Bernanke on Financial Regulation and Financial Stability
Submitted by
CalculatedRisk on Tue, 07/08/2008 - 5:16am (72 comments)
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Bernanke also endorsed proposals to set up a federal liquidation process for a failing investment bank.
"...and hurry!
Oh crap, is my mike on?"
More regulation by the Fed, the entity that totally disregarded that responsibility that it already had for lending. More stuff it can ignore.
Just cut my rates.
Yes, since they've proven their inability to manage monetary policy, they need a new job to justify their existence.
In general Bernanke argued the Fed needs more authority to provide proper oversight for the financial system.
Translation: In general Bernanke argued the Fed needs more authority to clean up the mess it created and nurtured in the first place.
Just make them sell their yatchs.
IMB down 43%
B-bye !
...as long as emergency conditions continue to prevail...
Yahoo! 404 - Page Not Found
Senate Housing Bailout moves forward again.
This is crazy. We really do live in bizzaro world if this blatantly populist and unfair legislation not only gets proposed, but gets widespread support.
I guess Ill be on the phone again to my senators today. They need to stop this crap, they have real work to do, like getting the troops home from Iraq.
Senate (202) 224-3121
"In general Bernanke argued the Fed needs more authority to provide proper oversight for the financial system."
The FED needs to go the way of the Dodo bird these market manipulating ass wipes have given us one bubble after another. Time to put a dagger in the heart of this beast.
Haha... the organization that championed the subprime loan has more great ideas for making our life better.
We were unaware of what was going on. We need more authority.
Uh huh. Sounds more like a blatant attempt to make certain the "right" people get a seat on the life boat.
Cheers,
I just saw a horrifying statistic, on bubblevision - Staples has 76,000 (slackjawed) employees.
Our economy is in deep trouble as consumption collapses, employment (for slackjawed barristas and store greeters) vanishes and fixed costs crush 'em.
Someone call me when we get 100 year mortgages. We are headed straight down the Japan path. We sure talk a big game. IMB is insolvent, so we send letters around and have to listen to the Fed Chairmen shout for more authority to misuse.
Buckle up kids this is going to get fun.
The Fed needs more power to inflate currency to subsidize big banks.
With regard to the housing bill:
"This will be the major achievement and accomplishment of this Congress when it comes to dealing with the underlying economic crisis, which is at its heart the foreclosure crisis," said Sen. Christopher J. Dodd, D-Conn., the Banking Committee Chairman who wrote the legislation.
It's funny that nobody considers that this may simply lead to future fiscal crises perhaps with their own economic consequences.
Not even judging whether this bailout bill is a good or bad idea, I can observe that in the congress long-term consequences are never considered. The future doesn't exist beyond the next election cycle.
I maintain this kind of thinking led us to sit idle as we destroyed the financial system by making obviously bad loans. And I see no signs that the underlying cause of our problems is being addressed.
We're not in the situation we're in due to lack of bailouts.
We're in this situation due to lack of foresight and responsibility.
I don't see this situation improving yet.
We have lots of jobs tied up in consumption like Staples....look at Starbucks. But on the other hand, that means we have lots of labor which theoretically could transition to useful jobs, like manufacturing (i.e. solar panels).
Im not saying the above would be easy or likely, but we have the labor base to make a recovery if we head in the correct direction.
Unfortunately for us the Fed and Congress have us heading the other way...led by their investment bank cronies.
Okay, prediction time.
Me crystal ball says we finish in the negative again today despite oil falling through the floor. Any other ideas?
But on the other hand, that means we have lots of labor which theoretically could transition to useful jobs, like manufacturing (i.e. solar panels).
Accept that most of the lower level service jobs are filled by absolute idiots.
Oops. "Except" not "Accept"
One nation under the Fed in which we trust.
Let me throw out a completely contrarian idea - and I'm not claiming to believe this myself, but it's worth thinking about...
When a man lends you money, it gives him power over you. When Bernanke lends the banks money, it gives him power over the banks. Maybe he isn't just the subservient lapdog that he appears to be. Maybe he truly believes that the big banks have gotten too much power and control over the financial system and he is setting them up for a good arm-twisting by the Federal Government. It's going to be hard for the banks to kick against closer regulation when they must cringe in terror that Bernanke will cut off their money supply...
Time will tell...
o no Skool, the Accept was simply perfect.
If they can make a machine for idiots that makes an espresso at the touch of a button, they can make a machine that makes solar panels at the touch of a button. Id rather have that dumbass making $5 solar panels than $5 Lattes
%---------------------------------%
OldSkool writes:
Accept that most of the lower level service jobs are filled by absolute idiots.
