Did Bernanke Save the World?

By Paul Amery

Federal Reserve Chairman Ben Bernanke’s speech to the Jackson Hole symposium, delivered on Friday, has already been dubbed a “we saved the world” declaration by some commentators.

In fairness to Bernanke, nowhere in his remarks does he make such a grandiloquent claim, unlike British Prime Minister Brown, who did just that last December in the U.K. parliament.

However, underlying Bernanke’s narrative of events is the U.S. central bank’s conviction that the panic that hit global markets last fall was a kind of act of God, a phenomenon that was “collectively irrational”, and which the Fed contained by its policy of “lending freely against sound collateral.”

Is this fair, or does Bernanke’s speech signify that U.S. policymakers have understood nothing and learned nothing?

For a start, Bernanke’s attempt to portray the events of last September and October as completely unexpected stretches his listeners’ and readers’ credulity. “When we met last year [in late August 2008] … ,” Bernanke writes, “there was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse. For example, although indicators of default risk such as interest rate spreads and quotes on credit default swaps remained well above historical norms, most such measures had declined from earlier peaks, in some cases by substantial amounts.”

Here’s a chart of the average credit default swap spread on the 14 key financial institutions active in the over-the-counter derivatives market, as calculated by Credit Derivatives Research LLC, from the beginning of 2007 to the eve of Bernanke’s speech on 22 August last year.

click to enlarge

Although Bernanke is correct to say that in August 2008, counterparty risk levels had not yet breached the March peak reached when Bear Stearns nearly failed (although they did very soon afterwards), it’s pretty evident to anyone, looking at this chart, that financial market strains had been on a general uptrend since the beginning of 2007. Indeed, the average credit default swap spread on these dealer banks was 13 times higher in August 2008 than it had been in January 2007.

Has the Fed lent “freely against good collateral”? Hardly. Here’s Econbrowser’s pictorial representation of the Fed’s balance sheet from a few months ago, showing a dramatic shift from holdings concentrated in US Treasuries to a mish-mash of mortgage-backed and asset-backed debt, taken on from Bear Stearns and AIG, on which it has already suffered losses of up to US$5 billion.

Most worryingly, it’s difficult to believe that Bernanke’s speech hardly mentions the word debt, given that most people accept that we have passed through a historic bubble in the credit markets. Isn’t it the vast global superstructure of debt based on limited underlying economic activity that is causing our current problems?

Bernanke asserts in the final paragraph of his speech that “we have avoided the worst”. He may be right, but I wouldn’t bet on it. I’m more inclined to agree with Willem Buiter, who wrote recently in the Financial Times that “[t]he US Treasury, the Congress, the Fed and the other financial regulators have, through their behaviour since August 2007, confirmed and re-inforced the incentives for excessive risk taking by crossborder banks and any other financial institution deemed too systemically important to fail. The groundwork for the next financial boom and bust cycle, worse than what we are just emerging from, has been put in place.”

Original post

Comments

[Brian McMorris:]

Puravidavid....wrong.

He will not be villified. He has done well with what he was handed, though maybe dallied a year or two too long. He was handed a balloon that had been reblown at least five times by Greenspan, and larger each time: 1987 (junk bond crisis), 1990-91 (S&L crisis), 1997-98 (Asian and Russian crises), 2001-03 (Internet bubble), 2003- (the beginnings of the RE bubble); at the time Bernanke assumed the reins from Greenspan, the RE bubble was in the midst of inflating and growing the economy and had successfully replaced the Internet bubble that had been compounded by 9/11.

There was no political will to solve the bubble problem in February 2006 when Bernanke took over the Fed Chairmanship. He was well aware of what would happen if the bubble popped which is why he delivered very early a prescription for dealing with the resulting deflation (the famous "helicopter Ben" speech). And he knew it would take a crisis to resolve the problem of successive bubbles blown since 1982 and all by Alan Greenspan (the greatest bubble blower of all time).

But I do agree with you that in a way, it is a matter of kicking the can down the road for a couple years. That is the healthy thing to do. Allowing uncontrolled default would further destroy our financial system. In theory, with no confidence in a financial system, prices will continue to drop until all that is left are hard assets with value set by barter in the streets. Is that what you want? Because that is what you would get: a return to the stoneage.



On Aug 24 02:52 PM [e-mail] wrote:

> Bernanke succeeded in kicking the bulk of defaults down the road
> a year or two, no more.
>
> He will be vilified and run out of office before long.

