With a groundswell of public opinion against the Federal Reserve in general and Ben Bernanke in particular, Sen. Jim Bunning (R-KY) takes something of a victory lap for having been the only committee member to oppose Bernanke’s nomination four years ago.

Bunning’s prepared statement at today’s confirmation hearing from his website:

Four years ago when you came before the Senate for confirmation to be Chairman of the Federal Reserve, I was the only Senator to vote against you. In fact, I was the only Senator to even raise serious concerns about you. I opposed you because I knew you would continue the legacy of Alan Greenspan, and I was right. But I did not know how right I would be and could not begin to imagine how wrong you would be in the following four years.

09-12-03_bunningThe Greenspan legacy on monetary policy was breaking from the Taylor Rule to provide easy money, and thus inflate bubbles. Not only did you continue that policy when you took control of the Fed, but you supported every Greenspan rate decision when you were on the Fed earlier this decade. Sometimes you even wanted to go further and provide even more easy money than Chairman Greenspan. As recently as a letter you sent me two weeks ago, you still refuse to admit Fed actions played any role in inflating the housing bubble despite overwhelming evidence and the consensus of economists to the contrary. And in your efforts to keep filling the punch bowl, you cranked up the printing press to buy mortgage securities, Treasury securities, commercial paper, and other assets from Wall Street. Those purchases, by the way, led to some nice profits for the Wall Street banks and dealers who sold them to you, and the G.S.E. purchases seem to be illegal since the Federal Reserve Act only allows the purchase of securities backed by the government.

It’s hard not to like an elected official who sees fit to include phrases like “easy money”, “filling up the punchbowl”, and “cranking up the printing press” in his prepared remarks.

The rest is below and is well worth reading – failure at consumer protection, failure to see asset bubbles, failure to regulate banks, failure to monitor derivatives…

On consumer protection, the Greenspan policy was don’t do it. You went along with his policy before you were Chairman, and continued it after you were promoted. The most glaring example is it took you two years to finally regulate subprime mortgages after Chairman Greenspan did nothing for 12 years. Even then, you only acted after pressure from Congress and after it was clear subprime mortgages were at the heart of the economic meltdown. On other consumer protection issues you only acted as the time approached for your re-nomination to be Fed Chairman.

Alan Greenspan refused to look for bubbles or try to do anything other than create them. Likewise, it is clear from your statements over the last four years that you failed to spot the housing bubble despite many warnings.

Chairman Greenspan’s attitude toward regulating banks was much like his attitude toward consumer protection. Instead of close supervision of the biggest and most dangerous banks, he ignored the growing balance sheets and increasing risk. You did no better. In fact, under your watch every one of the major banks failed or would have failed if you did not bail them out.

On derivatives, Chairman Greenspan and other Clinton Administration officials attacked Brooksley Born when she dared to raise concerns about the growing risks. They succeeded in changing the law to prevent her or anyone else from effectively regulating derivatives. After taking over the Fed, you did not see any need for more substantial regulation of derivatives until it was clear that we were headed to a financial meltdown thanks in part to those products.

The Greenspan policy on transparency was talk a lot, use plenty of numbers, but say nothing. Things were so bad one TV network even tried to guess his thoughts by looking at the briefcase he carried to work. You promised Congress more transparency when you came to the job, and you promised us more transparency when you came begging for TARP. To be fair, you have published some more information than before, but those efforts are inadequate and you still refuse to provide details on the Fed’s bailouts last year and on all the toxic waste you have bought.

And Chairman Greenspan sold the Fed’s independence to Wall Street through the so-called “Greenspan Put”. Whenever Wall Street needed a boost, Alan was there. But you went far beyond that when you bowed to the political pressures of the Bush and Obama administrations and turned the Fed into an arm of the Treasury. Under your watch, the Bernanke Put became a bailout for all large financial institutions, including many foreign banks. And you put the printing presses into overdrive to fund the government’s spending and hand out cheap money to your masters on Wall Street, which they use to rake in record profits while ordinary Americans and small businesses can’t even get loans for their everyday needs.

Now, I want to read you a quote: “I believe that the tools available to the banking agencies, including the ability to require adequate capital and an effective bank receivership process are sufficient to allow the agencies to minimize the systemic risks associated with large banks. Moreover, the agencies have made clear that no bank is too-big-too-fail, so that bank management, shareholders, and un-insured debt holders understand that they will not escape the consequences of excessive risk-taking. In short, although vigilance is necessary, I believe the systemic risk inherent in the banking system is well-managed and well-controlled.”

That should sound familiar, since it was part of your response to a question I asked about the systemic risk of large financial institutions at your last confirmation hearing. I’m going to ask that the full question and answer be included in today’s hearing record.

Now, if that statement was true and you had acted according to it, I might be supporting your nomination today. But since then, you have decided that just about every large bank, investment bank, insurance company, and even some industrial companies are too big to fail. Rather than making management, shareholders, and debt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of moral hazard.

