Bernanke hints at QE3, aka, handouts for Wall Street

This madness of shoveling cash over to Wall Street has to stop. The first two rounds did little for the 99% who have been clobbered thanks to Wall Street gambling but somehow, Bernanke wants to continue. What is good for Wall Street is clearly not good for the rest of the US.

Let the bankers go and gamble with their own money and leave everyone else out of it. We don't need more socialism for the 1%.

US central bank chief Ben Bernanke sparked a surge in share values on Friday after he signalled his willingness to embark on a third phase of money creation to boost the US economy.

The Dow Jones industrial average closed the day with a gain of 90 points after the chairman of the Federal Reserve gave a robust defence of past central bank interventions, which, traders said, prepared the ground for a third round of quantitative easing should the economic picture worsen. France's CAC and the German DAX closed up 1%.

In his much anticipated a speech in Jackson Hole, Wyoming, Bernanke described the current economic situation as "far from satisfactory". He said that high rates of unemployment were a "grave concern, not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for years".

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The Fed is "afraid to do its job" for fear of right-wing criticism

The headline quote is Krugman talking; my brief comment below. Remember — the Fed by law has twin mandates:

• Low inflation consistent with economic growth
• Low unemployment

The current zero-interest-rate environment serves bondholders and kills fixed incomes. But that policy preference — sacrificing seniors to the bond market Bigs — is at least within the mandate.

But this is not a low-unemployment environment (the other mandate). What's a Fed to do?

Here's Krugman on that:

[M]y sense is that [Fed Chairman Ben Bernanke's] latest testimony, in which he declared that the Fed has the power to take action, that the economy is in really bad shape, but declined to, you know, actually take action, has left even his usual defenders more or less speechless.

It really makes no sense — except in terms of politics. ...

So Bernanke says that the Fed has the power to act, but won't. Why won't the Fed "do its job"? Krugman's explanation:

fear of being accused of helping Obama

That's Krugman, and the comment is damning. (Remember, Krugman knows Bernanke personally. Bernanke was once Krugman's dept chair at Princeton.)

The implications of this are terrible. It means (a) that the "independent Fed" actually is helping Obama — by shielding him from right-wing criticism. And (b) that the "opposition party" is leading the Democrats around by the nose.

But if you think that's bad, there's a worse explanation — The Fed is sacrificing the entire economy (and everyone in it) to serve the top .01%, including the banks, who need low-interest Fed-sourced borrowing to survive.

After all, the current situation is unsustainable. No demand, no recovery. No jobs, no demand. Q.E.D. (Latin for "thus it is destroyed").

Your pick. I think Krugman, as always, is just a tad generous. Me, a little less so.

GP

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Krugman calls out Ben Bernanke—"he's been assimilated by the Borg"

This is another state of the Krugman post. You and I, flies on the insider walls, know that Ben Bernanke is a full professor at Our Betters U. — in other words, deeply involved in running his chunk of the State for the lords and ladies who govern us. Like all retainers Bernanke works for a living, but as Chairman of the Fed he's very high up.

Paul Krugman is now acknowledging the same thing, and becoming less and less collegial in the process. Why do I say "less collegial"? Because Krugman and Bernanke are fellow academics; in fact, Bernanke used to be Krugman's boss at Princeton.

As you read the following, remember that the Fed has twin legal mandates — low inflation (for the money crowd) and low unemployment (for the masses). In reality, of course, the Fed works only for the money crowd, keeping their pockets lined.

Krugman recently called him on that in the magazine piece linked below, and Bernanke has responded. As Krugman tells the tale [bracketed inserts mine]:

Ben Bernanke responds to my magazine piece; as I see it, in effect he declared that he has been assimilated by the Fed Borg:

I guess the, uh, the question is, um, does it make sense to actively seek a higher inflation rate in order to, uh, achieve a slightly increased pace of reduction in the unemployment rate? ...

To risk that asset [by "asset" he means "low inflation," though he's actually referring to the money crowd's well-lined pockets], for, what I think would be quite tentative and, uh, perhaps doubtful gains [by "gains" he means "work and food for the masses"], on the real side would be an unwise thing to do [because the world is ruled by "wisdom" and not, say, "greed"].

Notice the framing — “a slightly increased pace of reduction in the unemployment rate”. It’s basically an assertion that we’re doing all right[.] ... Disappointing stuff.

In other words, Bernanke is saying, Why trade a known-bad like inflation for something as ephemeral as improved employment? After all, my friends are fully employed right now.

