With regards to the Fed, I’ve been highly critical of them over many
years, believing that it was their unstable and easy money monetary
policy that sowed the seeds for the massive credit bubble that has now
popped. The FOMC’s policy response, led by Bernanke who was a key player
in the Greenspan 1% fed funds policy, to deal with the aftermath is to
revert to another period of easy money. Ben and Greenspan were the mad
scientists whose experiment went wrong after the recession in ’01-’02
and the world looks to a ‘new’ Bernanke now as Chairman, to clean it up
with another grand experiment. While the story of Jekyll and Hyde refers
to the personality conflict of good and evil, it could also be in
reference to changes in personality to different situations. I discuss
all this for the sole reason that Ben is giving a speech tonight at
Jekyll Island, Georgia on the bank stress tests as his functions have
pushed the limits of his responsibilities.

COF, BBT and USB have joined WFC and MS in raising private capital and
the sense of clarity that the stress test has provided based on the
specific sets of scenarios laid out by the Treasury have made investors
comfortable and private capital entering the financial industry is a
great accomplishment considering all the tumult. After March German IP
was better than expected on Friday, French and Italian IP came in weaker
than forecasted and its helping to weigh on European markets.
Commodities are taking a breather also in response.

Category: MacroNotes

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “Bernanke speaking on Jekyll Island, ironic?”

  1. Moss says:

    Partial clarity is better than no clarity. Still much to do with all the off balance sheet shenanigans. I imagine those deceptive tactics will be dealt with via regulatory changes.

  2. Dave in SW Oregon says:

    Considering the birth place of the Fed-Monster is Jekyll Island, as well described in THE CREATURE FROM JEKYLL ISLAND – A Second Look at the Federal Reserve by G. Edward Griffin, perhaps its not so ironic at all.

  3. Dave in SW Oregon tags it.

    Peter, did you not know? or read the book?

  4. leftback says:

    “I imagine those deceptive tactics will be dealt with via regulatory changes.”

    In fact, I imagine these deceptive tactics will continue….

  5. bruerr says:

    Peter, do you have a perspective if law for dealing with unruly Banks, is being underminded?

    TITLE 12 – BANKS AND BANKING
    CHAPTER 16 – FEDERAL DEPOSIT INSURANCE CORPORATION
    § 1831o. Prompt Corrective Action

    http://www.law.cornell.edu/uscode/uscode12/usc_sup_01_12_10_16.html
    http://www.law.cornell.edu/uscode/uscode12/usc_sec_12_00001831—o000-.html

    Please consider if this law has authority and look for weightier provisions. For what it is worth, it seems important do’s and dont’s are expressed in legal language as “shall” or “shall not.” When a term like “shall” or “shall not” is used, it describes a legal mandate. This is at requirement, or required action for the law to be fulfilled. If a legal mandate is NOT followed by the Treasury or Federal Reserve, or Regulators, it may denote possible intent to skirt, undermine or violate the standing law.

    Do you have an opinion as to why the powers that be, are not upholding this law in higher esteem?

    The above laws, especially 12 USC 1831 o, were made into law, to protect American people from financial fraud, lunacy, incompetence, bad investment mistakes, bad faith actors, youthful experiments, guile and chicanery – emitting from large and small financial corporations. These many failures and short comings which manifest during the Savings and Loan era, were uniquely problematic because the FDIC was to guarantee depositor funds at such institutions that were poorly managed.

    When American regulators finished dealing with the Savings and Loan scandal, they came together after resolving the problems, to draft a list of laws to deal with abuses, fraud, dereliction, mistakes of judgment and indulgence, emitting from banks, if such things should manifest in the future. They had the lessons learned from that experience and the laws have been in place since the 1980s.

    Today, many people are coming onto networks with Fox Business, Bloomberg, CNBC, ABC news and lothers, talking like we need new laws to regulate banks that are undercapitalized (for whatever the reason). This shows the person talking is possibly diluted with falsehoods from someone, in that they give pretense that there is no standing law, or imply that the law is not good enough to regulate. But it is and was good enough to regulate. The problem is that the ones in charge of carrying out the law, are NOT performing in good stewardship of the law, but rather, may actually be trying to subvert the mandated sections of the law, in such fashion as to render the law ineffectual.