Instead of taking that money and lending to consumers and cleaning up their balance sheets, the banks started to pocket record profits and pay out billions of dollars in bonuses. Because you bowed to pressure from the banks and refused to resolve them or force them to clean up their balance sheets and clean out the management, you have created zombie banks that are only enriching their traders and executives. You are repeating the mistakes of Japan in the 1990s on a much larger scale, while sowing the seeds for the next bubble. In the same letter where you refused to admit any responsibility for inflating the housing bubble, you also admitted that you do not have an exit strategy for all the money you have printed and securities you have bought. That sounds to me like you intend to keep propping up the banks for as long as they want.

Even if all that were not true, the A.I.G. bailout alone is reason enough to send you back to Princeton. First you told us A.I.G. and its creditors had to be bailed out because they posed a systemic risk, largely because of the credit default swaps portfolio. Those credit default swaps, by the way, are over the counter derivatives that the Fed did not want regulated. Well, according to the TARP Inspector General, it turns out the Fed was not concerned about the financial condition of the credit default swaps partners when you decided to pay them off at par. In fact, the Inspector General makes it clear that no serious efforts were made to get the partners to take haircuts, and one bank’s offer to take a haircut was declined. I can only think of two possible reasons you would not make then-New York Fed President Geithner try to save the taxpayers some money by seriously negotiating or at least take up U.B.S. on their offer of a haircut. Sadly, those two reasons are incompetence or a desire to secretly funnel more money to a few select firms, most notably Goldman Sachs, Merrill Lynch, and a handful of large European banks. I also cannot understand why you did not seek European government contributions to this bailout of their banking system.

From monetary policy to regulation, consumer protection, transparency, and independence, your time as Fed Chairman has been a failure. You stated time and again during the housing bubble that there was no bubble. After the bubble burst, you repeatedly claimed the fallout would be small. And you clearly did not spot the systemic risks that you claim the Fed was supposed to be looking out for. Where I come from we punish failure, not reward it. That is certainly the way it was when I played baseball, and the way it is all across America. Judging by the current Treasury Secretary, some may think Washington does reward failure, but that should not be the case. I will do everything I can to stop your nomination and drag out the process as long as possible. We must put an end to your and the Fed’s failures, and there is no better time than now.

Amazingly, the name Greenspan appears no less than 12 times in Bunning’s remarks.

That’s not exactly good company these days…

ooo

Tim Iacono is a retired software engineer and writes the financial blog “The Mess That Greenspan Made” which chronicles the many and varied after-effects of the Greenspan term at the Federal Reserve. Tim is also the founder of the investment website “Iacono Research” that provides weekly updates to subscribers on the economy, natural resources, and financial markets.

Category: Markets

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.

81 Responses to “Jim Bunning Does Not ♥ Ben Bernanke”

  1. rustum says:

    I just listened to his read out. He grasped lot of issues discussed over here. Some Sentators knows lot of stuff. They just have their own priorities.

  2. jeff in indy says:

    too bad he won’t be there to kick ol’ ben around after next year. maybe mr. paul, his soon to be successor, will continue kicking…just like his dad.

  3. odds says:

    I met Bunning a few years ago. We talked about his stint with the Pirates. Hall of Fame pitcher. I also gave him props for bashing Greenspan over the years. It was 2006 when we spoke, and I asked him what he thought about being the only person to take Greenspan on over the years. He said … and remember, this was during the time frame that the bubble was peaking … that he believed that the reason Greenspan gave him fits was that he used rates to set financial asset price policy, as opposed to inflation policy. He said that (and here comes the political part) George HW Bush was unfairly hosed by Greenspan due to Greenspan’s insistence that any rate cut in 1990 be accompanied by a tax hike. Bunning said they were separate issues. Meanwhile, Clinton was a great beneficiary of easy money going into Y2K, while George W. Bush suffered from a reversal of the easy money policy during his first few months. But then, Bunning said that Bush became a huge beneficiary for several years during the housing boom.

    Bunning’s point was that even though the Fed folks thought they were smart, and they used big words that made the folks in Washington fall all over themselves with adulation, the reality is that bubbles and busts kept getting worse. Funny thing is, he said it all with a slight smile on his face, as if he knew people would soon see why Greenspan deserved the verbal abuse Bunning unleashed.

  4. tradeking13 says:

    A ray of light in an otherwise Bernanke ass kissing session.

  5. franklin411 says:

    Jim Bunning had a stroke. Perhaps that explains it.

  6. [...] Jim Bunning Does Not Heart Ben Bernanke [...]

  7. censeo says:

    Amazing, just amazing: to hear an elected official speak truth, from his head and not his pocket book. And I love the ultimate denigration of Alan Greenspan, the biggest piece of scum to hit the skids, finally, in a long time. Ayn Greenspan has his place in economic history as the one of the biggest fools. What a piece of ugly, whiney, incoherent crud. Beware, beware of ideologues! I’m beginning to think my one summer course in American Economic History taught me more about the cause of the great depression than Bernanke seems able to conjure. It has gone out of fashion, but… Before Eeeconomistes got such celebrity status the going truth was: “If you laid every economist end to end they wouldn’t reach a conclusion.” Remember that one, Barry?

