Dirty AIG, Crazy Benny

NYT reported the grilling of Ben Chopper Bernanke by legislators. Excerpts..

The Federal Reserve Chairman, Ben S. Bernanke, told lawmakers on Tuesday that the country faces “a prolonged episode of economic stagnation” if they do not address the economic crisis forcefully, but he quickly encountered deep anger, particularly over the dealings of the ailing American International Group. Mr. Bernanke told the Senate Budget Committee that the worst outlook, should action on the crisis prove inadequate, would be “further deterioration in the fiscal situation” and probably “lower output, employment and incomes for an extended period.”....
Mr. Bernanke replied that nothing had made him more angry during the months of the sprawling financial crisis than the episode involving the insurance giant that has reported astronomical losses and has been given financial lifelines worth billions of dollars. “A.I.G. exploited a huge gap in the regulatory system,” Mr. Bernanke said. “There was no oversight of the financial products division. This was a hedge fund, basically, that was attached to a large and stable insurance company.” And this quasi-hedge fund, Mr. Bernanke went on, to nobody’s surprise, made irresponsible bets and took huge losses. “We had no choice but to try to stabilize the system because of the implications that the failure would have had for the broad economic system,” he said.

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So, it is the fault of the legislators because they created the system with the loopholes? Ben absolves himself and the fed of all blame. Ben, every one knew what was going on.

Ben also went on to support Obama's massive spending plan. Usually the bankers want the government to be fiscally sound and balanced, and not run deficits because deficit spending has consequences. However, Big Ben is playing a new tune.

The chairman of the Federal Reserve on Tuesday tacitly endorsed President Obama’s call for huge increases in spending and trillion-dollar deficits over the next couple of years, saying the economic crisis required aggressive action. Though the chairman, Ben S. Bernanke, did not endorse any of Mr. Obama’s specific proposals, he echoed the president’s call for bold government action to address the economy’s immediate travails and pointedly refused to criticize his longer-term plans. “All else equal, this is a development that all of us would have preferred to avoid,” Mr. Bernanke told the Senate Budget Committee, referring to record-breaking deficits expected this year and in the next two years. “But our economy and financial markets face extraordinary challenges, and a failure by policy makers to address these challenges in a timely way would likely be more costly in the end.”