Aug 24 10:29 PM

[Brian McMorris:]

FB5000: Well said


On Aug 24 10:11 PM FB5000 wrote:

> I can see that the Clowns are out in force tonight.
>
> How man of you geniuses - including the author saw this coming? Are
> you kidding me? This was "obvious"? Really?
>
> Ok. The path to enlightenment begins with honest self evaluation.
> Ask yourself the question. Did I see this coming. Be honest.
>
> Then ask yourself - what would you have done if you had your shot
> on the big stage.
>
> This is piece is about the funniest thing I have read in a while.
> "Although Bernanke is correct to say that in August 2008, counterparty
> risk levels had not yet breached the March peak reached when Bear
> Stearns nearly failed (although they did very soon afterwards), it’s
> pretty evident to anyone, looking at this chart, that financial market
> strains had been on a general uptrend since the beginning of 2007.
> Indeed, the average credit default swap spread on these dealer banks
> was 13 times higher in August 2008 than it had been in January 2007."
>
>
> January 2007 it was virtually zero. 13 times that is like wow. A
> lot right? So what.
>
> Pretty evident to anyone, eh?
>
> I love it. Dude - if it was so evident to anyone and you why the
> hell are you wasting your time producing this type of claptrap for
> SA - unless you are doing it from your 400 foot super yacht and are
> just killing time as you cruise the Med. from Istanbul to Alexandria.
> (Which I highly recommend)
>
> Editor. Thanks a million. This one made me laugh.
>
> History will be kind to Bernanke. He should be reappointed. Best
> one for the job.
>
>
>

Aug 24 10:32 PM

[Eu Jen Ek:]

Bernanke is the one who caused all this mess. He raised the Fed funds rate from 4.00% to 5.25%, in .25% increments every month, and then held the rate up there for 8 months. This caused the entire economy to seize up, leading to today's problems. It is clear he has absolutely no idea of what is going on.
And Prez O wants to extend Ben's stay for another 4 years. GOD help us all.

Aug 24 10:52 PM

[Big Bubbette:]

Are these guaranteed by the taxpayer? Anyone else think China buying these debts places US at risk should the assets not be worth what they pay for it? (Not that we are not deep in that hole already.) They pay $100.00 for something someone values at $1,000.00. It is found to be worthless and the buyer gets paid back $900.00 by the guarantor? How will mark to market figure in to this valuation?

This program is not receiving much coverage for how much risk is involved. B of A is said to have close to 50 trillion in toxic assets they are sitting on, there is more out there. A light needs to be shined on this program before it is kicked off.

Should this debt be washed in this program or be sent to a bankruptcy court?


"HONG KONG (MarketWatch) -- China's $200 billion sovereign wealth fund, China Investment Corp., is preparing to invest up to $2 billion in U.S. mortgage securities under the U.S. Treasury-backed Public-Private Investment Plan (PPIP), according to a media report Monday.

The Beijing-based fund, which is funded by cash from China's foreign exchange reserves, is in talks with at least a dozen PPIP managers and sub advisors, according to a Reuter's report, which cited sources it did not identify.

The report said CIC has yet to select any companies but is likely to finalize a decision before the end of August.

China Investment Corp. was eager to participate in real estate securities because it believes the U.S. property market will start to recover later this year in a gradual fashion, the reports cited its sources as saying. "
www.marketwatch.com/st...

Aug 25 12:51 AM

[GE collapse...:]

Green shoots! Recession over! Analysts agree! Economists see V-shaped recovery!

...I'd say short the markets now.

Bernake did a swell job of delaying the problems. But I'm not sure, is lending growing again? Are prime loans improving? Mortgage cure rates looking better?

Goliath companies injected with tons of cash, oil at 2007 levels, and China inventory build-up slowing - on the one hand.

On the other hand, Chicago government just shut down one day of work a week, half your friends have heard of someone struggling to find work, your company isn't on a hiring spree, and I don' t think you're upgrading your home right now.

Sure there'll be a recovery. But it isn't today, isn't tomorrow, isn't next week or next month or next quarter. Next half? Next year? That's what the markets an analysts are saying. But I don't think they're buying a vacation home right now either or getting a pay raise just yet. And definately not 40% - 70%. I'll buy back into long's in 3 - 6 months or when I hear the sky's falling again.