Fannie, Freddie Adequately Capitalized: Lockhart
Fannie, Freddie Adequately Capitalized: Lockhart - CNBC
Reading between the lines : Quit shorting me or there really will be trouble.
Well, that was a short-lived pump; from green to red in 15 minutes.
"Accept that most of the lower level service jobs are filled by absolute idiots."
OldSkool | 07.08.08 - 10:03 am | #
OldSkool,
I have 2 friends who have large auto/truck repair businesses. One needs 2 mechanics the other 3 or 4. Can't find em. So many people have shunned this field the shortage is pretty drastic. But,on the other hand, it is good for me !!!!
Chris
P.S.- Starting pay is 30-35 hr w/bennies if you have 10+ years experience...
The Fed is a private corproation owned by banks with political appointees. If we were serious about reigning in banks the there would be no federal Reserve and banks would have to borrow from the US treasury for money owing interest to the US taxpayer
P.S.- Starting pay is 30-35 hr w/bennies if you have 10+ years experience...
Cobradriver | 07.08.08 - 10:11 am | #
For 2 extra years in univeristy (instead of taking 2 years collage), my "5 year experience" pay is $125/h...
And I sit reading CR
The cost/benefit of those two extra years are incalculable.
as long as emergency conditions ``continue to prevail,'' Like terrorism, our economy is also in permanant emergency mode.
And back in the back when, the idea was that the government would allow investment banks to do crazy-ass risky shit, not because we thought that they were always smart enough to avoid getting burned, but because the government was NOT going to be there to pick up the pieces. Consumer banks put up with increased regulation and scruting IN EXCHANGE for FDIC insurance. I actually think that it is a good thing to have a parallel banking system for those willing to take bigger risks. But I don't want to have to bail out their casino losses.
@I can observe that in the congress long-term consequences are never considered. The future doesn't exist beyond the next election cycle.
I know, this why we'll never be like Norway for example. They seem to have the ability to think counter-cyclically. We don't.
Cobradriver:
That is correct. There is such a big difference between a skilled and educated worker. And it's not something that can be taught overnight. I don't know if it's a brain wiring thing, or the product of K-12 liberal arts teaching, but the ability to just "figure things out" has disappeared.
The Bank of Canada said on Tuesday it will not roll over a term liquidity operation on July 10, marking the effective end of a funding crunch in the Canadian money markets.
Bank of Canada backs off as credit tensions ease
| Reuters
Sanity returns to Canada
"as long as emergency conditions ``continue to prevail,'"
Emergency conditions eh? From all contained to emergency conditions...in like 16 months. Damn fine job Ben.
Cheers,
Quote from BB's speech:
Unfortunately, in the past few years, many mortgage loans were extended that were poorly underwritten or whose terms were inadequately disclosed, particularly in the subprime market.
And of course the Fed had nothing to do with this... Or maybe they were just asleep at the wheel? Or maybe they were looking out for their Wall St. buddies?
Having said that, I do not necessarily see the Fed's staggering supervisory failure as a ground to abolish it nor to deny it what should properly be its role as a prudential supervisor. Banking supervision in the US is broken and it needs to be fixed, but the idea that the market can take care of itself is ludicrous. (Even if regulation intrinsically carries some risk of moral hazard.)
Bankers, especially investment bankers, are paid to take risks (which is now they make money) and there remains a need for somebody to take away the punch bowl when the party gets out of hand (both in terms of monetary policy and in terms of prudential regulation). That doesn't necessarily need to be the Fed, but somebody has to do it.
The Fed could make a start by properly implementing the rules that are already on the Statute.
Is the FED in panic mode? Woke up to Bernanke speaking about FED needing more authority to liquidate bank in orderly fashion. Hmmm...What specific bank emergency is currently in his in-box. IndyMac? Lehman? Funny...haven't heard squat on bubblevision about Lehman shut out of oil trades or IndyMac's letter. Watch for emergency passage of new FED regulatory authority by congress, then deluge of bad news on banks. MSM collusion with FED on dripping out vital market news??
When I was hospitalized many years ago, my fiancee - now wife - was a regular DI on my breathing and other exercises. Didn't hate her but I did question her sense of mercy. She was absolutely correct.
Why don't we let her run the Fed? The beggars have to feel some pain to make some gain.
Welcome to Co-dependency as an economic aspect.
The Federal Reserve may extend securities dealers' access to direct loans from the central bank into 2009...
And with this gesture I toss away what remains of my credibility.
"Bernanke will cut off their money supply..."
LMFFAO!
Carlomagno wrote, Bankers, especially investment bankers, are paid to take risks (which is now they make money) and there remains a need for somebody to take away the punch bowl when the party gets out of hand (both in terms of monetary policy and in terms of prudential regulation). That doesn't necessarily need to be the Fed, but somebody has to do it.