    Ever since passage of the Emergency Economic Stabilization Act of 2008, it seems like our laws regulating bank mis-management and mis-behavior, have become more and more destabilized. Bankers and Federal Reserve in concert with the Treasury, have made standing laws, ineffectual, by way of omitting to uphold important provisions for regulating undercapitalized banks (IE: letting them continue to pass through money, to share holders via dividends, capital distributions or share buy back programs). This amounts to important provisions of the law being undermined and not just one law. U.S. Code, Title 12, Chapter 16, § 1831o Prompt Corrective Action (b)(2)(B)(i) and (d)(1)(A). Capital distributions (dividends) restricted.

    Many of these laws are common sense type laws, (IE: stop paying dividends, stop paying large bonus for underperforming companies, stop paying excessive compensation for companies that are not well capitalized, stop further issuance of in highly leveraged investment instruments because the government cannot continue to guarantee such investments, etc). The reason the law is not working, appears to be, because the people at the top are flaunting the law and treating Americans and the press like they are foreigners who cannot read the law, or, understand what parts of the law will protect the government and Americans from abuses.

    Because the laws are possibly being violated and routinely trampled (by top officials), it appears that Banks and Regulators are not acting with common sense, and everyone is wondering what the heck is going on with them? Well, what the heck is going on, is that top officials are possibly flaunting the law and violating it over and over in many places, so as to plunder tax payer funds.

    It is very concerning that Mr. Bernanke is asking for more powers, when he and Mr. Paulson have undermined so many standing laws, that would have otherwise protected the funds and brought the banks into stricter regulation.

    For example: How the government is to handle banks that are undercapitalized (after having paid out dividends from 2000-2007). Some of the companies in question, increased their dividend payout during those years such that it might equal the amount taxpayers were required to pay (as emergency economic relief) in 2008? In this example, a large bank may have paid 10-12 billion (or more) in the 6 to 7 year period between 2000-2007. Yet in the 8th year received that amount from the government, and were not required (although it is a law) to stop paying dividends at the time they received the capital infusion from Paulson.

    This is where common sense would guide a top steward who is genuinely concerned for the American tax payer. The law is quite plain. See above: U.S. Code, Title 12, Chapter 16, § 1831o Prompt Corrective Action (b)(2)(B)(i) and (d)(1)(A). Capital distributions (dividends) restricted.

    The money would not be allowed to pass through the corporation, had either one of the following prevailed: Common sense. Treasury upheld the law. …As it happened, Paulson placed no restriction. However, that does not negate the law.

    The law still provides that the dividend should not have been paid after they received money from U.S.government. Paulson simply did not uphold the law, and waited for someone to regulate him or tell him he needed to stop that. The President did not tell him to stop that and to abide by the law. And at the time, this is the one person Paulson was claiming to serve. This shows the President to be ignorant of the law, or derelict at that imperative point in the law. This also shows Paulson’s mindset, that he was not being straightforward and honest in his dealings with the President (omitting to inform the President about the law), or that he too was derelict (in that when he told the President, the President directed him to not uphold that important legal obligation).

    As a result “Capital distributions” or dividend payouts were not stopped. What seemed like common sense at the time, was actually the law.

    Many of our problems are due to important provisions of this law U.S. Code, Title 12, Chapter 16, § 1831o Prompt Corrective Action, being undermined by people who seem like they may have untoward ideas: to take money out of the Federal Reserve Fund meant to guarantee deposits of common Americans and give it to colleagues for safe keeping. The same colleagues who made bad investment decisions.

    Peter and Barry, can you please help explain how top officials can subvert such a law, or if you believe this law to be written in such way as to give top officials permission to undermine and fail to uphold important provisions?

    Thank you. Would appreciate any comments you have after skimming or carefully reviewing the above referenced law.

    Much appreciation for your positive efforts.

    Chris Bruer

  6. bruerr says:

    .

    Further reference to important mandates. These are at possible legal imperatives for dealing with unruly banks, as per lessons learned with Savings and Loan debacle:

    Many Americans are concerned with material change in accounting methods; after many large banks explained to Federal Reserve regulators and the public they were undercapitalized and needed money. U.S. Code, Title 12, Chapter 16, § 1831o Prompt Corrective Action (i)(1) and (i)(2)(D) restrict the activities of any critically undercapitalized insured depository institution; and at a minimum, prohibit any such institution from doing any of the following: Making any material change in accounting methods.

