Bernanke served for eight years in an administration that had zero compunction about pushing the envelope on abuse of power. So in the face of AIG’s blowup, as the Chairmen of the Fed, with the administration’s full backing, AND Hammering Hank in the background, he claims they had, “no leverage” and back off demanding haircuts? This is either a bold-faced lie or speaks wholeheartedly to Chris’s point that academic economists have no negotiating prowess or leadership ability when dealing with the execs at the banks.

Hank Paulson is consipicuously absent. I recall a NYT or WP article from a year or so ago detailing how Hank and Ben were tied at the hip-talking six or seven times a day trying to figure out the AIG crisis, working out the details on TARP, etc. So if Ben couldn’t carry the water in the AIG negotiations and there was a will to pay less than par then Hank could easily have put words in Geithner’s mouth to get the banks accept less. Problem is there never was a will to get the banks to accept less.

After the ghetto beatdown that Geithner and Bernanke have been taking for the last two weeks, I’d be pretty pissed that Paulson is off in his own office avoiding the disinfecting spotlight of congressional hearings.

While there focus here is on confirm/non-confirm of Bernanke, let’s not forget the overall performance of the Fed against their mandate/charter. Stable employment, stable interest rates, and stable currency. Failed on all counts. Not just a Bernanke problem, and did not start w/ Greenspan. Cannot get much worse (?) : endless bubbles, ZIRP + QE, in addition to the now hugely expanded Fed balance sheet – taxpayer problem, which if “marked-to-market” anytime soon would be likely lead to another meltdown, as I believe you mentioned this AM on NPR.

Bottom line is that America should not allow such an extra-Constitutional, quasi-governmental organization to have almost unlimited power over the entire economic system. Article 1, Section 8, Clause 5. Congress: Do your job. No checks and balances. Fed independence is – and has always been – an oxymoron. No “change” from Obama either. Status quo.

an anti-Mc Fadded Act screed, dressed up as an Econ 340 undergrad course, still, gives good background on the topic..

also, this list of bon-bons, http://www.fdic.gov/regulations/laws/important/index.html , should give one insight into the idea that ‘Banking’ isn’t what most of us *think it is..

Chris,

another fine article, thank you, much~

Thank you Chris. Alot of what you are saying rings true. Much more than rant, more like bedrock. Thanks again to you and Dennis at IRA

What an excellent rant to start the week…. ;-)

“Finally, the Federal Reserve has expanded the U.S. monetary base by more than 150% since the beginning of the recession. That is not a typo. The monetary base has soared from $800 billion to over $2 trillion. Much of this has been accomplished through outright purchases of mortgage-backed securities (not repurchases) and an equivalent creation of base money. Unless these securities can be sold back out into private hands for the same value that was paid to acquire them, the Fed will have effectively forced the U.S. government to make its implicit guarantee of these agency securities explicit, without the authorization of Congress. To the extent that the underlying mortgages default, the U.S. government will be forced to issue additional Treasuries to retire the mortgage backed securities now held by the Fed. Alternatively, if the U.S. does not explicitly bail out Fannie Mae and Freddie Mac to the full extent, the Fed will have created money, with no recourse, and without the equivalent backing of assets or securities on its books. In short, the Fed is now engaging in unlegislated, back-door fiscal policy.”

In addition to the big NO´s you mention regarding a second term for Bubblenanke:

From the minutes of FOMC meetings it has become clear that he was a huge proponent of the almost ZIRP (1%) policy of the FED. He was a deflationist even at that time. With the 36 months of too easy money plus doing nothing about the incredible amounts of mortgage securities, he was one of the men enabling and causing the crisis!

Plus, all his quotes, even in the months just before the crisis — great economy, only $ 50 billion impact, subprime damage contained, etc. etc. — reveal that intellectually he does not understand the financial world he lives in.

Who would have thought that a president elected with a mantra of change we can believe in, would NOT change this fed head?

BB is going to be re-confirmed not because he is the right person for the job, that much is clear.

He is being re-confirmed because the bastards that run this country, who were not elected, Rubin, Greenspan, Lord Blankfiend, J. Dimon, Gary Gensler, and ultra-powerful others have hijacked this country from the voters, and no matter what the voters want, their “elected” reps have been told what to do. Or else.

The difference between living in this country or some dictatorship is the disUnited States has Disneyland.