Yeah, like, receivership of the bank, including firing of all upper level executives and a 100% wipeout of equity?
Accept that most of the lower level service jobs are filled by absolute idiots...
Elitist BS. You know any people working these jobs? Ever talk to them? Exactly how did you become such a superior being?
and we're to believe that he will raise rates sometime this year to fight inflation?
nfw!
Interesting Times, what is your profession? I hope it doesn't involve writing (college vs. collage) haha.
Dear Ben
You and the FED have two jobs, Price stability and promote economic growth. You have failed miserably at both yet some how giving you want more power so your banking buddies can continue the rape of the American people while CONgress takes their campaign contributions and happily looks the other way.
You are one sad sack of shit Ben may you burn in hell.
NoVa,
Thank you.
I'm one of those who somehow can't help getting to know the people who make my coffee or take care of other needs. So I know a couple of baristas, a personal trainer, a waiter or two, the early morning cashiers at the grocery. Not only are they not idiots, they're unfailingly polite.
But they have stories to tell, as you may imagine.
amazing exchange here
"mark to truth"
Video - CNBC.com
Great news! Not only do we get a gigantic wealth transfer, we get a power grab as well! Sweet!
Raping is not enough! Pillage we must!
F-You, Ben Bernanke. F-You Congress.
I couldn't help but wonder the timing of this talk of regulation and more quick help to wall st firms, the Q2 earning season is upon us and Uncle Ben knows something that we can only guess. More writedowns, capital issues etc...
Once again Fed is trying to interfere in the so called "free markets"...
Is someone perhaps speaking through Ben's mouthpiece? Perhaps, mp, you are right, he went to Congress..., and now the private corporation has public obligations.
The time for Bernanke to speak on financial community oversight was back in 1997 during the Glass-Steagall Congressional hearings. WHERE WAS HE THEN?
Having skipped that opportunity, he might have spoken up on the topic in 2005 during his Congressional screening for the FED Head job, but again - NOTHING!
Media may have short memories, but Historians will remind our Grand-kids who abdicated their responsibilities in one of our Country's gravest times of need.
SHAME ON YOU BEN BERNANKE!
collage...
Rupert | 07.08.08 - 10:51 am | #
lmao. It involves thinking... lots and lots of thinking. No writting.
AA down 5% and they are reporting their earnings tonight. My guess, they blew it ...
come on, spill the beans. inquiring minds want to know in which field 5 years of experience will get you a $125/hr job.
Elitist BS. You know any people working these jobs? Ever talk to them? Exactly how did you become such a superior being?
Let's see. Neither of my parents have high school degrees; several of my best friends have only high school degrees. I worked in a Circuit City warehouse as a grunt for over 6 years to pay for a private high school, college, and law school.
Twice a week, I volunteer at a free learning center teaching computer, math, and language skills. When I first started almost 10 years ago, there were lots of "working class" people wanting to get their GEDs or learn a skill like Excel. For several years now, the overwhelming majority have been Hispanic immigrants who are actually trying to improve their lots in life. One the greatest moments in my life occurred when a 16 year Guatemalan construction worker asked me to teach him geometry and calculus because he wanted to be like the engineers that he saw on the construction sites. Meanwhile, I teach a $1K/weekend SAT course in which half the students are hung-over and asleep.
My problem is that most people, regardless of whether they're an Ivy League analyst or a Starbucks barista, simply refuse to think for themselves. It's easier to be willfully blind or to blame someone else for our condition. No, we can't all be what we want to be, but at the same time we have more control over our lives than we think.
From NYT lobbyists react to the new rules:
Industry lobbyists maintained that at a time of tight credit, tougher rules could make many mortgages more expensive by creating more paperwork and potentially exposing lenders to more lawsuits. They also complained that the restrictions were too broad and would restrain lenders from issuing otherwise creditworthy loans. Three of the industrys most influential trade groups the American Bankers Association, the Mortgage Bankers Association and the Independent Community Bankers of America separately filed letters criticizing the proposals.
Lets put J-Yello in charge of setting up a federal liquidation process for a failing investment bank and get her off the speaking circuit..
"Innovators will always outpace regulators"-Minsky
Elitist BS. You know any people working these jobs? Ever talk to them? Exactly how did you become such a superior being?
Yah, it was a throw away line that opened itself up to the elitist charge. I think if pressed, he'd include quite a few higher level jobs filled with idiots, too.
Gee the Fed had this authority all along:
"With no end in sight to the turbulence in the housing and financial markets, the chairman of the Federal Reserve said on Tuesday morning that it would issue new lending rules next week to restrict exotic mortgages and high-cost loans for people with weak credit."
