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.

****
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.”

FIVE BEN-EFICIAL IDEAS FOR BEN (BERNANKE)

Ben has been leading an all-out attack on his invisible enemies in this "financial World War III" (according to Erin Burnett of CNBC) but the situation appears to be worsening daily. Putting interest rates at 0%, and buying up all types of "worthless" mortgages and other financial assets has just made the situation worse, eroding confidence.
As long as Ben is running the printing press 24/7, here are some ideas, which, if implemented, will make our economy sky-rocket with a turbo-charged booster.

1. The Fed provides anyone who is laid-off the same annual salary as Ben.
   
2. The Fed pays everyone's health insurance premiums, and all co-pays. This includes people who are currently without any health insurance.
   
3. The Fed contributes the "match" (instead of the employer) to everyone's retirement plans- 401K, etc.
4. The Fed pays a new mother's salary for six months while she cares for the new-born baby.
5. The Fed pays the tuition of every College student.

Money spent on these initiatives will probably provide greater return than throwing it at crooked banks or at other lemons.

Out of Breath with the BnB 1-2 Punch

Today, Dr. Ben 'Helicopter' Bernanke and President Bush both talked about the economy, albeit at different venues.
According to the NYT, "In testimony before the Senate Banking Committee, Mr. Bernanke avoided the word “recession” in characterizing the current economy, noting instead that consumer spending and exports were keeping growth “at a sluggish pace” while the housing sector “continues to weaken.”

He added that spending for personal goods had “advanced at a modest pace so far this year, generally holding up somewhat better than might have been expected given the array of forces weighing on household finances and attitudes.”

While the risks to the overall economy were still “skewed to the downside,” he said, inflation “seems likely to move temporarily higher in the near term.”"

The same article quotes Mr. Bush as saying in a press conference that "“My hope is — is that people take a deep breath and realize that their deposits are protected by our government,” the president said. He added that economic growth “was not the growth we’d like” but expressed confidence that the country would overcome “a time of uncertainty.” The nation’s troubled financial system is "basically sound," he added." When a reporter asked what the short-term advice for Americans was in light of the high gas prices, Bush's main response was "There is no immediate fix. This took us a while to get in this problem; there is no short-term solution. I think it was in the Rose Garden where I issued this brilliant statement: If I had a magic wand -- but the President doesn't have a magic wand. You just can't say, low gas. It took us a while to get here and we need to have a good strategy to get out of it."

While Dr. Ben, along with Hank and Cox, is taking extra-ordinary measures to bail out and lend a helping hand to the financial and quasi-financial institutions with public money, Mr. Bush thinks that people should a deep breath and keep the faith. Perhaps he should add that by singing 'Don't Worry, be Happy" everything would be all right.

Ben, Bush and Hank's "The Song Remains the Same" - Me no Mea Culpa...

The NYT reports that "Ben S. Bernanke, the Federal Reserve chairman, and Treasury Secretary Henry M. Paulson Jr. told Congress on Thursday that new regulatory powers are needed to insulate the national economy from damage if a big Wall Street firm collapses."

So far, no one- neither President Bush, nor Mr. Paulson nor any of the previous Treasury Secretaries nor any of the CEOs of the home builders, mortgage brokers, or banks nor any of the regulators- has accepted blame or taken responsibility for his or her role in creating the current credit crisis and an ethical crisis. Quite a few people, including myself, had sounded warnings as early as 2004 and 2005 about the crooked practices used to juice up the mortgage market and the basic bet that the government will bail out the risk takers. While this is exactly what has happened, there is no public outcry about the culpability of the leaders. The American public, myself included, sorely needs an education in accountability- or have we progressed to a higher level where we do not want accountability?
Another example:
Charles Prince, the guy who led Citi to its current miseries, under whose reign Citi committed a number of grossly unethical acts, and who was effectively fired from Citi, was elected to Xerox Corporation's Board of Directors. Great Reward for a Job Well Done!

The Alan and Ben Show - Don't Worry, Be Greedy

Tow interesting headlines:

Fed may keep open lifeline to financial firms

Fed Sees Turmoil Persisting Deep Into Next Year

According to the article Mr. Bernanke said that the Fed would issue next week long-awaited rules to restrict new exotic mortgages and high-cost loans for people with weak credit.

Looks like Mr. Alan (Greenspan) and Mr. Ben were on a different planet all these years. ANYONE with a brain knew exactly what was going on- new financial products being 'engineered' and sold, by greedy firms and individuals to greedy firms and individuals. Lack of fiscal responsibility, and wanton ignorance of risk by both creators and buyers was evident to anyone who wanted to observe. The federal institutions and the people charged with oversight chose to sit back and smoke cigars.

Now, after the 'fast and loose' train has derailed and destroyed many a life, Ben seems to have seen the light and wants to craft appropriate regulations. The Alan and Ben Show has certainly been trying - to let the financial companies know that they need not worry as the 'Fed' is on their side....those firms can just continue to be greedy.