February 25, 2010

February 25, 2010

These times are truly amazing...when we look at what our 'wise and wisdom filled' congressional representatives ponder it makes one wonder how long the republic has left! For the clock is surely ticking...


Federal Reserve chairman Ben Bernanke gave a lesson once again in monetary policy to a still mystified House Financial Services Committee at a hearing on the Fed's semi-annual report to Congress today.
by Elizabeth MacDonald
PROF. BERNANKE INSTRUCTS CONGRESS--AGAIN

Is Fed’s Market-Timing State of the Art?
Not yet clear, because no one on the committee asked, is whether US taxpayers will ever get to see exactly what sludge they paid for in the AIG bailouts, where Goldman Sachs, Societe Generale, Calyon Securities and Merrill Lynch were made 100% whole on their trades with the toppled insurer.
The committee also did not give ample airing to the Fed’s exit strategy, in which it will need to dismount out of its very complex, very unorthodox, and very sizable intervention into the US economy, in which it has ballooned its balance sheet to $2 trillion from $800 billion pre-crisis, where it has junked up its financials with all sorts of asset-backed securities to rescue Wall Street.
Also not discussed are the Fed’s market-timing abilities, proven to be not so state of the art.
Can the Fed time the market right and make a profit selling these securities, many of which are underwater, to avoid losses? Since it took the Fed nearly two years to raise rates after the last two recessions, which exacerbated the bubble?
Can it do so when even Wall Street can't get it right, dancing deeper into paper refuse when their computer screens flashed red on subprime securities, proving artificial intelligence is no match for natural stupidity?
Fannie and Freddie Take Over Quantitative Easing
While the Fed has already ended all sorts of credit facilities for the financial sector, it’s clear Congress intends Fannie Mae and Freddie Mac will now take over the role of lending support to the US economy, as the Congress authorized for them an open-ended line of credit, previously capped at $400 billion, in the dead of night last December.
The House hearing of course didn’t give much time to discussing the impact of this blank check given to two of the worst offenders in the government distorted housing market which is getting a government bailout.
Hot Molten Evil
Because this is the same House Committee—Frank, Waters, et al--that chastised critics as hot molten evil if they dared come before it to tell the truth about Fannie and Freddie.
The Fed chairman didn’t quite fully address Fannie and Freddie reform, meekly noting something about the two being a private but yet maybe a public utility (my head just exploded), because again the representatives didn’t really fully give this issue an airing.
“Crap-ital Standards”
Although Rep. Randy Neugebauer of Texas did ask what the Fed was doing about bank reform in the way of tightening, as he unintentionally though aptly put it, bank “crapital standards.”
Standards which Congress seems to follow, as Bernanke noted once again that it’s “very important for Congress and the Administration to have a credible plan to bring the government back to a sustainable position on deficits,” since “basic arithmetic shows that interest payments on the debt would go higher and spiral out of control,” noting the Congressional Budget Office came up “with the same results.”
"Governments Jobs Are Not Productive"
To which the Fed chairman also said that while fiscal stimulus has created jobs, “you don’t want to create government jobs that are not productive.”
Deficit Spending Hurts Markets Now
This deficit spending problem “is not 10 years away, it affects the markets today,” Bernanke replied to a question to Rep. Ed Royce (R-Calif.), the only person on the committee who appears to not be a few peas short of a casserole, upon which committee chairman Barney Frank (D-Mass.) cut off this line of questioning.