  8. censeo says:

    to franklin411: What?

  9. Adult Franklin411 says:

    In short, you are the definition of moral hazard. Great!

  10. Moss says:

    The real issue with the Fed is captured in the statement
    ‘Meanwhile, Clinton was a great beneficiary of easy money going into Y2K, while George W. Bush suffered from a reversal of the easy money policy during his first few months. But then, Bunning said that Bush became a huge beneficiary for several years during the housing boom.’

    The Fed, and the potential for easy money policies, are seen by the party in power as a right of passage. Greenspan went one step further and insured that Wall Street and the stock market in particular would also benefit.

  11. ashpelham2 says:

    When I see remarks like that, I see someone who doesn’t have enough money to get re-elected. Everyone knows that the real political power comes from the funding you have, and no one has more money than big pharma and wall street. I will say this: Bernanke isn’t the worst we could do.

  12. the bohemian says:

    BR- Excellent post-

    this quote by Benanke from his last nomination should be all the reason needed to vote against renomination-

    Bernanke said at last nomination: “I believe that the tools available to the banking agencies, including the ability to require adequate capital and an effective bank receivership process are sufficient to allow the agencies to minimize the systemic risks associated with large banks. Moreover, the agencies have made clear that no bank is too-big-too-fail, so that bank management, shareholders, and un-insured debt holders understand that they will not escape the consequences of excessive risk-taking. In short, although vigilance is necessary, I believe the systemic risk inherent in the banking system is well-managed and well-controlled.”

    how’d that turn out?

    also- f411- ????

  13. carleric says:

    It is simply too bad that the James Thurber rule (when a person is more right than his neighbors he constitues a majority of one) doesn’t apply in that nest of morons – our United States Senate. Of course, there are still people that worship at the altar of th4 GreenspanPut.

  14. rustum says:

    I think, he just reiterated his point instead of victory lap.

  15. willid3 says:

    while i am not to opposed to the rest, i wish he had been more bipartisan (or at least admit failure from his side hen its there). the derivative mess is a bipartisan creation. it took both parties (not just Democrats) to create it.
    and i don’t really see why the Fed wants to keep consumer protection duties since they never ever use them until some body else forces them to do so.

    both of those failures along with deregulating the rating agencies are what created this mess!

  16. willid3 says:

    as to regulating banks and having the tools to do so, seems like the FED has dropped the ball on that for at least 12 years. they can’t deal with the TBTF banks and have proven that. the only reason the mess isn’t worse is because they pulled out every tool and check book they could to keep the entire economy from collapsing. and they just barely did that too. and then they don’t want to fix it so we don’t have to do the entire thing all over again in a few years.

  17. HCF says:

    Bunning pitches one up and in on Bernanke! The umpire warns both benches…

    HCF

  18. DeDude says:

    I certainly agreee with most of those critiques of Bernanke and Bunning should be commended for having opposed Bernanke 4 years ago. However, it would be nice to see his prepared statement from 4 years ago when he also opposed Bernanke. Was he as critical of easy money, lax bank regulation, lack of consumer protection, and lack of poping bubbles back then? Did he support Brooksley Born and derivative regulations at that hearing? Or is that all just a new found “after the fact” religion that he has adopted now because of its political popularity?

  19. bailey says:

    Neither do I, not since the fall BEFORE he was annointed when he said: housing prices reflect strong economic fundamentals.

    Nell Henderson, Washington Post Staff Writer Thursday, October 27, 2005, story titled: “There’s no housing bubble to go bust”.
    ‘ “U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals,” such as strong growth in jobs, incomes and the number of new households. ‘

  20. the bohemian says:

    anyone have news on the late day sell off?

  21. franklin420d says:

    Whooooaaaaaa Little bro put the bong down, just step away from the bong.

    What does having or not having a stoke have to do with anything?

    Ma’s going to be pissed at you.

  22. the bohemian says:

    I wonder if some info leaked out about tomorrow’s NFP numbers??? Thus the afternoon sell off?

  23. scepticus says:

    This is all bullcrap.

    It’s all very well moaning about bernanke and his helicopters but there seems to be an undercurrent of lalaland thinking in much of this criticism – if only we’d had higher interest rates and sensible men at the helm none of this would have come to pass.

    It’s BS, it would have come to pass right after 2001 and we would have had a screaming depression then which could only have been countered by printing money like we are now. High interest rates would have made it far worse. The debt was unsustainable then and its unsustainable now, so no point maknig out it would have been OK if it were not for the last 4 years.

    None of these distinguished gentlemen want to address the real issues which are unsustainable inequality of income leading to deeply deficient demand everywhere coupled with a merciless wage arbitrage.

    Instead they spend their time pissing around wagging their fingers in fits of red faced outrage in a vast blame game which seems to distract wonderfully from the abyss in front. Bernanke sees the abyss – and will have noted its presence in 2001. Of course he has no idea what to do about but print money so what he needs is some adult help.

