Bernanke on Recent Financial Turmoil
Submitted by
CalculatedRisk on Mon, 10/15/2007 - 3:04pm (114 comments)
in
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 23 members and 159 guests online.
Recent Recommendations
Oy. You see, the Fed has painted itself into a corner because of the full employment mantra. The problem now is that there are such major league structural imbalances in the economy that we absolutely cannot sustain any kind of stock market meltdown, or the effect on the real economy would be so severe that we might not talk about a healthy financial system again until Ben is six feet under from natural causes.
So, you can pretty much assure that the ABX, etc, today pushed the probability of another Fed cut up pretty nicely, however, as more and more time passes, the more ineffectual those cuts are going to look.
Shorter Bernanke: There is still some value that has not been looted from the Treasury. Until that value has been liquidated and the burdon of our credit binge has been transferred to the taxpayer (we don't care what country the taxpayer lives in), everything is hunky-dorey. Keep shopping.
Is it so hard to believe that Bernanke means precisely what he says?
"Indeed, although the Federal Reserve can seek to provide a more stable economic background that will benefit both investors and non-investors, the truth is that it can hardly insulate investors from risk, even if it wished to do so."
CBOT options futures imply 70% chance of no rate cut:
http://www.clevelandfed.org/research/Policy/fedfunds/
Bernanke- "Rather than becoming more crisis-prone, the financial system is likely to emerge from this episode healthier and more stable than before."
Conjure Bag is in the corner, laughing derisively.
"Rather than becoming more crisis-prone, the financial system is likely to emerge from this episode healthier and more stable than before"
Did he really say this? What a total load of crap!
I read the whole thing and I think any severe action by the Fed will be the swift take-over of a bank if failure is imminenent. I think that kind of progessive action will forestall a chain-reaction if the banks can't find a way to avoid the valuation losses, because rate cuts can't do a damn thing.
"Rather than becoming more crisis-prone, the financial system is likely to emerge from this episode healthier and more stable than before."
LOL!
SOmeone really ought to start the lolfed blog....
Give it time Nemo... you'll see.
Interesting...Read this as posted on CR and then read the Reuter's news..it kinda funny how things got left out of the MSM
Fed ready to act to ensure smooth markets: Bernanke
| Reuters
Donna, I guess that statement is kind of true - all depends on what you mean by before. Given that the current financial system is probably at its most unstable since the late 1920s, he could be quite right.
Bernanke is an academic who has probably never reported a yearly income greater than $200K.
My guess is that in the past few months, he has been wined and dined at the feet of people orders of magnitude wealthier than him. These folks now have his ear and have told him in no-uncertain terms that a true calamity awaits in the financial markets.
Mr. Bernanke == Wall St. Waterboy.
What he's saying is that a bunch of Wall Street speculators are going to get crushed so they don't make the same mistakes in the future. That is the only way "the financial system is likely to emerge from this episode healthier and more stable than before".
Maybe he is, I dunno, telling the truth?
Bernanke sees no spillover from mortgage woes
| Reuters
In May B. assured us that there would be no spillover from housing to the wider economy.
Now he says euphemistically, that it will be a "drag" on growth.
Will he ever admit he was dead wrong? Not a chance.
Barley, the author : Tamawa Kadoya, is probably not a native English speaker. That is a very bad interpretation of the original statement either through incompetence, OR, perhaps, if the author is a native speaker, out of pure management motivated spin.
From what I can tell, Ben said : "financial markets are healthy", not they are healthier than after this summer. He said they are likely to emerge healthier after this episode, but this episode sure as hell ain't over.
Bernanke will blink again and again. The problems have not gone away. The reason the ABCP market is shrinking is that their is genuine fear that the underlying assets will not perform. It is only a matter of time before another corner of the financial universe begins to meltdown.
Once again, the super-rich of Wall St. will call Bernanke and assure him that the financial world will take out the real economy. And Bernanke will blink.
The problem is really, really simple. In this episode, Bernanke has demonstrated himself to be a pushover.
In the game of chicken in August, Bernanke ducked very, very quickly. Now that Wall St. knows his MO, they will taunt him mercilessly.
AP Floats this version in Europe
..I quote ..
"WASHINGTON (AP) - A deepening housing slump probably will be a "significant drag" on economic growth into next year and it will take time for Wall Street to fully recover from a painful credit crisis, Federal Reserve Chairman Ben Bernanke warned Monday.
