Bernanke: I’m All In
Well, I’ll give Ben credit for this much: He recognizes the need for a plan (of any sort), and he seems to be recognizing that this is serious — no more pussy footing around.
The Fed Chair called for:
• Coordinated action between Congress, Treasury and the Federal Reserve
• Undertaking additional steps to rescue “Financial firms whose failure would pose a systemic risk”
• Supported “close regulatory scrutiny” of firms that engage in “risk-taking”
•Creating a “regulatory procedure for resolving a large, failing nonbank institution”
•Continued bolstering of credit for both consumers and businesses.
Hard to find much to argue with in that list. The bigger issue is whats missing (see this morning’s commentary for a complete discussion):
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Sources:
The Crisis and the Policy Response
Chairman Ben S. Bernanke
Stamp Lecture, London School of Economics, January 13, 2009
http://www.federalreserve.gov/newsevents/speech/bernanke20090113a.htm
Bernanke: More bank bailouts needed
Fed chairman endorses economic stimulus, but also says more help for banks is needed to fix the economy
Chris Isidore
CNNMoney.com, January 13, 2009: 10:52 AM ET
http://money.cnn.com/2009/01/13/news/economy/bernanke_speech/?postversion=2009011310
Bernanke Urges ‘Strong Measures’ to Stabilize Banks
Craig Torres
Bloomberg, Jan. 13 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=at6cYfv8wFJw&
Bernanke Says Stimulus Should Be Paired With Other Measures
MAYA JACKSON RANDALL
WSJ, JANUARY 13, 2009, 10:07 A.M. ET
http://online.wsj.com/article/SB123185225001377063.html
January 13th, 2009 at 11:57 am
How ironic to use a poker reference to sum up the Fed Chair’s view of the financial markets. But everyone’s all-in…
…the Congressional GOP will gang up on the fiscal policy plans Obama and the Congressional Democrats put forth. Would it help the future undecided voters out there if a plan is passed over vociferous GOP objections – with a Biden tie-breaking vote? – save the economy, and then… the GOP has to try destroy Obama like the tried to destroy Bill Clinton after he fought to balance the budget and they claimed in ‘92 that his plan would wreck the economy?
January 13th, 2009 at 12:05 pm
Barry,
Regarding “Undertaking additional steps to rescue “Financial firms whose failure would pose a systemic risk” “, firms should not be allowed to get “too big to fail”. Identify such firms and break them into smaller companies.
Regarding “Supported “close regulatory scrutiny” of firms that engage in “risk-taking” “, it is wrong and entirely unacceptable for a handful of people to put the entire financial system at risk. Among other things, this means limiting leverage, having proper accounting (i.e., on the books), and requiring compensation to be on a multi-year basis.
January 13th, 2009 at 12:07 pm
See William Poole’s interview on Bloomberg for a thrashing of Ben. Like Poole said, in my own words not his, “I know of no example in history where the printing of vast quantities of money turns out well.”
January 13th, 2009 at 12:29 pm
Yeah, he’s “all in” with MY MONEY (and everyone else’s).
January 13th, 2009 at 1:47 pm
“Continued bolstering of credit for both consumers and businesses”
If Bernanke is so concerned about deflation, why isn’t he arguing to use his own feared inflation mechanism of the wage-price spiral instead of cheapening debt?
How could I forget – supply creates its own demand – overcapacity cannot occur – Say’s Law rules.
Mr. Say, meet Mr. Debt. Oops. Your bad.
January 13th, 2009 at 1:48 pm
Bernake will be lucky to have a Cayman islands bank manager job after 2009.
January 13th, 2009 at 2:06 pm
AGG @ 1:48
He’ll probably go back to Princeton, write a book and make a million (or so) from it.
But if he wanted a job at a major bank, it seems to me that any of them would hire him.
He’s buying all their assets. Why the skepticism?
January 13th, 2009 at 2:12 pm
Looks like the market is calling his bluff….
January 13th, 2009 at 2:23 pm
This is getting really frightening. After all they have already done, Ben still wants to drop more Benjamins on the economy. It must be much worse than anybody realizes to still have such a gung ho approach.