So much for Bernanke. But again, this post isn't about the Ben — he's a known made man already. This is about the Krugman, who dares to say so using his Times blog-inches.

Thanks, Professor. And welcome. Soon you'll be as radical as you were in 2003, when Bush was king and we were still naïve.

GP

(To follow on Twitter or to send links: @Gaius_Publius) Read the rest of this post...

Bernanke hints at new round of easing, dollar drops again

In predictable fashion, the dollar was strengthening early today against the euro until Fed chief Bernanke started talking about yet another round of free handouts for Wall Street quantitative easing.

Because the oil prices are tied to the dollar, these remarks only contribute to the rise in oil prices, which of course, did rise as well today.

It's a fair criticism of the recovery to say that it's not (yet) convincing but until the Fed can explicitly show how another round of easing helps anyone other than Wall Street, those policies and talk should end. CNBC:

In a speech to the National Association of Business Economics ahead of the market open, Bernanke left the door open to more quantitative easing but without actually promising any more.

While not a departure from his previous comments, traders took Bernanke's speech to mean that Fed action is still a strong possibility.

The Fed chief's comments sent stocks higher, the dollar lower, and bond yields lower.

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Federal Reserve transcripts show extreme cluelessness

It's a wonder anyone on the board who was so far off still has a job at the Federal Reserve. Even worse, how is Tim Geithner running the US Treasury and how is Ben Bernanke still the Fed president? This wasn't a small miss, but a massive miss.

The problem is that they were all ordinary, mainstream thinkers so of course they dismissed analysis from outsiders who questioned the building problems. The Fed board is much too insulated from the real world. If nothing else, these transcripts from 2006 show that we need to also reform the Fed, to allow more outside thinking. They were falling over themselves to congratulate Alan Greenspan on his way out and completely missed the crisis that was coming. As we saw after 9/11, how badly does one have to screw up in Washington to lose a job? LA Times:

"We believe that, absent some large, negative shock to perceptions about employment and earned income, the effects of the expected cooling in housing prices are going to be modest," said Timothy F. Geithner, the current Treasury secretary, who then was president of the Federal Reserve Bank of New York. When Geithner was finished, Bernanke asked, to a round of laughter, "Anything to report on co-op prices in Manhattan?" "As in many cases, I am not sure what you can take from the anecdote, but I guess some people say that you see a little of the froth dissipating," Geithner replied. "But I don't think the adjustment is acute.

Yeah, that's a funny one. Too bad the joke was on the rest of the country. Read the rest of this post...

Bernanke planning QE3 program to throw more cash at Wall Street

For goodness sake it's not working so stop it. The quantitative easing programs have thrown wads of cash to Wall Street but nothing has trickled down from their pockets. Not even bread crumbs. The Federal Reserve really needs to be corralled because it's beyond cray to keep printing money just to help Wall Street. Let Wall Street go make their own money without government handouts and quit this nonsense. Aren't we supposed to be a capitalist country?

Federal Reserve Chairman Ben Bernanke told Congress Wednesday that a new stimulus program is in the works that will entail additional asset purchases, the clearest indication yet that the central bank is contemplating another round of monetary easing.

Bernanke said in prepared remarks that the economy is growing more slowly than expected, and should that continue the central bank stands at the ready with more accommodative measures.

"Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation," he said.

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Bernanke approval rating hits new low

You mean someone besides Obama and Wall Street likes him? Go figure.

Federal Reserve Chairman Ben S. Bernanke’s standing with the public has slid to its lowest level in almost two years of polling on the issue, even as faith in the Federal Reserve holds up.

Bernanke is viewed favorably by 30 percent of those polled, compared with 26 percent who view him unfavorably; the remainder are unsure. In September of 2009, Bernanke enjoyed 41 percent approval and 22 percent disapproval. The Fed itself is viewed favorably by 42 percent of voters, little changed from previous surveys.

The Bloomberg National Poll, conducted June 17-20, shows that the reputation of Bernanke, who led the central bank through the longest U.S. recession since the Great Depression, has slid lower as the unemployment rate has remained stuck near 9 percent or higher for 26 consecutive months.

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Bernanke: 12 of 13 largest US banks could have failed in 2008

Bernanke wasn't very successful with seeing the crisis or understanding the crisis so even claiming one out of thirteen banks sounds generous. There was widespread panic and logic was removed from the market.

