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Thursday, September 2, 2010

Bernanke the All Powerful

Items of Interest:

“Why, man, he doth bestride the narrow world like a Colossus.” ― William Shakespeare
If Banana Ben and the Fed are responsible for our boom-bubble-bust economy why is Congress giving him even more power to crush us?

Bloomberg Markets Magazine:
Bernanke Empowered -- The new financial regulation law gives the Federal Reserve chairman the authority to force banks to raise capital and tighten lending -- just as he’s trying to steer monetary policy in the opposite direction.

In November 2009, Senate Banking Committee Chairman Christopher Dodd advanced a radical proposal: to create a super-regulator that would take over most of the bank supervision that had been done by the Federal Reserve System, the Federal Deposit Insurance Corp. and other agencies.

Dodd had been a harsh critic of the Fed and its chairman, Ben S. Bernanke, declaring in July 2009 that the central bank’s supervision of financial services had been an “abysmal failure,” Bloomberg Markets magazine reports in its October 2010 issue.

In January 2010, the U.S. Senate approved Bernanke for a second four-year term by a tally of 70 to 30 -- giving him the most negative votes any nominee had received since the chamber started confirming Fed chiefs in 1978.

Six months later, when President Barack Obama signed into law a 2,300-page bill overhauling financial services regulation, the super-regulator had been forgotten. Instead, the Federal Reserve had acquired new regulatory heft, and Bernanke had emerged as the most powerful Fed chairman ever -- with more authority even than his legendary predecessor, Alan Greenspan, who had chaired the Fed for 18 years...

Bernanke told Congress on July 21 that the outlook for the economy is “unusually uncertain.” The same might be said for his prospects as the new master of financial regulation.
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Zero Hedge:
Does It Really Matter If We Get Another QE? -- Most of the investment world is a chatter with trying to discern when the Fed will announce another QE Program. When is it coming? How big will it be? How high will stocks soar when it hits?

The “Big Picture” thinkers already know that regardless of what Bernanke says or promises, the END GAME for Fed monetary intervention is at hand. If Bernanke DOES announce some new massive QE 2 program the subsequent spike in equities will only last a short time before stocks enter a free-fall (Europe’s $1 trillion bailout only bought a few days worth of gains back in June).

Moreover, the announcement of a massive QE 2 program would also kick the US Dollar off a cliff, sending a huge signal to international investors that the EXTREME moves Bernanker committed during the 2008-2009 Crisis are actually ALL he knows how to do and will remain the norm rather than the exceptional measures they were promised to be...
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Michael Pento / Businessinsider.com:
Bernanke Out of Bullets, But Not Bombs -- Word on the street is that the Fed is now "out of bullets."

Many economists fear that in its efforts to spur recovery, the Fed may have already exhausted its array of monetary ammunition and that it has nothing left of significance to fire at the steadily advancing recession...
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ABC News:
Bernanke Takes Blame for Muddled Message on Lehman -- U.S. Federal Reserve Chairman Ben Bernanke said he was partly to blame for leaving the wrong impression that the central bank could have saved Lehman Brothers from failure in 2008.

Bernanke, testifying on Thursday before a congressional commission examining the causes of the worst financial crisis in 80 years, said he thought it "very likely" the investment bank was insolvent and lacked sufficient collateral to borrow enough from the central bank to avert collapse.

But he said he kept that view to himself in congressional testimony given just days after Lehman's September 2008 bankruptcy because he was worried that such comments might have spooked already panicky financial markets...
related:
WSJ: Bernanke Defends Record On Lehman
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Deal Journal / Wall Street Journal:
Ben Bernanke’s Labor Day Reading List -- Fed Chief Ben Bernanke suggests some dry, but important reading to consider. Ever heard of CoVaR? How about Montagu Norman?

Bernanke was asked Thursday by the Financial Crisis Inquiry Commission what books or academic papers he recommends reading abut the financial crisis and its aftermath. The Fed chief offered up four suggestions and said he would get back to the commission with more ideas.

Here are Bernanke’s four suggestions:
Amazon: 
Slapped by the Invisible Hand: The Panic of 2007

Amazon:
Lords of Finance: The Bankers Who Broke the World

Markus Brunnermeier /Journal of Economic Perspectives:
Deciphering the Liquidity and Credit Crunch 2007-08

Markus Brunnermeier:
CoVaR (a derivative of the famous “value at risk”)
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