Aug 25 02:34 AM

[icandoitdon:]

you not just wrong....you miss the point entirely.

there were many economists, from the late 90s forward, who warned of the dangerous effects of repeated bubbles and "too big to fail" institutions. the driving force behind these bubbles, whether technology, commodities, real estate, bonds, et. al., was excessive and cheap credit, and the rapid growth of securitized financing schemes that drew investors like moths to a flame searaching for yield thanks to fed cheap money policies. the fed ignored them all because they weren't "in the mainstream." in other words, they didn't suffer from groupthink like the fed, which was collectively too stupid to understand the simple notion that unchecked credit and cheap money isn't an absolute good.

the federal reserve's primary mission is to preserve the stability of the financial system. from the greenspan era forward they have utterly failed in that task. it's a dysfunctional, political organization that has outlived its usefulness and if the events of the last 2 years haven't been convincing enough you'll just have to wait until the next fed-induced crisis to help your thinking along. i promise there will be one because neither the fed or the treasury have done a single thing to solve the "too big to fail" problem that nearly caused the collapse of the financial system. in fact they are pushing the same swill that contributed to its collapse. derivitives trading remains unregulated, financial institutions remain overleveraged and overleveraged consumers are urged to keep borrowing and spending, even as their bad debts are picked up by taxpayers, while savers are systematically swindled with yields so low investors would literally be better off having their money stuffed in a mattress.

this is what our financial system has come to...ass backward incentives that make no sense in order to keep the economy going at any cost. if you think the economy is out of the woods i think you'll be pretty disappointed at what follows. the overlevered, overpriced housing market is a good microcosm of our economy. it can't even function on record low mortgage rates. if yields only return to some semblance of normal the economy would freeze solid. the fed knows it and they're scared to death of it.

the fed hasn't stopped the train wreck...it's deferred it. if you think that's a victory you have just what it takes to be a federal reserve governor.


On Aug 24 10:11 PM FB5000 wrote:

> I can see that the Clowns are out in force tonight.
>
> How man of you geniuses - including the author saw this coming? Are
> you kidding me? This was "obvious"? Really?
>
> Ok. The path to enlightenment begins with honest self evaluation.
> Ask yourself the question. Did I see this coming. Be honest.
>
> Then ask yourself - what would you have done if you had your shot
> on the big stage.
>
> This is piece is about the funniest thing I have read in a while.
> "Although Bernanke is correct to say that in August 2008, counterparty
> risk levels had not yet breached the March peak reached when Bear
> Stearns nearly failed (although they did very soon afterwards), it’s
> pretty evident to anyone, looking at this chart, that financial market
> strains had been on a general uptrend since the beginning of 2007.
> Indeed, the average credit default swap spread on these dealer banks
> was 13 times higher in August 2008 than it had been in January 2007."
>
>
> January 2007 it was virtually zero. 13 times that is like wow. A
> lot right? So what.
>
> Pretty evident to anyone, eh?
>
> I love it. Dude - if it was so evident to anyone and you why the
> hell are you wasting your time producing this type of claptrap for
> SA - unless you are doing it from your 400 foot super yacht and are
> just killing time as you cruise the Med. from Istanbul to Alexandria.
> (Which I highly recommend)
>
> Editor. Thanks a million. This one made me laugh.
>
> History will be kind to Bernanke. He should be reappointed. Best
> one for the job.
>
>
>

Aug 25 02:44 AM

[Moon Kil Woong:]

As an economist, it is hard to Believe that bernake didn't realize that he helped save America from a crisis he and his former idol Greenspan create with their string of overly lax economic policies.

Furthermore, his actions have only served to stall the nightmarish result of massive debt, deficits, and unconstrained market risk taking that has now blow the derivative market from under $500 trillion to close to $750 trillion today without any meaningfuul reform or curbs to risk taking. For those not used to these types of numbers that is about 15x the net worth of all of America. Inevitably he knows as well as I they will come back to haunt us along with the trillions of AIG like backstops Bernake wrote to all sorts of financing companies to hide mass losses until his term expires (of course the final insurer is the taxpayer as always and most of the bonds are Freddie Mac and Fannie Mae mortgage bonds. The same time that is bankrupting them and the banks that write them).

Next time he starts to get up on his pedestal and preach how saintly he is, he should try better at hiding his horns and red tail. I can't think of one person other than Greenspan who wantonly encourages people to steal through governmental taxpayer beggingand dollar depriciation (especially by banks and special interest groups), sacrifice the prosperity of our young (just short of selling them into enslavement), and engage in henonistic consumerism until we are all bankrupt. All this while lying through his teeth about economic fundamentals, obscuring accounting truths, and obstructing any form of sound regulation (which there is none to speak of these days). If that isn't demonic I don't know what is.