  24. SteveC says:

    I just happened to turn on CNBC in the middle of this takedown. Very entertaining. You’re right that the only option the Fed has now is to print money. (My hunch is we won’t avoid a depression anyway. Too much debt).

    I think everyone is angry the Fed shot their wad on the I-banks and foreign banks without any negotiation. It tells me they know a lot about academia, but not much about business. These banks were all in deep trouble, and had no leverage at the bargaining table (other than “we’ll destroy the economy if you let us go under”). The Fed panicked and gave them everything they wanted. I would have f’d the bond holders and foreign banks, and opened clean, competing banks backed by Federal money to drive these bastards we saved out of business. That’s business the way GS likes to play it. Only fair play when its done back to them.

  25. Mannwich says:

    I’ll say this – I’d MUCH rather have Ben than what would likely be the alternative – Larry Summers as Fed Chairman.

  26. the bohemian says:

    well skepticus-

    maybe we should have confronted the abyss like adults in 2001-

    and what makes you think Bernanke wants help- somewhat presumptious to assume so- no? And that he was behind covering TBTF bank postitions w/ AIG at 100% w/ no haircut??? That alone shows vast incompetence or disregard for the taxpayer’s money-

    so he does need to be fired. Also ZIRP and QE are no way to run an economy. Maybe failures and debt contraction through bankruptcies and write-offs are what is needed to fix an over-indebted nation. Had we done that in 2001 we may have already been through most the hurt.

  27. Lugnut says:

    Props to SteveC, very good post

  28. scepticus says:

    Mannwich its less about people than it is about the system. A system in place for far too long and with so many dependants from lord blankcheck right down to the lowest food stamper cannot be abandoned at the drop of a hat and will be a train wreck no matter who is in charge.

    Try the ‘quick collapse’ route and one just ends up with thugs like hitler taking over when it turns out the ‘quick’ bit was wishful thinking and the hard new man in charge is in fact no more capable of changing things than the predecessor.

    Sad fact is a managed decline is the only option, warts and cocked up bailouts and all. The political machine is utterly paralysed by ideological and fiscal gridlock so until the halls of power can unclench their bowels and expell 30 or 40 years of constipation we’ll have to make do with monetary squits instead.

    Some patience is going to be required.

  29. scepticus says:

    “aybe failures and debt contraction through bankruptcies and write-offs are what is needed to fix an over-indebted nation. ”

    A common myth. WHen they tried that in the early 30s the saving rate was negative by 1933 and the economy was more indebted as a ratio of debt/gdp than when it started.

    You can’t write off debt unless you write off savings too. And the savings in question cannot just be bank bond holders. Bank bonds are not money.

    Money is deposits in banks, and unless some of these get wiped out writing off debt will make no difference. All deposits are claims on future income, and all other forms of debt are just derivatives of these.

  30. flipspiceland says:

    So why are you, BR, still a fan of Bernanke?

    What is it that you don’t get, or don’t seem to want to, to see this bastard/whore of a troglodyte thrown out on his ass?

  31. flipspiceland says:

    @scepticus

    So if all benny has to do is print money, why in hell do we need him? What’s so special about acting like Kinko’s on ‘roid rage?

    A zombie or corpse could do what he does.

  32. Theodore D. says:

    So…. Over the past year and a half of been learning everything I could about economics and our economy and I’m a newly converted Austrian – sorta. Problem is I just got out of Grad school and owe about 200k.

    Seems to me that we’re in/ going through a deflationary cycle that is only going to get worse. Those in debt hate deflation for obvious reasons… SO shouldn’t I hope helicopter Ben gets reappointed so he will turn the printing press to High to attempt to counter the deflation?

    As I see it the credit destruction is huge and it will take a ton of QE to counter the destruction. More than likely he’ll under-do-it, until he over does it. Waalaa – hyper inflation! I could pay my 200K back in no time as Bread costs 2,000$ per loaf and China threatens to invade.

    Not an ideal scenario for those with money (who would all be in gold by this point anyway), but it would be great for me!

    How am I wrong? (minus the threat of China invading and the social unrest due to wheelbarrowing greenbacks around?)

  33. scepticus says:

    you don’t need ben. that wasn’t my point. Whether you have ben or bob is not the issue.

    Had you had a real monetary hawk at the FED in 2008 we’d all be deeply, deeply FUBAR by now, well beyond anything you can imagine. Had you had a bob, much like ben, I don’t think the outcome would have been very different.

    Now the total collapse scenario has been postponed, there’s a chance to sort some things out. We should be using the time more wisely than squabbling .

    Don’t forget that the last year has only been round one. This, flipper, is the point I am trying to make.

  34. scepticus says:

    “How am I wrong? ”

    because no hyperinflation without willing borrowers. Also, they can be neutralised by raising reserve requirements from zero, reversing the rules on sweeps and by raising bank capital requirements.

    I’m sure there will be some strong inflation, not imminently but in 10 years or so once consumer debt has been paid down – it takes that long.

  35. wally says:

    It is a political mistake by Obama to support this reappointment.
    Loyalty in politics can be a fine thing, but loyalty to people who are not loyal to your constituents is a huge error… and Bernanke not only is not loyal to Obama’s constituents, he doesn’t even understand them or how they live.

  36. DeDude says:

    >>>Maybe failures and debt contraction through bankruptcies and write-offs are what is needed to fix an over-indebted nation. Had we done that in 2001 we may have already been through most the hurt.<<<

    That is an absurd idea that we would have been able to recover in just 8 years if we had let it all fall. Remember that the last great depression we fell into, took 15 years and an unbearable world destroying war to get out of again. This was followed by decades of top taxrates that were twice the current max (to rebuild society and pay back the debt from the massive war “stimulus”). The cost of a depression is an unbearable burden over several generations; that is why almost any price is worth it to prevent one.

  37. the bohemian says:

    so . . .scepticus-

    for instance- billy bob has a mortgage- billy bob lost his job- billy bob stops paying his mortgage- bank takes over property- resells at loss and writes off the difference-

    who’s savings got extinguished in that scenario??? outside of the banks loan loss provisions-

    I am talking about helping Joe and Schmo out there- so you tell me what I’m missing

  38. Theodore D. says:

    scepticus -

    I agree with you on sweeps, and reserve requirements (capital req’s aren’t zero – but its stilla problem), but your point about there being no one to borrow shows a lack of understanding about inflation. If I borrow ten dollars today with the understanding that 10$ will be worth the equivalent of 5$ tomorrow then you certainly would have borrowers.

    Also why 10 years? If consumer debt is all paid down in 10 years – which you suggest, why even inflate? What you say makes little sense. If the only thing that is sticky is my debt and everything else increases – how is this bad?

  39. willid3 says:

    TB, probably who ever deposited the money in the bank that made the loan. their savings just got stuffed down the drain. the way banks operate is take in deposits to make loans. or at least that the way they are supposed to do it.

  40. the bohemian says:

    “The cost of a depression is an unbearable burden over several generations; that is why almost any price is worth it to prevent one.”

    wow- sounds like you got it all figured out-

    there have been other depressions and financial crises- we seem to have survived. How does prescribing debt and insolvency a cure for debt and insolvency?

    at some point someone will be presiding over an even bigger crisis because we cannot deal with what is in front of us now.

  41. Mannwich says:

    It seems like we’ve had these same debates on this blog and others ad nauseum. Or is it just me?

  42. mitchn says:

    @Scepticus wrote:
    > None of these distinguished gentlemen want to address the real issues which are unsustainable inequality of income leading to deeply deficient demand everywhere coupled with a merciless wage arbitrage.

    Bingo.

  43. Mannwich says:

    @mitchn & scepticus: They don’t mention it because they either know they can’t fix it (at least not easily) or simply don’t think that it’s a problem to be fixed. I vote for the latter. What does that tell you?

  44. the bohemian says:

    willid-

    hmmm . . . let’s see- if a bank has a million in deposits w/ a 10% reserve then it can lend out 10 million dollars-

    so the money is never there- that’s fractional reserve banking-

    bank lends money to silly sally who buys a sassy sofa- silly sally loses her job and stops paying on the sofa- bank repossesses the sofa- sells it for a fraction of the balance owed and writes off the difference against loan loss provisions-

    once the sofa was purchased- the bank only really had the continued employment and promise to pay backing the sofa- because the sofa – once repossessed- will never be worth what it cost the borrower to purchase.

  45. scepticus says:

    bohemian, when banks write down assets their capital decreases.

    when their capital/equity has decreased they have two options: issue new loans to bolster assets and thereby restore their equity or shrink their balance sheet which means divesting themselves of deposit liabilities.

    If all banks try and do this at the same time the divested deposit liabilities have nowhere to go.

    equity = assets – liabilities

    and remember that deposit liabilities = savings.

  46. DeDude says:

    We survived the previous depression but it took a long time and a lot of pain to get out of it. The issue is not whether debt has to be payed back or defaulted on some day. The question is the speed of the process. Steve Berry gave a link a few days ago showing that the total level of debt in this country has begun to be reduced (topped in Q1 of 09). If the process is to fast it produces unemployment and that brings down consumption and (since consumption is 70% of the economy) that brings down the GDP.

  47. The Curmudgeon says:

    franklin411 Says:

    December 3rd, 2009 at 3:02 pm
    Jim Bunning had a stroke. Perhaps that explains it.

    Yes, ad hominen attacks always serve to advance the dialogue. So, here’s some more:

    franklin411 is a pustule on the asshole of real America, without the intelligence or maturity to ever be allowed an opinion. Although so young he is still shitting yellow in his diapers, on the basis of no more evidence in his lifetime except that he thinks that things really sucked while he was growing up when the Republicans were in charge, he steadfastly supports any and all government manipulations and machinations, now that the Dems are nominally in charge. He’s too stupid to see that all this ideology bullshit is just a smokescreen to keep the sheeple occupied while their asses are being sheared and they are being prepared for the chopping block. franklin411 will one day make for a tasty barbecue, roasted on the spit of one of these government bureaucrats he so steadfastly supports. In the meantime, we’ll be regaled with stories of how inherently good are guys like Bernanke, whose heart is always in the right place–I mean he is from the government and he said the world would’ve ended w/out Goldman Sachs, so he was doing God’s work by rescuing them, right?

  48. the bohemian says:

    manny- as i said the other day to Dead Hobo who hasn’t posted in a while-

    welcome back to the echo chamber- because the same ideas have been bouncing around TBP for a while-

    and what have we accomplished?

  49. scepticus says:

    mannwich these men are not stupid despite what we all might think. they know its a problem however they face a very powerful lobby which also knows its a problem, but don’t care as long as they get theirs.

    I don’t know much of jim bunning, but what I would like to ask has this particular man even done to address these problems or even acknowledge them?

    Jack sh1t, I’m betting. Which means he is capitalising on the misery of ordinary people by channeling their popular anger through him at an obvious target. Classic politics.

    And of no damn use to anyone.

  50. scepticus says:

    as to echos, yeah, I hear them, and I don’t come here that often.

    misinformed populism, most of it.

  51. Mannwich says:

    @scepticus: I never said they were stupid. They know damn well what they’re doing. In fact, I would ascribe more sinister motives to what they do. They simply believe that if they bail out their friends in high places that enough crumbs will fall off the table to feed the Sheeple so that said Sheeple doesn’t disturb the status quo with any nasty uprisings. That’s their bet. I hope it works out..for their sake.

  52. Mannwich says:

    @ahab, I mean bohemian: Nothing. We’re all just more aggravated, although I’m just posting every now and then for sport. I don’t expect anything to change for the better and I feel somewhat relieved by that acceptance. Heck, I personally have a pretty good life, so eff it. Might as well go out and enjoy it. I’ve long ago come to terms with this train wreck that’s in progress. I’m just a mere observer these days. Got my popcorn, my recliner, and am just watching it unfold. What else can you do?

  53. Adult Franklin411 says:

    Hey Curmudgeon! Lay off my earlier self. I grow up to be a better person. I promise. ;-)

    The popular unrest appears to be contained.
    Ben Bernanke, December 3, 2009

  54. Mannwich says:

    @scepticus: Why come here at all then if you already have all the answers? You sound like Ben Bernanke himself. Figures.

  55. the bohemian says:

    poor f411- no respect- lol

    idealism is ok in small doses- but at some point people have to wake up to reality- good post TC

    manny-

    pretty much sport posting myself-

    but- I am now thinking that our representatives move at glacial speed- but just maybe- are starting to get a clue- thus the renomination of Bernanke bringing on much criticism from all sides- so maybe there’s hope- but then again- maybe i’m just delusional

  56. the bohemian says:

    Dedude-

    yeah- I see your point- but it isn’t as if we are going to have the same President for the next 13 years a la FDR to shape policy-

    different faces- different priorities- so the longer it all is- i can almost guarantee the more fucked we will become

  57. ab initio says:

    Scepticus -

    Deposits are way down the stack. Banks have other liabilities too including preferreds and various classes of debt.

    There are many more astute than me including for example John Hussman who posit that if the banks were forced to write down many of their under-water assets – their equity would be wiped out (so shareholders get zero) and as you go down the stack – bond holders would take haircuts but not wipeouts – but depositors would still be whole. This is in general – every banks case would naturally be different.

    All the bailouts and money printing by Bernanke, Geithner et al have done is saved the bond holders at taxpayer expense.

    Households are doing the right thing now – getting their balance sheet in order – as seen in the contraction of household credit. But the government and the Fed are ballooning their balance sheets – thats why total debt/GDP is rising. Bottom line is that credit growth cannot compound at a rate greater than GDP indefinitely. IMO, countries have to do same thing that businesses and households do when their balance sheet gets out of whack. I don’t think there is any magic here.

    There are no instances that I am aware of in history where money printing resolved a balance sheet problem.

  58. [...] Tip: The Big Picture (Tim Iacono) Share and [...]

  59. DeDude says:

    the bohemian-

    I personally think we should begin the payments on national debt by increasing the top tax rate to the good old Nixonian level of 70%. It would only remove money from where there is so much money that it is destructive (investor class creating bobbles here there and everywhere, screwing up prices on commodities etc.), without harming the consumer class (essential for economic revival). But try getting that through congress ;-)

    It is unfortunate that the voters of this country will only vote for those who advocate simple pain-free “solutions”, that pretty much ensures that nothing drastic or fast will ever happen regardless of whether it would or would not work. Lets hope that somehow they do not vote for those who peddle quick fix bull crap pain-free “solutions”, but I would be surprised if they don’t.

  60. the bohemian says:

    hmmm . . . from the Huffington Post-

    Bernanke reminded Congress that it has the power to repeal Social Security and Medicare.