The 10-member panel's final report was endorsed only by its six Democratic members. It criticized the culture of deregulation championed by former Federal Reserve Chairman Alan Greenspan and said the government had ample power to avert the crisis but chose not to use it.

The report did not identify which of the 13 firms was not considered by Bernanke to be in danger of failure, but it did say that Goldman Sachs was among those Bernanke feared could be taken down amid a huge funding crisis in late 2008.

"If you look at the firms that came under pressure in that period ... only one ... was not at serious risk of failure," Bernanke told the commission. "Even Goldman Sachs, we thought there was a real chance that they would go under."

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Bernanke thinks that 103,000 jobs means economy is recovering

This is scary if he actually believes what he's saying. Remember that the US economy needs to add roughly 150,000 jobs per month just to break even with workers coming into the system, so falling short doesn't sound encouraging. Then again, when your focus is on maintaining the lifestyle of Wall Street, maybe you miss a few details beyond Manhattan. Reuters:

The U.S. economy may be finally hitting its stride, even if growth remains too weak to put a real dent in the nation's jobless rate, Federal Reserve Chairman Ben Bernanke said Friday.

Offering no real clues on the future direction of monetary policy, Bernanke sounded cautiously more upbeat, citing improvements in consumer spending and a drop in jobless claims as hopeful signs that a fragile recovery was perking up.

"We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold," the central bank chief said in his first testimony to Congress since the Fed launched a controversial plan to buy an additional $600 billion in government bonds.

Bernanke did go on to say that employment numbers will take another "four or five years" but even that sounds optimistic. He doesn't have a great track record with his predictions. Read the rest of this post...

Bernanke says bond-buying will create 700,000 jobs

Uh huh. And tomorrow the TSA will tell us that their new grope or porno-scan will save a gazillion lives. Where do these people come from and who listens to their nonsense?

Federal Reserve Chairman Ben Bernanke told lawmakers on Capitol Hill that the Fed's $600 billion economic aid program could create 700,000 jobs over two years.

Bernanke made the comments during a private meeting Wednesday with members of the Senate Banking Committee, according to Sen. Richard Shelby, R-Ala., and others who attended the meeting. Bernanke was citing research done by the Federal Reserve Bank of Boston.

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Bernanke: shut down banks if threatening system

While letting a bad bank makes sense, Bernanke himself has helped make this nearly impossible. The problem of too-big-to-fail has been made worse since the crisis. The troubled bank list is growing by the day while the list of profitable banks shrinks. Concentrating profits in fewer and few banks is extremely dangerous until someone decides to break up this situation. Any talk about "too big to fail" is laughable until they decide to remake the banking system. Anyone happen to see anyone in Washington with the courage to do that? Me neither. The longer they wait, the larger the problem becomes and the more expensive it will be to fix it.

Federal Reserve Chairman Ben Bernanke told a panel investigating the financial crisis that regulators must be ready to shutter the largest institutions if they threaten to bring down the financial system.

"If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved," Bernanke said Thursday while testifying before the Financial Crisis Inquiry Commission.

If the lesson was so important, then why is he not doing anything about it? Why grow the problem? Read the rest of this post...

Bernanke approved for second term

How much more change can a person really handle? Was the vote really about "market stability" as some suggested or is it all about maintaining the same status quo that brought us to this crisis in the first place? Somehow it's "populist" (as if that too is a bad word) to be disgusted with this failed system.

Bernanke was completely wrong about the economy even before he was Chairman the first time and he hardly deserves lavish praise for his efforts. Maybe he wasn't Chairman when the crisis was building but there's nothing that suggests he would have acted any differently from Greenspan. Another wasted opportunity to bring the previously discussed (but now missing) change to Washington. Once again, this is why voters think so little of everyone in Congress and the White House.

Bernanke's nomination was approved 70-30 by the Senate after clearling a procedural roadblock with a 77-23 vote. A simple majority of 51 votes in the 100-person chamber was needed for approval.

Senators debating his nomination credited Bernanke with steering the U.S. economy through a wrenching financial crisis but leveled withering criticism at him for policies they argued sowed seeds for the turmoil and for an initial slow response.

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Democrats rally to support Bernanke confirmation

Besides supporting Obama, why? A bad choice is a bad choice regardless of Obama's self-made problems.

President Barack Obama phoned Senate allies Saturday as two key senators predicted that embattled Federal Reserve Chairman Ben Bernanke will be confirmed for a second term.

Obama made calls from the White House to members of the Senate leadership and others and was assured Bernanke would win confirmation, a senior White House official told The Associated Press. The official spoke on the condition of anonymity to discuss the private phone calls.

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Ben Bernanke confirmation now in doubt

I don't even care about the reason. I'd just like to see him moving on. The only problem at that point is what Wall Street lapdog Obama might promote for the job. It's hard to see Obama having the good sense to find a good replacement. Will Congress stick with "the devil they know" or go for a clean break?

With the U.S. job market in disarray and voters angry at Wall Street, members of Congress facing mid-term elections in November have come down hard on the central bank and its leadership.

They say the Fed failed to prevent the worst financial crisis since the Great Depression, and combated the meltdown in a way that favored the financial sector at the expense of ordinary citizens.

Senators Barbara Boxer and Russ Feingold brought the total of known "no" votes among the Democratic majority to four, while many others have said they were still on the fence.

"Our next Federal Reserve chairman must represent a clean break from the failed policies of the past," Boxer said. "It is time for Main Street to have a champion at the Fed."

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Time Magazine's "Person of the Year" remained clueless during crisis

It remains a mystery how Obama could even think of staying the course with Bernanke. An even larger mystery is how Congress could confirm him for another term. Nobody forced Obama to run a campaign based on "change" so is it really asking too much for him to implement some kind of change? Renominating Bernanke is an insult to the American public who suffered in no small part as a result of his incompetence. Then again, they did tolerate Greenspan who was also hailed as a champion.

The problem now, just as it was during Bush and before that Clinton, is that there continues to be a firm belief in maintaining the same system and the same people who ushered in this failure. There is too much fear in Washington about tapping into anyone new. If this last recession couldn't shake confidence in the old guard, nothing will. The public has offered little support for this system or the same old people, but in Washington that doesn't count since it won't fund expensive political campaigns. For now, Washington will continue to fear change and stay the course.

Bernanke, who was in charge of regulating the nation's largest banks, told the audience that these firms were not at risk. He said most were not even involved in subprime lending. And the broader economy, he concluded, would be fine.

"Importantly, we see no serious broad spillover to banks or thrift institutions from the problems in the subprime market," Bernanke said. "The troubled lenders, for the most part, have not been institutions with federally insured deposits."

He was wrong. Five of the 10 largest subprime lenders during the previous year were banks regulated by the Fed. Even as Bernanke spoke, the spillover from subprime lending was driving the banking industry into a historic crisis that some firms would not survive. And the upheaval would shove the economy into recession.

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Bernanke passes Senate Banking Panel, full vote ahead

As disappointing as this may be, it's hardly a surprise. Considering how little Congress has done to address the economic crisis, it's obvious there is very limited interest in addressing the problems that led to the crisis. Even re-nominating Bernanke for a second term was a clear indication of how risk averse the administration really is. If this is the "change we can believe in" it's no wonder so many of us are uninspired.

If you look at the new WaPo/ABC poll on the economy, 61% see the US in a long term economic decline. What part of these results are being accepted in Washington? The public is not happy with this direction - the same direction as we were going under Bush - yet Congress and the White House are dishing out more of the same. Defending these decisions to the public who are already fuming over the handling of the crisis is not going to be easy. CNBC:

The Senate Banking Committee Thursday is scheduled to vote on his renomination in a 9:30 a.m. hearing, a vote that is expected to pass before his confirmation goes to the full Senate in several weeks time.

Bernanke is expected to be confirmed, but he has his critics, including Sen. Jim Bunning, (R-Ky.), who blasted Time's selection as a reward for failure. Some in Congress have complained about the Fed's approach to the financial bail outs and have called for curbs on the Fed's powers.

Sen. John McCain (R-Ariz.) said he is leaning against voting for the Fed chairman, and Sens. Bernie Sanders (I-Vt.) and Jeff Merkley, D-Ore. both say they are definitely voting against him.

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Indie Senator Sanders blocks Bernanke nomination

From Sanders' office. This is significant since it's a Democrat taking on a Democratic administration. It's fair to say that the White House's problems have moved beyond the "Internet left fringe":

Sanders Blocks Bernanke Confirmation

WASHINGTON, December 2 – Sen. Bernie Sanders (I-Vt.) today placed a hold on the nomination of Ben Bernanke for a second term as chairman of the Federal Reserve.

“The American people overwhelmingly voted last year for a change in our national priorities to put the interests of ordinary people ahead of the greed of Wall Street and the wealthy few,” Sanders said. “What the American people did not bargain for was another four years for one of the key architects of the Bush economy.”