    There are other concerns which give Americans reason to pause: Keeping the same board of directors, CEOs and CFOs at the corporations who engineered failure for firms. In violation of U.S. Code Title 12, Chapter 16, § 1831o Prompt Corrective Action (f)(2)(F) Improving management, doing 1 or more of the following: (i) New election of directors Ordering a new election for the institution’s board of directors. (ii) Dismissing directors or senior executive officers Requiring the institution to dismiss from office any director or senior executive officer who had held office for more than 180 days immediately before the institution became undercapitalized. …

    The executives who signed their firms into toxic debts, are, in theory where fraud is true, not being dismissed and is instead, appear to be receiving substantial rewards and bonus pay for their company work inside underperforming and failing companies. Originally large bonuses were justified to reward profitability that was well above the normal level of a corporation’s annual profit. Other than that, there was no justification for large than life bonus pay.

    With regard to concealment issues: Note two groups of executives. Both groups are comprised of lower, mid and upper level executives. The first group concealed by name and firm, are the ones who signed corporations into debt that would later not be honored (except by U.S. tax payer funds). The second group concealed, are those executives who were paid a large sum bonus of approximately 18-35 billion in aggregate; during December 2008.

    This could denote payouts to people who when signing the debt obligations, did so believing a time would come when the debt would be passed on, by way of federal guarantee or threatening the government with widespread collapse (at many large banks) if such debts were not insured. Sort of like signing firms into debt created a poison trigger or hot button mechanism, so that later they could say something to the effect of, we are going to push this button if you do not guarantee this debt (ie: if you do not pay us and take the debt from our balance sheets – boom – we let financial institutions fail).

    Here comes the money into the firms and it is routed to large bonus structure in aggregate, one of the largest payouts ever engineered in financial history.

    Since the names of signing parties are not released for review prior to awarding substantial bonuses, concealment of signing executives, lays the groundwork for a potential fraud and payoffs. In theory of fraud, payoffs are accomplished by way of high executive pay or bonus awards.

    By firing no person, and keeping all the same actors at their posts, it merely reinforces the same thing can happen again, and bad faith actors will get a bonus.

    By concealing names of executives and keeping them at their posts, before and after bonus is paid, it merely reinforces the same thing: bad faith actors will be concealed from scrutiny and not made public, and will also, get paid a sizable bonus for keeping quiet.

    Our concern is that regulators are not regulating the banks in accordance with common sense, nor with regard to standing law above.

    Peter or Barry: Do you have a sense when reading important provisions of the above law, if they are presented as mandates, meant keep things like this from happening? (To keep people in banks from paying bonus to un-regulated executives. To keep un-ruly executives from staying in place to do push the bottons a second or third time.)

    Do you believe it is appropriate or inappropriate to apply a narrow interpretation to laws which are presented as mandates?

    Many in my town believe the laws were meant to protect Americans from abuse, if they are being properly upheld. (Reference: Purpose*) Do you have an opinion if the law provides sufficient safe guards, if it was properly followed?

    Thank you.

    .

  7. bruerr says:

    .

    *Purpose:

    TITLE 12 – BANKS AND BANKING
    CHAPTER 16 – FEDERAL DEPOSIT INSURANCE CORPORATION
    § 1831o. Prompt Corrective Action

    (a) Resolving problems to protect Deposit Insurance Fund

    (1) Purpose: The purpose of this section is to resolve the
    problems of insured depository institutions at the least
    possible long-term loss to the Deposit Insurance Fund.
    (IE: Least expense to tax payers).

    (2) Prompt corrective action required:
    Each appropriate Federal banking agency and the
    Corporation (acting in the Corporation’s capacity
    as the insurer of depository institutions under this
    chapter) shall* carry out the purpose of this section
    by taking prompt corrective action to resolve the
    problems of insured depository institutions.

    .

  8. bruerr says:

    .

