The following information comes from a well-placed sourced, whose partner was present at the event — but since its 2nd or 3rd hand to me, consider it a rumor until proven otherwise.
Over the prior weekend of April 6, former Fed Chair Paul Volcker was present at a small gathering. Several luminaries from the worlds of finance, economics and trading were in also attendance.
The conversation turned to the present Federal Reserve. The blunt, straight talking Volcker stated that Ben Bernanke is not likely to serve more than one term as FOMC chief. Quote: "He’s a one-termer."
For reasons both political and economic.
The economic reasons are the weaker of the two issues. Most of the forces leading to the current situation were in effect long before Bernanke became Fed chief. But if the current crisis gets worse — a possibility only a few economists and analysts see as likely — heads will have to roll. While the current administration does not believe in falling on your own sword in the event of failure, it has been considered honorable amongst other, less disingenuous administrations.
Regardless of who wins the White House in November, there is a strong impetus for change across the board. Bernanke was George W. Bush’ Council of Economic Advisers Chairman. If a Democrat wins, the political pressure for change will be even greater.
It is only fair to point out that Ben Bernanke essentially inherited the current crisis. As far as assessing where the blame goes, between him and Greenspan, I find its 85/15 in favor of Greenspan.
Why only 15% responsibility? As we have long lamented, the policies that led directly to the current crisis trace directly back to Greenspan. His malfeasance in refusing to allow the Fed to perform its duties as regulator of banks — despite Ed Gramlich’s warning about predatory lending — is the enabling governmental act for the reckless and irresponsible lending frenzy. Easy Al then compounded the problem by dropping rates to generational lows at 1%, and then keeping them at 1% for an unprecedented length of time. His actions are what is primarily at fault here.
Bernanke only gets 15% for his prior words, not actions. 5% responsibility as CEA chair — but he was so late in this admin that most of the economically problematic policies were already well in effect. He gets another 5% for his now infamous deflation speech. That rationalized Greenspan’s ultra-low rates, and deflected criticism. Lastly, the "Savings Glut" meme he help to propagate is also worth 5%. Each of these two speeches were influential, and raised Benrnake’s profile. They also served to provide intellectual cover for the now discredited and otherwise indefensible policies of Alan Greenspan. Hence, but 15% is Bernanke’s fault.
The bottom line remains this is an ongoing issue, one that is likely to be increasingly costly for US taxpayers, and damaging to the global economy.
Must See TV: Volcker’s Speech on Financial Crises http://bigpicture.typepad.com/comments/2008/04/paul-volckers-s.html
Deflation: Making Sure "It" Doesn’t Happen Here
Governor Ben S. Bernanke
November 21, 2002
The Global Saving Glut and the U.S. Current Account Deficit
Governor Ben S. Bernanke
Federal Reserve, April 14, 2005. http://www.federalreserve.gov/boarddocs/speeches/2005/200503102/default.htm
Ex-Fed Chairman Chides Current One
MICHAEL M. GRYNBAUM
NYT, April 9, 2008
Volcker Says Fed’s Bear Loan Stretches Legal Power
John Brinsley and Anthony Massucci
Bloomberg, April 8 2008
WSJ, April 9, 2008; Page A14
Category: Federal Reserve
I have been meaning to post this since Thursday morning : An interview with Joseph Stiglitz, the Columbia Professor who is a Nobel Prize-winning economist, with his overview of the economy.
The professor pulls no punches — about the economy, President Bush, and Fed Chair Bernanke.
Stiglitz on the Economy
Thurs. Apr. 10 2008 | 7:00 DT[08:07]
Joseph E. Stiglitz Home Page
Why? Not only is Kind of Blue Davis’ best-selling album, it may very well be the best-selling jazz record of any artist, of all time. Even though it was released almost 50 years ago, it still sells over 5,000 copies per week today. In addition to its commercial success, it has come to be described by many Jazz critics as the greatest jazz album of all time.
Writing in AllMusic, Stephen Thomas Erlewine noted: “Kind of Blue isn’t merely an artistic highlight for Miles Davis, it’s an album that towers above its peers, a record generally considered as the definitive jazz album, a universally acknowledged standard of excellence. Why does Kind of Blue posses such a mystique? Perhaps because this music never flaunts its genius. It lures listeners in with the slow, luxurious bassline and gentle piano chords of “So What.” From that moment on, the record never really changes pace — each tune has a similar relaxed feel, as the music flows easily. Yet Kind of Blue is more than easy listening. It’s the pinnacle of modal jazz — tonality and solos build from the overall key, not chord changes, giving the music a subtly shifting quality.”
The one jazz record to own even if you don’t listen to jazz — the band is extraordinary: John Coltrane, Julian “Cannonball” Adderley on saxophones, Wynton Kelly and Bill Evans on piano, Paul Chambers on bass, and Jimmy Cobb on drums. I recently received a remastered CD of kind the album, thus retiring my scratchy hiss and pop laden vinyl version. (And another intelligent CD pricing: $7.47 at Amazon)
For those of you looking for some , check out NPR: Kind of Blue (54 minutes)
videos after the jump . . .