    “It’s only mandatory until Congress says it’s not mandatory. And we have no option but to address those costs at some point or else we will have an unsustainable situation,” said Bernanke.

    interesting . . .so much for the elderly and the poor . . .maybe it’s inevitable

  61. DeDude says:

    ab initio;

    Total debt maxed out in Q1 of 09 so if total debt/GDP is rising it is not from ballooning debt but from falling GDP. And that is the danger of paying debt back so fast that it prevents economic growth. If you cut debt in half and the economy in half, you have actually gone nowhere (except to Argentina). You no have the same relative debt problem and a second world GDP trying to support a first world society (that ain’t gonner work). So now that infrastructure that used to allow you to be efficient effective and productive at an industrialized nation level starts rotting away.

    But you are absolutely right that money printing does not solve a balance sheet problem, so its not for the sake of the balance sheet that money has been printed (its to prevent further fall in GDP). Eventually it has to be payed back and that can happen via increased in actual taxes or increase in the tax that nobody needs to show themselves as having votet for (inflation).

  62. Pat G. says:

    Many people first got to know Bunning when he began pitching for the Tigers. I was a kid then & my dad was a service advisor for a local Cadillac dealership in Detroit. It wasn’t unusual for him to bring home other peoples vehicles as he test drove them on the way. So, he says to me, nice car huh? Yep, can we go for a ride in it, I asked. Sure. We stop at a park and he tells me to open the glove box and pull out the registration. Yep, it was Bunning’s car.

  63. the bohemian says:

    dedude-

    dedude-

    good points- true on the higher taxes on the rich- got to get money from somewhere- and that’s where most of it is-

    and “quick fix bull crap pain free solutions”- well- that is what we clamor for-

    what we need is a little “cold hard truth”

  64. the bohemian says:

    “dedude”- a name so nice i used it twice (-:

  65. Mannwich says:

    @ahab: For Ben To talk about “reducing entitlements” for the masses, while robbing the masses to prop up the elite reveal his elitism and arrogance to a “t”. Only in a bizarro world like ours would this be even remotely acceptable to even mention, much less do. If Ben and the Fed want to remaind “independent” (which is laughable, since we know who they answer to – not us…their banking masters), then he shouldn’t comment on these political matters. He has a lot of nerve to suggest that we should cut Social Security and Medicare while he uses taxpayer money to bail out his buddies. Good grief.

  66. The Curmudgeon says:

    @ Mannwich; Ahab:

    But it’s all about wage arbitrage. American workers won’t see their pay stop declining until it roughly equals that of a Chinese peasant, with all the lack of government benefits to boot. It is the way of trading partners. The real crime here is that the Chinese are doing all they can to keep their own sheeple completely sheared. It ends up hurting not just their people (but that have never known anything better), but also the American worker that is just too expensive to employ (hence unemployment at 10% plus).

  67. Mannwich says:

    @Curmudgeon: I totally agree (see my post above in response to mitchn’s post).

    mitchn Says:

    December 3rd, 2009 at 6:21 pm
    @Scepticus wrote:
    > None of these distinguished gentlemen want to address the real issues which are unsustainable inequality of income leading to deeply deficient demand everywhere coupled with a merciless wage arbitrage.

    Bingo.

    Mannwich Says:

    December 3rd, 2009 at 6:25 pm
    @mitchn & scepticus: They don’t mention it because they either know they can’t fix it (at least not easily) or simply don’t think that it’s a problem to be fixed. I vote for the latter. What does that tell you?

  68. mitchn says:

    @Mannwich
    They don’t care about it — that’s the globalization 3.o paradigm. Wages will be arbitraged to the lowest-cost country while the boys and girls with fractional jet shares flit from safe have to safe haven. Until they don’t. (See Wikipedia: Antoinette, Marie.)
    ker

    @ab initio
    I loathe the man, but you should check out the Brain Wesbury segment (there were two) on Tech Ticker today. BW said pointed out that the market began to rally in mid-March when it became clear that Barney Frank and Congress were going to force FASB to switch back from mark-to-market to mark-to-fantasy. IMO, that’s exactly right.

    As for the echo chamber effect that many on this thread are complaining about. Well, nothing much has really changed over the last year, has it? Bubble collapsed and now the powers that be are trying to reinflate it. Same old, same old…

  69. The Curmudgeon says:

    Sorry Manny, as usual, your comments cut straight to the heart of the matter. I think you should rename yourself “Occam”. Also per usual, I’m getting in on the tail-end of things.

    http://en.wikipedia.org/wiki/Occam%27s_razor

  70. Mannwich says:

    No apologies needed, Curmudgeon. These threads can get quite long. Not easy to read every comment.

  71. [...] Jim Bunning Does Not ♥ Ben Bernanke Tim Iacono The Big Picture, Dec. 3, 2009 http://www.ritholtz.com/blog/2009/12/jim-bunning-does-not-heart-ben-bernanke/ PERMALINK [...]

  72. jpmist says:

    No one else seems to be bothered by the absurdity of anyone from Congress crapping on the Fed about anything. The Fed isn’t a branch of the federal government, Congress is. I doubt that there is anything the Fed did or didn’t do that Congress didn’t have legislative control over. Bunning blames the Fed for allowing the banks to become too big to fail? Really? I didn’t know the Fed could pass legislation.