Bernanke once again pledged to "act as needed" to help financial markets -- which have suffered through several months of turbulence -- function smoothly and to keep the economy and inflation on an even keel.
"Conditions in financial markets have shown some improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks," Bernanke said in a speech to the New York Economic Club. A copy of his remarks were made available in Washington.
It was Bernanke's most extensive assessment of the country's current economic situation since the August turmoil unhinged Wall Street.
The ultimate implications of the credit crunch on the broader economy remain uncertain, the Fed chief said.
Against that backdrop, Bernanke said the central bank will be closely watching the economy's vital signs. He didn't specifically commit to cutting rates again.
Economists have mixed opinions on whether the Fed will lower interest rates at their next meeting, Oct. 30-31.
To help cushion the economy from the ill effects of the credit crunch and housing slump, the Fed on Sept. 18 slashed a key short-term interest rate by one-half percentage point to 4.75 percent. It marked the first rate cut in more than four years. It also reflected the most aggressive action taken by the Fed to curb fallout from the credit crisis, which intensified in August.
Since that September meeting, the housing slump -- the worst in 16 years -- has gotten deeper, Bernanke said.
"The further contraction in housing is likely to be a significant drag on growth in the current quarter and through early next year," he said.
"However, it remains too early to assess the extent to which household and business spending will be affected by the weakness in housing and the tightening in credit conditions," he added.
Spending by businesses and individuals is an important ingredient to keeping the economic expansion -- which began in late 2001 -- from fizzling out." [close quote]
Bernanke should stop talking. It seems every time he opens his mouth he sound more like a gopher.
"These continued problems suggest that investors will need more time to gather information and reevaluate risks before they are willing to reenter these markets."
Investors aren't "reevaluating", they reevaluate in nanoseconds!
They're waiting for more rate cuts, Bernanke knows it, PIMCO knows it, EVERYONE knows it. Next time Ben, cut ff a full 100bp, maybe that will helpget them back into the game. Then, in Jan. you can cut another 100bp & we'll be closer to what these Wall St. pirates consider fair value. We all know Wall St. loves to get in the game when it's fair, huh? Sure they do, as long as they define fair.
What a disappointment!!!!!!!!!!!!!!!!!
Anon, what he is doing is called ratcheting down expectations. He clearly sees the economy weakening, but he never does much prognosticating until it is already a market established consensus. Had he said this BEFORE it had become conventional thinking, all fricking hell would break loose. And clearly, he knew it before it became commonplace. So just imagine what he is REALLY thinking now, and place your bets accordingly. We'll get more rate cuts, because recession is pretty much a gimme. Just look at the state by state employment numbers, think about what is driving them down in the various states, and then look at the housing market trajectory. That's all you need to know.
Bernanke needs to say something smart, like:
Economic growth that comes at the cost of long-term stability is not desirable.
Fed officials (most recently Poole) continue to "greenlight" dollar shorts. They do so each time they imply or openly state that higher commodity prices and a weaker dollar are not inflationary, and hence not the objects of monetary policy.
In and of itself the "reflation" statements are not that injurious. The harm comes from the opposite tack that foreign Central Banks must take. Many countries are fighting an all-out war on food and energy inflation. The list is too long to include here, but countries that have tightened monetary policy and/or revalued their currency pegs include: South Africa, Vietnam, Brazil, Singapore, UAE, India, Qatar...
For the above countries, the Fed's inaction makes their life harder, it makes inflation more pressing, and it makes revaluation a logical way out.
So basically, its the rest of the world does not share the Fed's views about inflation and how aggressively one must fight it. They have an incentive to "turn the tables"; that is, revalue, increase dollar export prices, and effectively "re-export" inflation back the U.S,. thereby proving the Fed wrong. The missing element, the gigantic finger in the dike, is China, which arguably has the most pressing food inflation problem.
We've all worked with folks like Bernanke before. They demonstrate an extraordinary academic grasp but lack any actual muscle: nerds, geeks, dorks.
Wall St. is run by salesmen and jocks. Sure, their are a tremendous number of geeks on Wall St. But the people at the front of the line are monstrously aggressive, hugely egotistical and have balls of steel. They also have the capacity to charm and intimidate at will. They're good at what they do.
Throw poor(!) Ben into a room of jocks each worth in excess of $100M and what are you going to get?
Someone is going to loose his lunch money.
I don't know about a cut at the end of the month. Looking at the futures and the actual fed fund rate vs the target rate, both are saying no cut this time around.