Fed Sees Turmoil Persisting Deep Into Next Year - NY Times
It is important to note that what Bernanke argues for are historic fundamental changes in responsibility. The Fed has never been charged with being responsible for the financial system or for the financial well-being of the country, but it seems to be assuming that role now in the public eye. Since that really is the role of Congress - which seems to have abdicated - Bernanke needs to be very careful or he will end up with the appearance and the responsibility, but not the power.
His arguments are based in the current temporary situation, but their long-term consequences are so large that this should not be taken lightly.
Rupert writes:
Interesting Times, what is your profession? I hope it doesn't involve writing (college vs. collage) haha.
Rupert | 07.08.08 - 10:51 am |
'Round here, we're concerned with the art of bricolage not collage.
Let's step back a moment:
Everything...and I do mean EVERYTHING...that Bernanke has done to date has been with one goal in mind: save the insolvent banks. Doesn't matter if gas goes to $10/gal, doesn't matter if unemployment skyrockets, just create time and spread for the banks to recapitalize.
Problem is that it's not working. Now we enter the triage phase where weak or especially irresponsible players get crushed so that others can feed off the dead carcasses.
Jim Rogers is right and has been right since November: short the banks to $8 and then reconsider the situation.
@trail Jamie Dimon just started speaking (CNBC has it live). It'll be interesting to see if he alludes to the point you're making.. are the IBs going to admit they need to pull in their horns and accept much tighter supervision because of their access to the Fed lending facilities?
Left Behind,
That certainly isn't the impression BB has been giving the public. He is increasing 'the face' responsible for 'the economy'.
Risky, risky, risky.
In general Bernanke argued the Fed needs more authority to provide proper oversight for the financial system. - CR
So being fed chmn isn't enough, Ben wants to be the ANTI-CHRIST too?
Hmmmmm... I can see congress delegating that authority to him... they seem pretty good at delegating away authority & avoiding responsibility.
[/sarcasm]
BTW - I'm all in favor of more bank regulation & better supervision but maybe its time to regulate the FRB too while at it (looking at you congress - step up & actually BE a republic maybe?)...
Why make the IBs more like real banks?
I thought we learned in 1930 to keep them seperate?
During the last 80 years we have watched congress unlearn that lesson.
How long will it take to learn again?
Probably as long as it takes to erase all of my savings.
I sincerly hope that this country falls into civil war and the peasants take back what is rightfully theirs. Their freedom, their jobs, their security, their nation.
Everyone stop whining right now.
You live in what is still one of the top 6-8 countries to live in in the world, rich or poor, and the country with the most social mobility outside of Asia, where they think it was invented last week.
People are complaining that the Federal Reserve chairman didn't stop institutions the Federal Reserve doesn't regulate from taking on risk?
People are complaining that the Federal Reserve is more interested in providing liquidity during a credit contraction than protecting the Dollar. That's their job.
People blaming the government, the Federal Reserve, anyone but themselves for the loss of their savings (sometimes prospectively!). Folks, it's a free country. Move your savings, if the FDIC isn't good enough for you. Treasuries are fine. If you're seriously worried about a debt default (which is silly at present), there's always gold.
The situation is not that bad (it's bad, don't get me wrong, I'm presently a confirmed bear), Ben Bernanke is an intelligent if occasionally misguided man doing his best at a very difficult job, and the government really isn't out to get you.
That is all.
Almost anybody could figure out that exotic mortgages are a flawed sttragegy instrument, for the long run, that would help creat the bubble.
Therefore, the question is, apparently, why would The Fed want to introduce the limiting of these flawed instruments after the bubble has burst rather than before when sanity needed it?
A couple of miles behind the curve?
The American people are about to get the biggest raping of their lives.
"You live in what is still one of the top 6-8 countries to live in in the world, rich or poor, and the country with the most social mobility outside of Asia, where they think it was invented last week."
Didn't we used to be number One? Wasn't that long ago, was it? All those crazy Americans, with flag pins on their lapels, screaming "we're number one!"
And now you want the crowd to chant "we're number eight! We're number eight!"? And you expect some enthusiasm?
Naw, never happen.
Payback is coming...this is not over until all those folks labeled "sheeple" are well and truly aware of what has been done to them and their country.
And their children's future and their grandchildren's future.
Regarding the Housing bill: congress is trying to do what congress does best at this point in their history, that is, help a small number of americans, who are sinking miserably. The Bernanke and Paulson have bailed out their top shelf people via more than 40 billion taxpayers dollars. The congress is trying to get some 1.7 billion misguided dollars to a few hundred thousand people. That's basically chicken sh^^ compared to what a very few wall streeters got. Congress is helpless when it comes to dealing with the financial fiasco BushCo has reigned upon the land. So don't get your knickers in a knot with this bill.