    Was it the Fed who starved the SEC for funds and staffing? Was it the Fed who created Fannie and Freddie? Was it the Fed who allowed high rollers 30:1 leverage? Was the Fed the only institution who ignored rampant mortgage lending fraud? Who takes more money from lobbyist, the Fed or Congress?

    Bunning points the finger at Greenspan for “easy money” when it is Congress that ran up record setting earmarks, passed a Sr. Rx bill just to keep the Bush in office a second term and hasn’t balanced an annual budget since Clinton. Since Congress just keeps spending us into a multigenerational deficit hole, what choice does the Fed have but to print money, inflate and devalue the dollar?

    The balls on this guy. . .

  73. Adult Franklin411 says:

    I doubt that there is anything the Fed did or didn’t do that Congress didn’t have legislative control over.

    I guess somebody missed the class where we talked about the independence of the Fed.

  74. jpmist says:

    AD Frank, apparently you missed my point.

  75. FrancoisT says:

    “I guess somebody missed the class where we talked about the independence of the Fed.”

    Sigh! So sick of reading that urban myth!

    Fed’s independence is toward the Executive, NOT the Legislative branch of our go-vermin.

    Two weeks ago the House Banking Committee voted to authorize periodic audits of the Federal Reserve System by the Government Accountability Office, and outrage spread through the media about the Congress usurping the authority of the Fed.

    The fact of the matter is that oversight of the Federal Reserve is part of the job description of the Congress. The Constitution of the United States empowers the Congress “to coin money [and] regulate the value thereof.” When he was chairman of the House Bankng Committee in the 1950s, Wright Patman liked to say that the Constitution gave the Congress full power over money, “but we have farmed it out to the Federal Open Market Committee” in the Federal Reserve System.

    The much touted “independence” of the Fed is an independence from the executive, not the legislative branch.

    The Fed can write its own budget without dictation from anyone for the practical reason that printing money is profitable and the central bank always shows a surplus. But under our system of government, the Congress can no more give the Fed full policy independence than the President can resign as commander-in-chief of the Army and Navy. The legally mandated twice-yearly “Humphrey/Hawkins” reports that the chairman of the Fed makes to the Congress are an expression of ultimate Congressional responsibility for monetary policy.

  76. ToNYC says:

    Ben thinks that if he goes all in with our credit he can’t lose. What he didn’t fathom is that when you lose the trust of the players by being an unfair umpire for the Banks, you can’t play with an empty table. The best this guy can do is resign. I watched the full 14:24 available at market-ticker. His body language said it all, back to Princeton to write had to be one of his notes. The fork came out clean; the man is done.

  77. torrie-amos says:

    maybe we will get partisinship after all, when everything goes to hell in a hand basket

  78. [...] Bunning to Ben: “you are the definition of moral hazard” – Big Picture [...]

  79. Transor Z says:

    FrancoisT, the writer you quoted is correct from a constitutional standpoint but that doesn’t make A Frank wrong. Congress has been abdicating its authority to the Executive for a long time now. They turned the Fed into an untouchable black box. So you’re right in theory but not in reality.

  80. [...] a quote of comments by Sen. Bunning in the recent re-confirmation hearings for Ben Bernanke (”Jim Bunning Does Not ♥ Ben Bernanke“). Sen. Bunning (who was the only one to vote against Bernanke’s appointment four years [...]

  81. tshaddy45 says:

    The main job of the FED. should be to prevent bubbles. Looking back on history. Look to William McChesney Martin Jr. FRB Chair 4-2-51 to 1-31-70 Contrary to Truman’s expectations, however, Martin guarded the Fed’s independence, not just through Truman’s administration but also through the four administrations that would follow. To the present day, his term as Chairman is the longest term the Board of Governors has seen. Over nearly two decades, Martin would achieve global recognition as a central banker. He was able to pursue independent monetary policies while still paying heed to the desires of various administrations. Although the objectives of Martin’s monetary policy were low inflation and economic stability, he rejected the idea that the Fed could pursue its policies through the targeting of a single indicator and instead made policy decisions by examining a wide array of economic information. As Chairman, he institutionalized this approach within the proceedings of the FOMC, gathering the opinions of all governors and presidents within the System before making decisions. As a result, his decisions were often supported by unanimous votes on the FOMC. His most famous quote about his central banking philosophy was that the job of the Federal Reserve is “to take away the punch bowl just as the party gets going,”[1] referring to the need to raise interest rates when the economy is at its most active.
    EXAMINING A WIDE ARRAY OF ECONOMIC INFORMATION BY GATHERING THE OPINIONS OF ALL GOVERNORS AND PRESIDENTS WITHIN THE SYSTEM BEFORE MAKING DECISIONS!
    The FED needs to continue to be independent of politics he knew that. Unfortuniatly the current mentra is to go with the big money in policy.
    THIS WILL ULTIMATELY LEAD TO FAILURE AND MUCH MORE PAIN BEFORE THE ULTIMATE CRASH. WE HAVE NOT SEEN THE WORST YET!