Aug 25 04:06 AM

[manya05:]

Excerpt (abstract) of AP/Yahoo News with the rumor about Obama re-appointing Bernake:

"President Barack Obama plans to reappoint Ben Bernanke to a second term as chairman of the Federal Reserve, a position from which he guided the economy away from its worst recession since the 1930s and, the White House hopes, toward an economic recovery critical to its legacy."

let's look at the key words here "...White House hopes..." at this point the US economy is running on green shoots thinking (and lots of cash printed out of thin air)

Aug 25 05:16 AM

[Michael Clark:]

Actually, the US, at the moment, lacks the political will to do almost anything. Our political system attracts people who want and NEED to be popular. In fact, being popular is how you keep your job.

We need a real leader. In democracies, real leaders will only emerge when the crises comes to a real head. Obama has failed so far. He's trying to preserve what is already gone. He is not thinking about re-creating, he is thinking about preserving the status quo. And he is thinking about getting re-elected.

But if Obama has failed, the Republicans are no answer. The Republicans brought us to the abyss with their 'see no evil, hear no evil, see no evil' ideology.


On Aug 24 03:54 PM market mojo wrote:

> The US lack the political will/environment to raise taxes and balance
> the budget but at some point it will have to be done.
>
> In Sweden the budget deficit swelled to 90% in the early 1990s during
> their financial crisis. 15 years later it was down to around 40%
> of GDP. Paying down the debt by 1-2% a year and growing the economy
> by 2-3% per year will reduce the debt fairly quickly. All that is
> needed is a decade+ of restrained spending and/or higher taxes.<br/>
>

Aug 25 05:34 AM

[Michael Clark:]

This post just about says it all.


On Aug 25 04:06 AM Moon Kil Woong wrote:

> As an economist, it is hard to Believe that bernake didn't realize
> that he helped save America from a crisis he and his former idol
> Greenspan create with their string of overly lax economic policies.
>
>
> Furthermore, his actions have only served to stall the nightmarish
> result of massive debt, deficits, and unconstrained market risk taking
> that has now blow the derivative market from under $500 trillion
> to close to $750 trillion today without any meaningfuul reform or
> curbs to risk taking. For those not used to these types of numbers
> that is about 15x the net worth of all of America. Inevitably he
> knows as well as I they will come back to haunt us along with the
> trillions of AIG like backstops Bernake wrote to all sorts of financing
> companies to hide mass losses until his term expires (of course the
> final insurer is the taxpayer as always and most of the bonds are
> Freddie Mac and Fannie Mae mortgage bonds. The same time that is
> bankrupting them and the banks that write them).
>
> Next time he starts to get up on his pedestal and preach how saintly
> he is, he should try better at hiding his horns and red tail. I can't
> think of one person other than Greenspan who wantonly encourages
> people to steal through governmental taxpayer beggingand dollar depriciation
> (especially by banks and special interest groups), sacrifice the
> prosperity of our young (just short of selling them into enslavement),
> and engage in henonistic consumerism until we are all bankrupt. All
> this while lying through his teeth about economic fundamentals, obscuring
> accounting truths, and obstructing any form of sound regulation (which
> there is none to speak of these days). If that isn't demonic I don't
> know what is.

Aug 25 05:37 AM

[FB5000:]

No. You are so funny it is kind of sad.

"Lots of economists..." Sure. There are always plenty of folks with the benefit of hindsight will come out of the woodwork. And if they held those positions back then - so what? There's always a contra view no matter how fringe or marginal - and it does not mean it is correct. Proves nothing.

The Fed's #1 mandate is price stability. Inflation is the enemy.

It is arguable whether you include asset price inflation in that mandate. Historically it has not been. Bursting bubbles was not a focus. Maybe going forward it will be.

What occurred was unprecedented and it was not directly due to Fed policies. The price of money did not drive the foolish decsion making at AIG and other places. That was actually a byproduct of too much complacency and belief that risk was dead. In a perverse way if you NEED to blame the Fed (and it looks like a lot of you really NEED to) - you could say that the great job they did of managing money supply and cushioning shocks encouraged an extreme level of stupidity among a lot of people who should have known better. But that is like blaming the toll road operator for dangerous driving habits of folks who see a nice level and open road ahead. They can reset speed linits and put in more checkpoints but idiots will always find a way to get into trouble.









On Aug 25 02:44 AM icandoitdon wrote:

> you not just wrong....you miss the point entirely.
>
> there were many economists, from the late 90s forward, who warned
> of the dangerous effects of repeated bubbles and "too big to fail"
> institutions. the driving force behind these bubbles, whether technology,
> commodities, real estate, bonds, et. al., was excessive and cheap
> credit, and the rapid growth of securitized financing schemes that
> drew investors like moths to a flame searaching for yield thanks
> to fed cheap money policies. the fed ignored them all because they
> weren't "in the mainstream." in other words, they didn't suffer from
> groupthink like the fed, which was collectively too stupid to understand
> the simple notion that unchecked credit and cheap money isn't an
> absolute good.
>
> the federal reserve's primary mission is to preserve the stability
> of the financial system. from the greenspan era forward they have
> utterly failed in that task. it's a dysfunctional, political organization
> that has outlived its usefulness and if the events of the last 2
> years haven't been convincing enough you'll just have to wait until
> the next fed-induced crisis to help your thinking along. i promise
> there will be one because neither the fed or the treasury have done
> a single thing to solve the "too big to fail" problem that nearly
> caused the collapse of the financial system. in fact they are pushing
> the same swill that contributed to its collapse. derivitives trading
> remains unregulated, financial institutions remain overleveraged
> and overleveraged consumers are urged to keep borrowing and spending,
> even as their bad debts are picked up by taxpayers, while savers
> are systematically swindled with yields so low investors would literally
> be better off having their money stuffed in a mattress.
>
> this is what our financial system has come to...ass backward incentives
> that make no sense in order to keep the economy going at any cost.
> if you think the economy is out of the woods i think you'll be pretty
> disappointed at what follows. the overlevered, overpriced housing
> market is a good microcosm of our economy. it can't even function
> on record low mortgage rates. if yields only return to some semblance
> of normal the economy would freeze solid. the fed knows it and they're
> scared to death of it.
>
> the fed hasn't stopped the train wreck...it's deferred it. if you
> think that's a victory you have just what it takes to be a federal
> reserve governor.

Aug 25 07:33 AM

[boghall:]

Though to be a little fairer to Gordon Brown, he wasn't really trying to say he 'saved the world', rather that his Government worked with others to 'save the world’s banking system.' Transcript - search for 'saved' on: www.publications.parli...
And whatever his failings (e.g. underregulation, incidentally endorsed by the UK opposition party), he was widely praised for his pivotal role in (probably) fixing the problem:
www.guardian.co.uk/wor...

Aug 25 07:41 AM

[Joseph L. S...:]

"Did Bernanke Save the World?"

Only on the backs of the American taxpayer.

"A legend in his own mind..."

Aug 25 10:33 AM

[Observer45:]

World? = world series = USA. That's it, no more. It's a pity that when Obama looked down the barrel there was nothing left to pick.We not only have a trade deficit but we have a talent deficit.

Aug 25 10:54 AM

[American in...:]

That is simply incorrect. The global financial system almost collapsed last fall. The Fed prevented it. Bernanke is a hero and guys like you are stuck in ideological straight jackets.


On Aug 24 09:29 AM J Stew wrote:

> It's ironic that most people think that saving the financial system
> helped all Americans. In reality, the actions taken by the Fed (Bernanke)
> protected the wealth/power of the current leaders in America at the
> expense of all Americans (taxpayers give money to large financial
> institutions for free and with little obligation). Granted, it would've
> temporarily hurt everyone if the system "collapsed" (aka the people
> gambling were forced to take their losses), but none more than the
> people gambling (and the ones financing the gambling).
>
> By the way, the world wouldn't have ended if the financial system
> "collapsed" - new leaders and trade systems would take effect as
> people fought for food and shelter, if it even got to that.

Aug 25 03:42 PM

[growser7:]

Brian McMorris and all who might agree that the world has been saved---this isn't over yet. At best, it is merely a postponement of a more harsh day of reckoning. Our dubious "salvation" has been accomplished only by the expansion of public debt, which will need to be dealt with, either by inflation or higher taxes. Right now that is a mere abstraction, but it will come to pass, and will bleed wealth, growth, and opportunity out of this land. There is no free lunch. We enjoyed the upswing of a massive sine wave, and we will inevitably face the down swing---postponement is not a resolution. But more to the point, the economic contraction isn't over. A 10-15 year credit bubble isn't going to resolve in 18 months. As a physician I would never say I saved anybody while I am sitll doing CPR.

I would also differ with your comment that people aren't really poorer. The unemployed and the marignally employed are getting twisted into the ground, and their ranks are growing. Give this another one to two years and we might all sadly see how poor our fellow citizens (and ourselves) have become.

--The ides of March have come.
--Aye, Caesar, but not gone.

Aug 25 04:32 PM

[Papasmurf:]

"That is simply incorrect. The global financial system almost collapsed last fall. The Fed prevented it. Bernanke is a hero and guys like you are stuck in ideological straight jackets."

Who put the global financial system in this situation? Who is better off for this so called "rescue"? Who should have taken the losses for criminal and negligent conduct? This is like a rapist paying for the abortion and says all is good now so there was no crime of rape.

The facts are this crisis was brought on by criminal conduct at the Federal Reserve, member institutions and the politicians charged with regulation over the "free markets". Barney Frank et al comes to mind, along with all multi-national banks you can name. They had the knowledge, control and the obligation to run the system and business with safety and integrity. I do not accept this is an accident that could not have been foreseen.

Capital could not have been pushed out into society without this criminal conduct. Capital (really debt) was deliberately pushed out through the magic of banking leverage through lenders who knew the borrower didn't have means to pay and didn't care because they divorced the risk from the profit. They multiplied leverage ratio by selling off toxic crap to retirement funds and those retired who spent their life savings on this junk. They tilled this theft back into the scheme time and again, rolling the crime over on new bets. That makes this the most reprehensible crime of all time, because it stole from those least able to recover from the theft.

Evidence of this malicious conduct is the deterioration of lending standards, including don't ask/don't tell loans, lending at and above collateral values and loans to people who couldn't even demonstrate citizenship, much less a stake in the deal.

Alan Greenspan often explained the excessive expansion as the "miracle of productivity growth", but the truth is it was rampant theft. Greenspan damn well knew it was theft. He just estimated the economy could swallow the losses. Greenspan was responsible for "oversight". Because of his position, his education and his obligation as chairman, he is criminally responsible and morally reprehensible. Bernanke was there during all of what transpired, but he did nothing, so he is equally responsible.

Wall Street shifted their losses from their crimes to retirement funds and risk-adverse investors through toxic asset based crap. They knew exactly what they were doing while the wrote themselves fat bonus checks for producing nothing of value for society. They continue to write themselves bonuses while they steal from the remaining market fools through high frequency front-running made possible by co-located server and computer technology that provides an illegal advantage.

American taxpayers, who were overwhelmingly opposed, were forced to buy back this toxic crap under threat of martial law stated on Capital Hill. Politicians rewarded Wall Street banksters, the international financial gamblers and they rebuilt Goldman Sachs via AIG who served as a conduit for this taxpayer theft. This theft not only harmed those smart enough to not invest in these schemes, but it harmed those who remained conservative by holding cash and now have nowhere to preserve their wealth against this fraud. Our politicians and Paulson, later Geithner acted criminally through a most massive robbery of all time. Ultimately, the American taxpayer was robbed at pen point by banksters and their beholden politicians.

Bernanke was on the FRB during all this. Hero? My Ass! He was a participant in these crimes. If he couldn't alter the course, he should have resigned.

Bouquet of roses to all for a job well done.

Aug 25 06:16 PM

[Vij009:]

You mean things are safe and the problems are resolved?
I think not - I think this is the eye of the cyclone and what you see as a relative calm is just a pause before the SH.. hits the fan again.....

Aug 25 08:00 PM

[a fat panda:]

Michael,

I liked your post, not as much as when I first read it of course, pricelessquotesbypauls.../. I don't know who came up with it first, but the other author said it was something like ... ZeroHedge.Com.