As head of the central bank since 2006, Bernanke could have demanded that Wall Street provide adequate credit to small and medium-sized businesses to create decent-paying jobs in a productive economy, but he did not.

He could have insisted that large bailed-out banks end the usurious practice of charging interest rates of 30 percent or more on credit cards, but he did not.

He could have broken up too-big-to-fail financial institutions that took Federal Reserve assistance, but he did not.

He could have revealed which banks took more than $2 trillion in taxpayer-backed secret loans, but he did not.

“The American people want a new direction on Wall Street and at the Fed. They do not want as chairman someone who has been part of the problem and who has been responsible for many of the enormous difficulties that we are now experiencing,” Sanders said. “It’s time for a change at the Fed.”

The Federal Reserve has four main responsibilities: to conduct monetary policy in a way that leads to maximum employment and stable prices; to maintain the safety and soundness of financial institutions; to contain systemic risk in financial markets; and to protect consumers against deceptive and unfair financial products.

Since Bernanke took over as Fed chairman in 2006, unemployment has more than doubled and, today, 17.5 percent of the American workforce is either unemployed or underemployed.

Not since the Great Depression has the financial system been as unsafe, unsound, and unstable as it has been during Mr. Bernanke's tenure. More than 120 banks have failed since he became chairman.

Under Bernanke's watch, the value of risky derivatives held at our nation's top commercial banks grew from $110 trillion to more than $290 trillion, 95 percent of which are concentrated in just five financial institutions.

Bernanke failed to prevent banks from issuing deceptive and unfair financial products to consumers. Under his leadership, mortgage lenders were allowed to issue predatory loans they knew consumers could not afford to repay. This risky practice was allowed to continue long after the FBI warned in 2004 of an "epidemic" in mortgage fraud.

After the financial crisis hit, Bernanke's response was to provide trillions of dollars in virtually zero-interest loans and other taxpayer assistance to some of the largest financial institutions in the world. Adding insult to injury, Bernanke refused to tell the American people the names of the institutions that received this handout or the terms involved.

“Mr. Bernanke has failed at all four core responsibilities of the Federal Reserve,” Sanders concluded. “It’s time for him to go."

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Bernanke: recession 'very likely over'

Not that he's been the most accurate with his predictions, but still encouraging news. The downside is that he too sees a stubbornly slow recovery.

Taking questions following a speech at the Brookings Institution, Bernanke gave his most explicit endorsement yet to the idea that the economy bottomed out sometime this summer and has begun growing again, at least as measured by gross domestic product.

"Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time, as many people will still find that their job security and their employment status is not what they wish it was," Bernanke said.

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Newsweek: Bernanke victim of identify fraud

Maybe there's something to this little problem after all. Newsweek:

If ever there were living proof that identity theft can strike the mighty and powerful as well as hapless consumers, look no further than the nation's chief banker: Ben Bernanke. The Federal Reserve Board chairman was one of hundreds of victims of an elaborate identity-fraud ring, headed by a convicted scam artist known as "Big Head," that stole more than $2.1 million from unsuspecting consumers and at least 10 financial institutions around the country, according to recently filed court records reviewed by NEWSWEEK.

Last summer, just as he was dealing with the first rumblings of the financial crisis on Wall Street, Bernanke learned that a thief had swiped his wife's purse—including the couple's joint check book. Days later, someone started cashing checks on the Bernanke family bank account, the documents show. "It's fair to say he was not pleased," said one close associate of Bernanke, who asked not to be identified discussing what the Fed chairman considers a private matter.

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Senator Sanders slams Bernanke nomination

If only more in Congress and the White House shared this view. Bernanke was part of the problem and remains an obstacle to change. Here's the full statement:

Sen. Bernie Sanders (I-Vt.) today issued the following statement on the nomination of Ben S. Bernanke for another term as chairman of the Federal Reserve:

"As a result of the greed, irresponsibility and illegal behavior of Wall Street our country has experienced the worst economic decline since the Great Depression. Mr. Bernanke was head of the Fed and the nation's chief economist as this crisis, driven by reckless speculation, developed. Tragically, like the rest of the Bush administration, he was asleep at the wheel during this period and did nothing to move our financial system onto safer grounds.

“As the middle class of this country continues to shrink, we need a chairman of the Federal Reserve who is more concerned about expanding the productive economy – increasing decent-paying jobs for all Americans – than continuing to fan the flames of Wall Street greed and outrageous compensation packages.”

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