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Saturday, September 4, 2010

Geenspan and the Fed: High Crimes and Misdemeanors

More perspectives on the Federal Reserves mismanagement of the economy.

Gonzalo Lira:
The Prosecution’s Case Against Alan Greenspan -- Should Alan Greenspan, the former Chairman of the Federal Reserve Board (1987–2006), be tried for Crimes Against the Economy, put up against a concrete wall, handed a cigarette, offered a red blindfold, and then executed by firing squad?

Yes—absolutely. No question...

There are four main charges against the so-called “Maestro”:

  • One—Irresponsible Market Liquidity, Which Created Rampant Moral Hazard...
  • Two—The Fed’s Do-Not-Touch-the Financial-Services-Sector Policy...
  • Three—Subsidized Money, Which Radically Distorted The Economy...
This is probably the biggest crime Alan Greenspan committed as Federal Reserve Chairman: The so-called “Greenspan Put”.

For the twenty years of his tenure, the Accused—supposedly an avowed free marketeer—subsidized the cost of money...

What happenes when a good—any good, including money—is subsidized? Simple: It creates market distortions. And the higher the subsidy, the greater the distortive effect.

The market distortions Greenspan’s monetary policies created led to one asset bubble after the other—each of which was bound to pop, as they eventually did. Each of which was worse than the last, which they were: Equities, dot-coms, tech, real-estate—they all ballooned, then they all popped. The latest bubble—which I have argued is the Final Bubble—are of course Treasury bonds...
  • Fourth and finally—Turning Economics Into a Religion with the “We Are Right Because Our God—Math—Is On Our Side” Fallacy, and Marginalizing the Heterodox...
discussion: Zero Hedge

Alan Greenspan the patron saint of easy money
Alan Greenspan the Patron Saint of Banksters and Easy Money
More mismanagement by the Federal Reserve with its new regulatory powers.

David Goldman / Inner Workings:
Gastric Bypass Surgery for Anorexia -- What do you do for an anorexic economy that refuses to ingest risk? The Federal Reserve prescribes the regulatory equivalent of gastric bypass surgery. Under federal regulatory pressure, Goldman Sachs reportedly will shut down its Principal Strategies group. Other banks will do the same. The headline reflects a transformation of the financial environment: Regulators are telling the banks not to take risk, which means to divest themselves of all but the most transparent and low-risk assets (e.g., Treasuries, mortgage-backed securities and corporate bonds). The evolution of the former swashbucklers into utilities is nearly complete...
Bernanke changes his Lehman story.

John Cassidy / New Yorker:
Bernanke Changes Story on Lehman Collapse -- What really happened [at Lehman] remains an open question. But by shifting his ground at this late stage, even if only modestly, Bernanke has given more ammunition to his inquisitors...
Seeking Alpha:
The Cost of Bernanke's Failure-Aversion
Ron Paul: Bernanke Deliberately Destroying Dollar

Congressman Ron Paul slams Federal Reserve chairman Ben Bernanke during a House Financial Services Committee meeting for following a policy of deliberately destroying the dollar and wiping out the American middle class. Paul held Bernanke to task over his refusal to address the decline of the dollar and its clear link to inflation...

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia