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No one seems to remember 1969-70, when Wall St. was busy creating a bubble of takeover loans. The Fed came down to the Street and told us to cut it out, to stop making loans that they termed "nonproductive." Indeed, for a time, the tax-deductibility interest on such loans was suspended. We cut it out.The moral is, if the Fed isn't aware what's going on (overnight funding, for example)it's likely to have difficulty identifying a problem that needs treatment. But then again, if one is a deadline-beset journalist with zero working knowledge of how business actually gets done on the Street, what possible useful judgment can you render? Brian: you need to add some good bloggers, such as Yves Smith at Naked Capitalism, to your roster of experts.
He didn't understand the interconnections? Really? Isn't that his job?
So is he smart or clueless? Or selectively so?
It is not too complicated to understand. There were plenty of people raising warning flags. They were just ignored or told they were alarmists.
Many state governments saw the problem coming and wanted to regulate the sub-prime mortgages and the Bush administration took them to court to prevent them. Where was Mr. Bernanke then?
inflation has not hit America yet because all the banks are sitting on the cash, when the banks release this money into the economy we will finaly have inflation. The national Banks are shareholders in the FED it is a public/private institution. Who are these banks and who are the largest shareholders?
He may have had the biggest effect on the world, but not for the reasons cited:
1. He did nothing to reign in the profligate gambling before the crisis and did everything to support it by not exercising any oversight.
2. The choice between bail-out and collapse is a false one. By law, the potential insolvency of the firms is to trigger their going into receivership.
3. He did not prevent the panic, he created it by blackmailing the citizenry "If you don't bail out the banks, the whole economy will collapse."
4. He saved the paper economy, but did nothing for the real economy which is financing the bail-out.
5. He refuses to say which firms got what amounts of money.
6. The canard that it is all too complicated for regular people to understand only serves to justify their doing whatever they want to do.
For your listener who inquired about an apology:
Bernanke, advertised as the greatest expert on 1929 etc, seems not to have read much history. I was looking up something in Chernow's big book on Morgan and found on pp.354-55 this great exchange in the summer of 1932 (before the election) between Leffingwell of Morgan and FDR: "...You and I know," (wrote Leffingwell,) "that we cannot cure the present deflation and depression by punishing the villains, real or imaginary, of the first post war decade, and that when it comes down to the day of reckoning nobody gets very far with all this prohibition and regulation stuff." To which FDR replied: "I wish we could get from the bankers themselves an admission that in the 1927 to 1929 period there were grave abuses and that the bankers themselves now support wholeheartedly methods to prevent recurrence thereof. Can't bankers see their own advantage in such a course?" And then Leffingwell again: "The bankers were not in fact responsible for 1927-29 and the politicians were. Why then should the bankers make a false confession?
Time Magazine...not a reliable source of information.
Please have your guest stop typing on his computer. We can hear it.
Ben was also the head of the Federal Reserve as an unregulated shadow banking system flourished. A system that had no lender of last resort when markets started to freeze.
He is cut from the same cloth as Friedman and still believes the Fed can clean up any mess after a bubble bursts instead of monitoring and correcting bubbles before they burst.
Re the interest rate comment: low interest rates encourage spending by everyone, not just big investors, and also keep ARMS and home equity lines affordable. Not all of us with adjustable rate mortages were part of the sub-prime scam -- for example, we had excellent credit ratings, and got a low adjustable rate, with a cap, that was a better deal than a fixed rate, given that we planned to retire and sell the house in fewer than 15 years.
In the meantime, however, many of us have had salary reductions, job losses, et al due to the recession. We appreciate the low interest rates, which help ease the pain while the economy recovers.
People trashing Obama have no understanding of history. Read a few histories of the Great Depression; you will recognize the strategy behind the stimulus. Roosevelt didn't nationalize the banks, either; he closed them for a week and then audited them. Obama followed a similar strategy. Spending is also part of the plan.
They've done a great job, and I am weary of listening to no-nothings on the right say otherwise.
I was pissed about the AIG bailout, because they should have taken a haircut (100 cents on the dollar!?) But my friend told me that was Geithner at the NY fed who made that decision (is this true?), and I should keep in mind that it was made during a catastrophe. In hindsight I would like to hear an apology for this. But why is Berneinke leaving interest rates so low that fatcats can get free money to re-invest in other countries currency and make a quick buck?
ummm, who reads Time magazine anyway??
Benanke, Geitner, Summers, Orsag: the whole Obama economic team saved us from Great Depression 2.0. Bernanke symbolizes the efforts, and he's not a member of the Administration's team, so he's a good "apolitical" choice.
Baloney. These guys are all involved in the big scam and make loads of money on their "positive" reporting.
He printed money making the US dollar more worthless and gave the money to those "talented" people.
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