On Aug 24 11:20 AM Michael Clark wrote:

> Forgive me for seeing Bernanke attached to an extruded part of Paulson's
> body. That's how I'll always think of him.
>
> March 13th, 2007 – Henry Paulson: “the fallout in subprime mortgages
> is "going to be painful to some lenders, but it is largely contained."
>
>
> March 28th, 2007 – Ben Bernanke: "At this juncture . . . the impact
> on the broader economy and financial markets of the problems in the
> subprime markets seems likely to be contained,"
>
> April 20th, 2007 – Paulson: "I don't see (subprime mortgage market
> troubles) imposing a serious problem. I think it's going to be largely
> contained." , "All the signs I look at" show "the housing market
> is at or near the bottom,"
>
> May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures
> will continue to weigh heavily on the housing market this year, it
> will not cripple the U.S.”
>
> June 20th, 2007 – Bernanke: (the subprime fallout) ``will not affect
> the economy overall.''
>
> July 12th, 2007 – Paulson: "This is far and away the strongest global
> economy I've seen in my business lifetime."
>
> August 1st, 2007 – Paulson: "I see the underlying economy as being
> very healthy,"
>
> October 15th, 2007 – Bernanke: "It is not the responsibility of the
> Federal Reserve - nor would it be appropriate - to protect lenders
> and investors from the consequences of their financial decisions."
>
>
> February 14th, 2008 – Paulson: (the economy) "is fundamentally strong,
> diverse and resilient."
>
> February 28th, 2008 – Paulson: "I'm seeing a series of ideas suggested
> involving major government intervention in the housing market, and
> these things are usually presented or sold as a way of helping homeowners
> stay in their homes. Then when you look at them more carefully what
> they really amount to is a bailout for financial institutions or
> Wall Street."
>
> February 29th, 2008 – Bernanke: "I expect there will be some failures.
> I don't anticipate any serious problems of that sort among the large
> internationally active banks that make up a very substantial part
> of our banking system."
>
> March 16th, 2008 – Paulson: "We've got strong financial institutions
> . . . Our markets are the envy of the world. They're resilient, they're...innovative,
> they're flexible. I think we move very quickly to address situations
> in this country, and, as I said, our financial institutions are strong."
>
>
> Mar 18th, 2008 - Bear Stearns Bailout Announced
>
> May 7, 2008 – Paulson: 'The worst is likely to be behind us,”
>
> May 16th, 2008 – Paulson: "In my judgment, we are closer to the end
> of the market turmoil than the beginning," he said.
>
> June 9th, 2008 – Bernanke: Despite a recent spike in the nation's
> unemployment rate, the danger that the economy has fallen into a
> "substantial downturn" appears to have waned,
>
> July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through
> the storm”, "… in no danger of failing.","…adequately capitalized"
>
>
> July 20th, 2008 – Paulson: "it's a safe banking system, a sound banking
> system. Our regulators are on top of it. This is a very manageable
> situation."
>
> August 10th, 2008 – Paulson: ``We have no plans to insert money into
> either of those two institutions.” (Fannie Mae and Freddie Mac)
>
>
> Sept 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is
> on the hook for an estimated 1 - 1.5 trillion dollars. Over 5 trillion
> is added to the nation’s balance sheet.
> September 16th, 2008 - $85 Billion AIG Bailout “Loan”
> September 19th, 2008 - $700 Billion Bailout Plan Announced
>
> September 19th, 2008 – Paulson: "We're talking hundreds of billions
> of dollars - this needs to be big enough to make a real difference
> and get at the heart of the problem," he said. "This is the way we
> stabilize the system."
>
> September 19th, 2008 - Bernanke: "most severe financial crisis" in
> the post-World War II era. Investment banks are seeing "tremendous
> runs on their cash," Bernanke said. "Without action, they will fail
> soon."
>
> September 21st, 2008 – Paulson: "The credit markets are still very
> fragile right now and frozen", "We need to deal with this and deal
> with it quickly.", "The financial security of all Americans ... depends
> on our ability to restore our financial institutions to a sound footing."
>
>
> September 23rd, 2008 – Paulson: "We must [enact a program quickly]
> in order to avoid a continuing series of financial institution failures
> and frozen credit markets that threaten American families' financial
> well-being, the viability of businesses, both small and large, and
> the very health of our economy,"
>
> September 23rd, 2008 – Bernanke: "My interest is solely for the strength
> and recovery of the U.S. economy,"

Aug 25 11:13 PM

[a fat panda:]

It is a little early to say "Saved". We aren't out of the woods yet. If it comes to pass that the banks which created this crisis are saved, it will be because Bernanke diverting capital from the rest of us to the banking systems.





On Aug 25 03:42 PM American in Paris wrote:

> That is simply incorrect. The global financial system almost collapsed
> last fall. The Fed prevented it. Bernanke is a hero and guys like
> you are stuck in ideological straight jackets.

Aug 25 11:17 PM