MOT, yes, they are saying that today, why? Because that is based on what just happened, which is, a stock market that has retracted all of its losses almost since the first round of public acknowledgement of a financial system problem. The reason that happened is because one Fed cut and the MSM basically convinced everyone that the problem is solved. Well, guess what? It isn't. And now we'll walk back those gains and as they are pared off, those probabilities will shift right back. Just trace out the stock market vs the no cut probability. You'll see.
Bernanke is an academic who has probably never reported a yearly income greater than $200K.
My guess is that in the past few months, he has been wined and dined at the feet of people orders of magnitude wealthier than him. These folks now have his ear and have told him in no-uncertain terms that a true calamity awaits in the financial markets.
Mr. Bernanke == Wall St. Waterboy.
Due to his academic background Bernanke is considered a "Depression expert". This kind of thinking is insane. It's like saying a guy who watches a lot of football is qualified to be a quarterback. Or somebody who watches a lot of TV shows about doctors can perform surgery.
It's not a matter of whether he's most qualified or not (he may be). It's the absurdity of even entertaining the thought that somebody who's never done a particular thing is going to be good at that thing.
How about trying to avoid problems that nobody has any experience dealing with by containing runaway speculation instead?
No, nevermind. That might actually work.
CR - seems to me Ben ought to be looking at the data you have posted.
I strongly recommend reading the entire speech.
The Federal Reserve's efforts to provide liquidity appear to have been helpful on the whole. To be sure, the volume of loans to banks made through the discount window, though it increased for a time, has been modest. However, collateral placed by banks at the discount window in anticipation of possible borrowing rose sharply during August and September, suggesting that some banks viewed the discount window as a potentially valuable option. On the other hand, no amount of liquidity provision by the central bank can be expected to solve the problems regarding the valuation of complex securitized assets or to reverse the credit losses on subprime mortgages. These underlying difficulties will be resolved only over time by financial markets.
I have said it before, and I will say it again: I think all y'all seriously underrate this guy.
Illiquidity = Fed needs to get busy. Insolvency = Firms need to go under. Bernanke gets it... Or at least, he seems to in this speech.
Geoff, if you are so sure about that rate cut, why don't you load up on futures options on the CBOT and make a killing?
I'd be amazed if there was a rate cut this month. I don't see any rationale for it.
--
John Berry: No Fed Rate Cut
Based on Bernankes speech at Economic Club of New York minutes ago. Mr. Berry is considered the top Fed prognosticator and he was commenting real-time on Bloomberg.
No earnings growth and no Fed rate cut. What will keep the stock market going up?
Jas
What I read is that if Wall Street wants a rate cut, drop 2000 points and I will give you one. But first take all of the speculators out and shoot them.
Foreign investors are not taking this one lightly either. BB doesn't control the out of control fiscal policy or the stupid war policy- so the dollar falls, and all BB can do is note the drop.
So with essentially one lever to pull, he just awaits the next crisis. Many of the comments basically point out that we will fight inflation when it shows up, but Wall Street, you are on your own. I would not take much comfort from these comments if I ran a big Wall Street investment house, in fact I would be liquidating everything to shore up the balance sheet before the next shoe drops.
Geez, BB compares himself to Bagehot indirectly. Pain is coming!!!
"Conditions in financial markets have shown some improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks."
Setbacks? I smell CYA.
More:
"In particular, investors are continuing to reassess the risks they face and have not yet fully regained confidence in their ability to accurately price certain types of securities. The ultimate implications of financial developments for the cost and availability of credit, and thus for the broader economy, remain uncertain."
I remain uncertain, except that I am certain more grief is on the way. This speech simply says, hey we are doing our best to make sure things keep going, but you are all on your own.
Sorta like I have been doing in real life. I note that almost all gold coin sales by the mint are currently suspended.
Someday this war's gonna end...
OT, but interesting read about hedge fund risk from former SEC Donaldson.
Bill Moyers Journal . Transcripts | PBS
Nemo, first, who is to say I haven't? Second, it's not that a rate cut is needed now, or in the cards. It is a matter of what develops between now and the next date. What happened today should tip you off that we haven't done jack to solve the underlying problem. I do agree that liquidity isn't the issue. But Im not saying that he will cut because of liquidity. Im saying the economy is going down the drain, and he can cut to save that. Im also saying that he cannot afford to let any downward market momentum go to far, since it will increase the insolvency problem we are already experiencing.
AllenM: I think you are right. If Wall Street has been expecting perpetual Fed bail-outs, and they believe this speech, we may see some serious market turmoil. (I would say his self-comparison to Bagehot was more than indirect. He cited him by name.)
