-informed and wrong, or irresponsibly deceptive that he should have tendered his resignation by now.
The only answer is to tell everybody "Game's over. Time to play by some rules."
Worth reading -- the press release from Rep. Kaptur's office regarding her encounter with Helicopter Ben. A small sample:
In prepared remarks, Congresswoman Kaptur said, “America is facing an economic situation that has the potential to be catastrophic. Because of the poor judgment and intense greed of a few banks, companies, organizations, and, indeed, politicians, the average American has been thrust into economic insecurity."
[...]
Congresswoman Kaptur said an economic stimulus package should focus on infrastructure projects to create jobs and consumer spending on American products.
(end quote)
The "average American" had nothing to do with this "subprime mortgage" stuff, nothing to do at all -- some banker dudes just ran up from behind and "thrust" them into "insecurity." So now they need the government to give them money, so they can buy new Wii consoles and stuff, so America can be saved from the bankers.
Fascinating to parse the whole statement for Marcy Kaptur's understanding of cause and effect.
Interesting piece on "B-52" Ben. Doesn't the Federal Reserve control the printing press? It's interesting that Ben never mentions regulations, which would have helped lessen the crisis. When you start giving loans to people and not have them document income, shouldn't that be a cause for concern? Is Ben too blind to see that? He might be a bright guy, but he obviously only sees what he wants to see(like Greenspan) and disregards the rest. The funniest thing I read in that article was the text book author thought Bernanke was a Democrat. What a hoot!!
"Game's over. Time to play by some rules."
Oh come on Sifter. It's a bit too late for that! Time to buy gold...pop a bag of popcorn...and enjoy the decline!
I read really much worthwhile material in this post!
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