    § 1831o. Prompt Corrective Action (b)(2)(B)(i) and (d)(1)(A) and (d)(2)

    (b) Definitions
    (2) Other definitions …
    (B) Capital distribution
    The term “capital distribution” means—
    (i) a distribution of cash or other property by any insured …
    company to its owners made on account of that ownership…

    (d) Provisions applicable to all institutions
    (1) Capital distributions restricted
    (A) In general: An insured depository institution shall** make no
    capital distribution if, after making the distribution, the
    institution would be undercapitalized.

    (2) Management fees restricted: An insured depository institution shall**
    pay no management fee to any person having control of that
    institution if, after making the payment, the institution would be
    undercapitalized.
    - – - -
    **Shall is to denote legal mandate; a requirement.

    Generally when a firm becomes undercapitalized, and it is the federal government’s guarantee, to make common people whole, who have money with that firm, the federal government brings that company into stricter performance and eventual receivership. To do this laws are in place to protect the tax payer and government.

    One of the first things to go are dividends, by mandate?

    A blue print for disaster, as learned from the Savings and Loan debacle, is that an insured firm in financial trouble, continues to pay dividends. This is a no-no. Ben Bernanke and Hank Paulson knew this and so does most everyone in the regulation of banks. It represents a substantial violation of standing law @ Prompt Corrective Action. 12 USC 1831o.

    Dividends are no-go (period) when a company is in danger of being undercapitalized. Same for bonus pay. Reference legal citation above: U.S. Code Title 12, Chapter 16, § 1831o Prompt Corrective Action (i)(1) and (i)(2)(F) restrict the activities of any critically undercapitalized insured depository institution; and at a minimum (emphasis added), prohibit any such institution from doing any of the following … (F) Paying excessive compensation or bonuses.

    Also see : U.S. Code Title 12, Chapter 16, § 1831o Prompt Corrective Action (i)(1) and (i)(2)(D) … shall, by regulation or order— restrict the activities of any critically undercapitalized insured depository institution; and at a minimum, prohibit any such institution from doing any of the following … (D) Making any material change in accounting methods.

    Peter and Barry, if by subverting imperatives and keeping unruly officers in positions of power, where they can do it again, (and paying them bonus awards) is this equivalent to provoking indignation or inciting insurrection against those who would act against the inherent good, intended by the law?

    .

  9. bruerr says:

    Reference Declaration *narrow interpretation” … It is their right, it is their duty to throw them off ,… (dictators or tyrants or governments that trespass unalienable rights – among these are Life, Liberty – Liberty as in freedom from being unjustly forced to incur the debt obligations of dishonorable NY banking associations and their affiliations).

    That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, (in other words declare independence from NY-based officials and tyrants who seek to UNLAWFULLY impose the debt obligations of nincompoop financial firms on Wall Street – especially those who act in habitual lawless pattern behavior – or continually undermine imperative law.)

    .
    .
    .

    Notation for clarity: Many Americans (99 percent) did not sign themselves to be legally obligated for debts of NY banking firms. In reference to capitalism and preservation of capitalism, those parties who signed their firms into debt, shall be held liable, and no other person shall be legally liable, except those who signed their firms into that debt obligation and who also benefited from initial cash infusions from incurring that debt (whence they improved their health care and dental benefits, or improved a building structure or enhanced their position in wide area real estate enterprising, whether they improved their corporate gym, whether they improved their response to having infusion of capital by way of retreats and use of spas and did by other method use the funds to celebrate executives of those firms – the same who did lawfully incur the debt.) —-> @ pursuit of Life, Liberty and Happiness – to be free from indulgent tyrants, third world type dictators or aristocrats who usually end up trying to do the same : dump their debt obligations off on the common. Freedom from similar acting terrorists and tyrants.

    Liberty = Freedom from enemies foreign and domestic.

    Liberty = Freedom from debt obligations of others.

    Liberty = Ability to uphold the rule of law and capitalism in the same stance.

    Such things if pursued, may bring to pass happiness, happiness as defined by founding fathers †

    .
    .
    .

    † Liberty and Happiness denote things common men may have a right or sense of duty to arm themselves and fight toward.

    .
    .
    .

    Common
    men
    of
    all
    race
    creed
    and
    colour.

    Where it comes down to defining an unalienable right.

    .
    .
    .

  10. bruerr says:

    .
    Warning
    .

    Hank Paulson and Ben Bernanke, by way of omission, acted to enjoin Americans as guarantor for highly leverage transactions involving derivatives and guaranteeing transactions in the derivatives market. In Violation of U.S. Code Title 12, Chapter 16, § 1831o. Prompt Corrective Action (i)(1) and (i)(2)(B) … (i) Restricting activities of critically undercapitalized institutions: To carry out the purpose of this section, the Corporation shall, by regulation or order— (1) restrict the activities of any critically undercapitalized insured depository institution; (emphasis added) AND (emphasis added) … (2) at a minimum, prohibit any such institution from doing any of the following … (B) Extending credit for any highly leveraged transaction.

    Tim Geithner is also trying to put Americans and Federal government in the middle of partnership arrangements inviting private investors to buy assets or bundles of mortgages with backing of the U.S. government, guaranteeing their investment. These will result in banks extending credit for, highly leveraged investment transactions, requiring Americans (via their government) to be in liable partnership with private firms. In other words, this will result in direct violation of the standing law, meant to protect Americans and their government (from just such arrangements). http://www.treas.gov/press/releases/tg65.htm

    In the PPIP program to give incentive to private investors to partner with government, Geithner is seeking to violate the established law at U.S. Code Title 12, Chapter 16, § 1831o. Prompt Corrective Action (i)(1) and (i)(2)(B) … Extending credit for any highly leveraged transaction.

    .
    Warning
    .

    The above referenced laws were meant to protect Americans and their government from being abused or exploited in trusting relationships.

    Trusting relationships @ fiduciary responsibility.

    The law can only work to this end, if the law is upheld by responsible officers in highest seats of authority and power. Responsible officers @ people acting in good faith to protect Americans and their funds from being exploited or misused (for example misuse might been discovered during Savings and Loan era, and can be defined as money passed through a large financial firm to pay bad faith actors or executives who are liable for incurring questionable debt, or debt obligations they intended to dump on FDIC at point of originating the debt).

    Such bad faith actors do not warrant protection from Federal Reserve officers, bank regulators, nor Treasury Office personnel. Nor shall the President be obligated to protect such guile, where true, nor actors, even when his campaign was partly financed by tilted aristocrat-like representatives (low, mid or upper level executives who work for same or have worked for same and have since moved onto more lucrative job title after taking their *40mil* bonus awards at previous job).

    .

  11. bruerr says:

    .

    *40mil* being deemed excessive in violation of U.S. Code Title 12, Chapter 16, § 1831o Prompt Corrective Action (i)(1) and (i)(2)(F) restrict the activities of any critically undercapitalized insured depository institution; and at a minimum (emphasis added), prohibit any such institution from doing any of the following … (F) Paying excessive compensation or bonuses.

    40mil = 40 million

    Applicably, 20 million may also deemed by 99 percent of the populace as being excessive. Where in some parts of the United States, 10 million may also be deemed excessive as defined by the above referenced law, in the precise circumstance where government is giving cash infusion from tax payer funds intended to protect deposits of common Americans.

    2 million, 3, 4 and 5 million may be deemed sufficient reward and compensation, as most Americans believe this is more than enough to make ends meet, and to cover cost of everyday living expenses.

  12. bruerr says:

    Peter and Barry,

    Please keep in mind we have the benefit of hindsight, in having seen many variety of problems that occurred during the Savings and Loan era. Problems that were reviewed carefully and in their entirety, for 4 to 7 years prior to enacting the law, referenced above; 12 USC 1831 o

    What law is in place that allows powers that be, are NOT liable to uphold this law with higher esteem and consideration for the work of others who came before them?

    What gives folk like Bernanke, Paulson and Geithner the right to undermine, bazooka or “torpedo” laws meant to protect the American people – having benefit of both experience and hindsight?

    Trying to draw a line of understanding. Please help me out.

    Chris

  13. bruerr says:

    What gives folk like Bernanke, Paulson and Geithner the right to undermine laws meant to protect the American people – having benefit of both experience and hindsight?

    Trying to bring line of understanding parallel with a line of common sense. Computational review; seems overly difficult trying to make sense of their actions, when comparing law that appears was crafted to protect Americans and their government from abuse and begin taken advantage of? Please help out.

    Chris