Geoff: You might be right, but the data do not imply a recession... Yet.
I realize the perma-bears cannot imagine things working out well. And here on CR, home of the housing and mortgage experts, it is hard to imagine how this once-in-a-lifetime disaster in your industry could not take down the broader economy.
But it is a very big economy. And the actual economic numbers simply aren't that bad. So far.
This forlorn hope speech said a mouthful about the Greenspan glory hole he left us.
M-LEC= Mortgage-Loan Excess Cleanup
"I'd be amazed if there was a rate cut this month. I don't see any rationale for it."
Heck Mama we still have a couple of weeks to go a good 1000 point drop on the S&P betweeen now and then would probably work. I think Wall Street has old Benny right where they want him dancing like the guy getting bullets shot at his feet.
This is what one of the hedgies had to say the last melt down.
"The higher purpose of the recent moves in stocks, the largest weekly decline in a week in five years, includes getting the Fed to reduce interest rates, reducing the rate on mortgages, which are now back to year-end levels, providing the opportunity to show that there is grave concern for the small person, the chance to move the dollar lower, and the clearing of the brush and canopy so that the sun can shine through and growth can be even more vigorous in the future."
VICTOR NIEDERHOFFER 728/07
"show that there is grave concern for the small person." Ya gotta love that line.
Bernanke speaks pablum.
The Fed has become a Wall St. bitch
Nemo, my point is that housing has a long way to run down. And what do you think has caused all the damage so far. We agree that rate cuts arent going to save housing. So what is going to save the economy? We arent going to get a job surge in health care, education, government, etc, or any of the sectors that are still adding jobs. We are already seeing a slowdown in financial jobs..in fact, they are dead in the water. Govt jobs are going to slow because state and local govts are starting to slash budgets and half of govt spdg is state and local. Commercial building is already pulling back and job growth has stalled. Bus cap spdg has not grown much if at all for five quarters. Please tell me what prevents this all falling further apart if the main driver of the problem is hitting harder ahead? We all know that this bubble unwinds slowly. We are still building like crazy, and look how much the building slowdown has already spilled over to various sectors. It's going to take time, but it's a frickin steamroller and it's coming. The only big boost in job growth ahead is export related, and it's not quite big enough of an offset to make up for the problems. And even though there will be tons of lawyers hired in the coming year, professional service job growth wont save us either.
Bloomberg - Paulson Pressured by G-7 Calls to Aid Dollar, Market
Paulson Pressured by G-7 Calls to Aid Dollar, Market (Update2) - Bloomberg.com
Bernanke Says Housing Slump Will Probably Be a 'Significant Drag' on Economic Growth
Expired
Hello 'Real World' to ethereal academic Ben...
Housing Slump is already MOST DEFINITELY a 'Significant Drag' on USA Economic Growth
"What is going to save the economy?"
As I said, you may be right... But if not, the answer to your question will probably be "global growth".
I have a relative who just started working at Cisco. They are growing like gangbusters, and not primarily domestically.
OK so that's purely anecdotal. But the general thesis holds. You lay out the bearish case well, including using words like "slowing" and "stalled" as if they were synonymous with "declining". But you might be overestimating the degree of decline and underestimating the effect of exporting within a global economy that is quite frankly in excellent shape.
Bernanke again:
However, it remains too early to assess the extent to which household and business spending will be affected by the weakness in housing and the tightening in credit conditions.
I think that is correct. You may be right, or this may just be the "end of the world as we know it" rationale du jour. Time will tell.
Ah yes, Mr. "glorious second act after blowing up his first fund" Niederhoffer, the latest entry on the Hedge Fund Implode-O-Meter...
The Hedge Fund Implode-O-Meter - All "imploded" Funds
Paulson Pressured by G-7 Calls to Aid Dollar, Market
G-7 is a boondoggle they haven't done anything meaningfully in at least 5 years. the dollar will rise in anticipation of a non-event good time to add to currency positions.
They demonstrate an extraordinary academic grasp but lack any actual muscle: nerds, geeks, dorks.
Tanta is a Nerd and i for one am scared to death of her...i think you might actually die if you tried to steal her lunch money. at the very least, you would walk away with your lips in a thin shriveled line and eyes frozen wide, covered in goosebumps and a cold sweat, clutching your pencil to your chest like it was your long-lost teddy bear from when you were four years old and everybody would wonder what happened to you...