January 13th, 2009 at 2:28 pm
Still in the Ready, Fire, Aim mode of crisis management.
I think by the end of the summer, we’ll all recognize this time for what it is.
January 13th, 2009 at 2:34 pm
Will we get heads then?
January 13th, 2009 at 3:25 pm
He recognizes the need for a plan (of any sort)……
Too funny.
January 13th, 2009 at 3:32 pm
Well, we won’t get a pony.
January 13th, 2009 at 3:38 pm
Somehow this half hazard dispensation of taxpayer debt will magically help shore up these failed organizations posing all of this systematic risk.
Will the electronic transfer of these funds somehow fix all of their bad investment decisions, fire the bad managers and replace them with competent ones, and allow of the bad debt and assets to be realized instead of put o life support.
Money that will be needed to help weather the coming storm will instead be wasted on useless politically motivated wishful thinking. We we really need it down the road, we will have a bankrupt taxpayer base saddled with trillions intax debt obligations and a fed and treasury with little capacity to create new capital as the world CBs will no longer be coming to the auction table for another helping of Ts
insert golf clap here…..
January 13th, 2009 at 4:06 pm
Well, we wuz right about the budget deficit:
http://finance.yahoo.com/news/Treasury-deficit-hits-new-apf-14049804.html
Treasury: deficit hits new record in just 3 months
Treasury: federal deficit already totals record $485 billion in first 3 months of budget year
Yes, fans of the amazing disappearing economy…the budget deficit for the first three month of the fiscal year is larger than the entire 2008 deficit.
See what you can do when you really put your mind to it?
January 13th, 2009 at 10:55 pm
Let’s address these one at a time (so many questions):
• Coordinated action between Congress, Treasury and the Federal Reserve
Separation of powers anyone? Collusion? Oversight by anyone, anyone? Either way, has it helped so far?
• Undertaking additional steps to rescue “Financial firms whose failure would pose a systemic risk”
Free market? We now have an elitocracy. Who decides which financial firms? Was Bear Stearns hated, and unsupported? Was allowing Lehman to fail just a mistake, or on purpose? Why would we let anyone get so big as to even pose a systemic risk? Yet ever larger mergers are still the solution, still. Is anyone affiliated with Goldman at the head of the line for bailouts? Any frat buddies of the current Treasury secretary getting special treatment, whoever the secretary is??
• Supported “close regulatory scrutiny” of firms that engage in “risk-taking”
Horse out of the barn, better than nothing. Prosecution, anyone? Other than Madoff, who else is under investigation for fraud? What is risk taking? Whose opinion? Cutting off the animal spirits of economic growth?
•Creating a “regulatory procedure for resolving a large, failing nonbank institution”
The Fed has control of this area (nonbanks)? What is large? Insured by whom?
•Continued bolstering of credit for both consumers and businesses.
Oh, I get it. Loose credit caused the excess stimulation/overleveraging. Bolstering credit will fix the problem. The cause of the prior problem is the current solution. Is Greenspan still on the job? Any lessons learned yet?
January 14th, 2009 at 12:43 am
Maybe if he was really all in he’d start closing down some banks instead of propping them up. Sigh. A guy can dream, can’t he?
January 14th, 2009 at 5:07 pm
• Coordinated action between Congress, Treasury and the Federal Reserve
don’t make me laugh.
• Undertaking additional steps to rescue “Financial firms whose failure would pose a systemic risk”
what about those financial firms whose survival would pose a systemic risk?
• Supported “close regulatory scrutiny” of firms that engage in “risk-taking”
does this include those aforementioned “financial firms”, or just the short-sellers trying to stay alive in a sinking market?
•Creating a “regulatory procedure for resolving a large, failing nonbank institution”
I thought that was called “bankruptcy” — or is that now obsolete in the realm of TBTF?
•Continued bolstering of credit for both consumers and businesses.
streamline the process, just send out bales of newly-printed money. The inflation will take care of the repayment issues.