Hey km4, you might want to try reading the speech instead of the McNews summary written by some twenty-something who majored in some non-field-of-study like "Journalism".
Moderate growth in overall economic activity has continued despite a notable contraction in the housing sector that began in the second half of 2005.
...
The decline in residential investment directly subtracted about 3/4 percentage point from the average pace of U.S. economic growth over the past year and a half.
I think Prof. Ben knows exactly how much of a drag the housing slump is.
ABC, today
(quote)
While the mortgage company he founded is in shambles and many of its customers facing foreclosure, Roland Arnall continues to enjoy a life of prosperity as the United States ambassador to the Netherlands with an estimated fortune of $l.5 billion.
"If you're building a 'Mount Rushmore' of people who should be on the face of the mortgage lending crisis, I think Roland Arnall has a distinct place in that litany," said Ira Rheingold, executive director of the National Association of Consumer Advocates.
Ameriquest has fired thousands of its employees and closed its sales offices after settling a lawsuit brought by 49 state attorneys general over alleged deceptive and predatory lending practices. The company has since been sold.
While admitting no wrongdoing, Ameriquest agreed to pay $325 million to resolve the legal action.
Thousands of Ameriquest customers are involved in a class-action lawsuit, alleging they were misled or deceived about the terms and rates of their mortgages. Many say they have lost their homes as a result.
"Mr. Arnall knew, or should have known, that the practices he put in place would result in this kind of conduct," said Jill Bowman, one of the attorneys in the lawsuit. "He just got to sit at the top and collect the profits," she said.
The profits were huge. At its height, Ameriquest bought the naming rights to the Texas Rangers baseball stadium, sponsored a Rolling Stones summer tour, and Arnall and his wife became the single biggest Republican contributors during the Bush-Cheney campaign in 2004.
Arnall was later appointed U.S. ambassador to the Netherlands.
At his confirmation hearing, Arnall denied being involved in the day-to-day operations at Ameriquest and said the problems were the result of "rogue" employees.
"When we found out, they were let go and action was taken so that it wouldn't happen again," Arnall testified.
"That's completely laughable," said consumer advocate Rheingold. "I mean I think what you had at Ameriquest was a corporate culture of corruption."...
(end quote)
ajw
Ah yes, Mr. "glorious second act after blowing up his first fund"
Maybe so but he was correct, rate cut dollar fall, grave concern for the small person, he missed the lower mortgage rates but I would say his analysis was for the most part correct and I imagine he shorted it on the way down. Sometime failure can be a very enlightening learning experience.
Two evidence that economy is getting worse by month.
1)\tLast Sat. I was in a party in San Diego and three people (a used car dealer, a bank loan officer who gets part of her salary from commission on loans she generates, and a store owner). All of them said that business is very bad. The car dealer said that in average they have sold 15 cars in a month in their lot, in Sep. they sold three.
2)\tToday, I received my stuff (52 SONY LCD HDTV, Blu-ray & SONY FX900W receiver/surround sound ) from east coast (NJ) by YELLOW Transportation Co.. I started talking to the driver and asked him how is business, he said that the business is very bad and he has never seen it this bad. Then I asked him how long he has been in the business, he said he has been in the business for 35 years.
These are just a couple of random selection of opnions and it say a lot. 2008 WILL BE MUCH WORSE THAN 2007.
Gee well OK self righteous Nemo
I'm waiting for Bernanke to spell it out in clear uncertain terms and say it explicitly without being a mealy mouthed servant to Wall St and Paulson.
Telegraph UK - Paulson admits fears over $80bn bail out fund
Paulson admitted regulators do not know enough about the off balance sheet investment vehicles...and said that there has been a lack of transparency.. he admitted regulators didn't have clear enough visibility with what was going on in terms of SIVs...
Paulson admits fears over $80bn bail-out fund - Telegraph
Mr. Arnall would be proud to know that 25% of the loans that Argent (Ameriquest's wholesale unit) made in Cleveland are in foreclosure.
Calling Attorney General Mark Dan, a billionaire is now in your sights.
My read on all this is the dollar tried to gap up today and failed. Long rates are edging up. A rate cut makes no sense.
Then again, the same could be said before the last cut. The difference is that the dollar is now flirting with dropping below 78...rather than bouncing between 80-85.
Then you get crap like this:
"Indeed, although the Federal Reserve can seek to provide a more stable economic background that will benefit both investors and non-investors, the truth is that it can hardly insulate investors from risk, even if it wished to do so."
Well, I think it wishes to do so. But at the end of the day he's right, it can't. So my take is that it's trying to give the pig-men a chance to change the bag holders. A rate cut will happen if the pigs haven't unloaded enough bags.
Cheers,
OT
I dont buy this decoupling crap. BRIC better hope we sell all these homes quick.
And at a huge profit!
London Times - Cosy deals that will not save the world
Cosy deals that will not save the world - Times Online
ac,
I agree with your comment about his inability to articulate any line in the sand. I just cannot figure out what Ben's bedrock principles are.
We know that parsing Fed Governor statements is problematic. It is like the chemistry club throwing a party that is crashed by the jocks. The geeks don't want them there, but they can't throw the brutes out. They can't even ask politely.
Watch what the fed does, not what it says. Cuts on two option expiration days in a row, front-running of a rate cut, blatant circumvention of capital standards by our banking system at the time taxpayers need the capital the most.
As Jim Rogers says, what the hell is he going to do when the stock market is down 25%?
The market for slaps-upside-the-head has been thin lately, but as soon as potential buyers re-evaluate the situation they'll be back for more and the market will return to the historical norm.
Big U.S. Banks Try to Restore Confidence in Credit Markets
By FLOYD NORRIS
New York Times
October 16, 2007
3 Major Banks Offer Plan to Calm Debts in Housing - New York Times
I dont really see that this is going to make a significant difference, said Jan Hatzius, chief United States economist at Goldman Sachs. It seems a little more like a P.R. move, frankly.
Mr. Hatzius said he wondered why this is going on when previously the official word was that things were getting better.
Well how refreshing to see that Jan Hatzius speaks the truth unlike Bernake, Paulson, and our idiot-in -Chief.
How embarrassing! don't know who is more corrupted, Mr Arnall or Bush.
Arnall was appointed as ambassador to the netherlands (even though he knows shit about diplomacy) thanks to paying $5.5 million for bush's re-election.
nauseous! it would upset me less if he had been sent to tanzania, but netherlands?
the crock is a good business man though, $5.5 M for being ambassador in netherlands is quite cheap.
"On the inflation side, prices of crude oil and other commodities have increased somewhat in recent weeks, and the foreign exchange value of the dollar has weakened. However, overall, the limited data that we have received since the September FOMC meeting are consistent with continued moderate increases in consumer prices."
And of course this nonsense. I spent ~$30.00 yesterday to make a relatively small beef stew. MODERATE...my butt.
Cheers,
I don't see much that Ben can do that will help the economy and I am getting a feeling that the markets are on the edge of instability.
A few points from an academic's point of view. I am sure that BB feels a lot of responsibility piloting the biggest economy in the world. However, academics are not often impressed by money or position. So I don't think that Ben will be intimidated by the richest and most powerful on Wall Street. On the other hand, he knows that if things go wrong with the economy, he will likely be blamed and if we can get through the weak spots, he will be acclaimed.
Academic
ROFLMAO...Ben is "Piloting the world's largest economy" LOLLOLOLOLOLOl. Oh lord that is rich. BB ain't piloting jack. And if you beleive that "academics are not often impressed by money or position" I got a bridge in Brooklyn I'll sell ya real cheap.
Cheers,
7/8 of an iceberg in underwater
Well, I prefer BB to Wrinkles from whom I'm sure we'll hear from soon enough.
I think Nemo fails to recognize the real weight of housing in our economy...not just the lightly scored %GDP figures but the huge weight in the Financial sector which is generally not tabulated in GDP (ie "non-Financial corp").
Moreover, the hope that the global economy can take the baton from the US consumer, and US exports can ramp up to meet this new consumer demand...is rather polyannish when you consider the real changes in US trade over the last 8 years.
But that is the understandable idea, --to look for something that will take the place of housing (which you consider to be represented fairly enough by RI it seems) and fuel the next leg of the continuous, hopefully eternal, boom started with the IT boom.
But I agree with Nemo that BB seems to be sayin that Citi is not going to get special treatment...we'll see.
Financiers estimate housing will recover in 10
Mortgage executives predict continued fall, and flattening in 2009
Financiers estimate housing will recover in ’10 - Real estate- msnbc.com
BOSTON - U.S. housing prices will continue to decline at least through the end of next year and may not begin creeping upward again until 2010, executives from the nations biggest mortgage financiers said Monday.
I've read the speech but didn't really give it much cred - as far as I'm concerned its just propaganda - paying ritual obeisance to some long abandoned gods - exactly the same way the CPC does it ritualistic incantation of the Two Contradictions, Three Representations and the Four Tops and the Jackson Five.
I'm gonna watch what Cramer says, what they say on harlot TV - CNBC. That's a far better predictor of future Fed policy that any speech Bernanke gives.
-K
Putting on my ultimate tinfoil hat...plugging the the coil into the battery pack....
The Fed is owned by these War Shriek giants. NO WAY will the Fed let them fail. BB HAS to listen to his bosses.
No, the sludge will get pushed off to other bag holders. They're just trying to arrainge the deck chairs, so that they're in the life boats.
Cheers,
=====================
Re: Academic
However, academics are not often impressed by money or position.
Now that's amusing - next you'll tell me they aren't human.
-K
Ben sounds reasonable to me. He is saying that his mandate is a joint-optimization problem -- employment and inflation and not just one or the other. He is also saying his mandate does not ask him to bail out anyone, if that is the consequence of monetary policy, unless it is related to the above mandate.
" it is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences of their financial decisions. But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy"
Translation: The current system of banking and finance has painted me into a corner. I don't want to bail anyone out, but the system, as it exists, requires that we socialize some of the losses to prevent a meltdown.
Don't blame Ben, he can't change the system. The politicians who wrote lax laws and then cut funding for regulators are giving their contributors exactly what they paid for... a license to print money for the private banks.
Despite telling more damned lies, Bernanke has taken a bold step toward half-truths that will be grudgingly accepted in the hindsight of years.
Paulson admitted regulators do not know enough
horse hockey...Again...
that is why cramer's rant was so great..they know exactly how bad it is.
and the exchange between santelli and cramer was even better...
flaming portfolio's sounds just about right
ps...
CITI Bank Run
get out now
"So I don't think that Ben will be intimidated by the richest and most powerful on Wall Street."
He will do exactly as he is told or they'll melt this puppy to the ground even though what the FED does only has for the most part a psychologically effect on market paticipants as the FED only directly controls about 45 billion in bank reserves which is not a whole hell of a lot in a 13+ trillion dollar economy. The FED reacts to the bond market it doesn't lead it.
"The politicians who wrote lax laws and then cut funding for regulators are giving their contributors exactly what they paid for... a license to print money for the private banks."
The FED is a cartel of private banks who's power is derived from monopoly of turning goverment bonds into federal reserve notes or dollars and setting bank reserve requirements which currently only cover checking deposits or about .5% of all outstanding loans. This power was granted to the FED by congress in the late hours on Chrismas eve 1913.
FT.com / Financials - ‘Super fund’ helps ease markets
can anyone with access to FT tell me WTF they are referring to by the improvements?
BB didn't say in what sector there will be additional employment. You guys are talking H1B people and a few nerds joining up with Cisco et al.
Based on what I see on the political horizon, we will see hundreds of thousands, maybe up to 1 million, recruited to work for the Federal govt in programs like VISTA and the current version of CCC and Habitat for Humanity. Volunteerism among the Boomers, with a small financial kicker, will get them back contributing to their country.
No new agencies need to be invented out of whole cloth; this is not 1933.
The Treasury will provide scarce $$ and the folks will become "employed" albeit for nearly no money.
The Fed has been turned into a media freak show.
THE CANADIAN PRESS
Published Monday October 15th, 2007
TORONTO - An investors committee has been given more time to try and rehabilitate the $40 billion of troubled asset-backed commercial paper that sparked the recent credit crunch in Canada.
The deadline, which was set to expire Monday, has been extended to mid-December, according to a release.
"The extension of our standstill agreement reflects the high level of co-operation that we have achieved with all parties, including the bank counter parties, as we continue to work together towards a solution which will maximize the value of third-party ABCP," Purdy Crawford, chair of the investors committee created to resolve the liquidity problem afflicting non-bank asset-backed commercial paper, or ABCP.
"We intend to provide investors with definitive restructuring proposals for each affected conduit prior to the expiry of our extended standstill. We understand that many investors have a pressing need for liquidity and this remains a high priority for us," Crawford added.
The committee is developing a solution for 22 troubled non-bank conduits - trusts holding ABCP, which is packages of mortgages, credit-card receivables and other assets.
FT via MSNBC
By James Mackintosh in London
Updated: 14 minutes ago
Cambridge Place Investment Management has become the latest hedge fund to limit investor withdrawals and cut fees after the $9bn London and Boston-based structured credit specialist saw returns crumble.
CPIM, co-founded by finance entrepreneur Martin Finegold, best known as the founder of UK subprime lender Kensington Group, persuaded investors in two of its funds to vote to block withdrawals until next summer to give it time to turn them round. Another of its five funds will hold a vote on blocking withdrawals later this month.
Extended lock-ups are becoming increasingly common among hedge funds hit by the credit squeeze, many of which would be forced into a firesale of assets if they allowed withdrawals
Nearly half of homeowners with adjustable rate mortgages don't know exactly how they work, according to a national survey released Monday by the AFL-CIO.
Three-fourths also couldn't say what their new monthly mortgage payments will be after an interest rate reset, according to the survey of 500 homeowners who took adjustable-rate mortgages (ARMs) from 2002 to 2006.
"We decided to take a look at how people are feeling and what they understand, and you can see from the survey [that] they don't understand a lot," said Scott Treibitz, spokesman for the labor organization, which also announced a financial help line for members of any union troubled about their mortgages.
Adjustable rates still a mystery to many, study says | StarTribune.com
Ummmm..can anyone say this whole M-Lec effort smacks of illegal collusion?
I say Congress steps in an investigates this..this is clearly doing something to avoid losing money..last time I checked, you cant really do that:
3 Major Banks Offer Plan To Calm Debts in Housing - NY Times
I read the whole thing and I think any severe action by the Fed will be the swift take-over of a bank if failure is imminenent.
Does the Fed even have the manpower and resources to take over a bank as big as Citi ?
everyone on this blog should sign Karl Denningers petition to change the abusive lending laws. he's done alot of work on this and we should support it:
Congress - Repair Our Financial System!
rich,
Yes...remeber fed reporting on cnbc thought his brief case size important. Don't watch that trash anymore. Perhaps they still do.
Cheers,
San Diego Business Journal
(quote)
Accredited Gets $100M Infusion From New Parent
Accredited Home Lenders Holding Co., which completed the sale of the company to a subsidiary of Lone Star Funds Oct. 12, said Oct. 15 it received $100 million in working capital from the new parent firm, LSF5 Accredited Investments LLC.....Last month, Accredited settled a dispute with Lone Star, accepting a discounted price of $11.75 per share for the company, down 22 percent from the $15.10 price it originally negotiated with Lone Star in June....The company also announced one of its lenders, Farallon Capital Management LLC, a San Francisco hedge fund, exercised its option to demand repayment of its $230 million loan.
(end quote)
"everyone on this blog should sign Karl Denningers petition to change the abusive lending laws. he's done alot of work on this and we should support it:
Congress - Repair Our Financial System!
"
Maybe CR and Tanta can do a blog on it?
Well, I was wrong about the USMint suspending sales- they just have new prices- the Gold Buffalo Proof 2007 edition is now on sale for $899.95- a seventy dollar increase over last week.
The annualized inflation rate is 8.4% from that increase alone. Of course if we figure it from the $799.95 price in effect for the 2006 proof we are looking at 12.5%!!!
Inflation is making me not wait;-}
Share and enjoy this thought of how your dollar no longer goes as far as it used to.
Someday this war's gonna end...but first we will have to pay for it somehow!!!
"the Federal Reserve has a mandate from the Congress to promote maximum employment and stable prices"
Let us all become slaves and always able to buy potatoes a $50 a bushel. There is your maximum employment and price stability.
"Rather than becoming more crisis-prone, the financial system is likely to emerge from this episode healthier and more stable than before."
Bernanke's smily face!
http://tickervideo.org/eod-1015/eod-1015.html
and
Congress - Repair Our Financial System!
Sound off. Send it to ten of your friends.
re Denninger:
for each petition each of us signs, he will personally fax a copy to our congressman at his own expense and time. if he gets 100,000 signatures he will fedex the entire stack to Bush himself.
Until recently 93 percent of FDIC insured institutions, which held 98 percent of insured deposits, paid nothing (zero) for deposit insurance.
Do not trust FDIC deposit insurance to be there for all.
http://www.cbo.gov/ftpdoc.cfm?index=6342&type=0
FDIC: Assessments Rate Cases and Outlook for DIF
I say Congress steps in an investigates this..this is clearly doing something to avoid losing money..last time I checked, you cant really do that:
Congress isn't going to do jack they all just want this to go away or be able to us it for their own greedy election hopes, unless one of the state guys comes up with some plan to help his cause nothing will be done.
Bottom line the FED is there to protect their cartel, this is one reason rates were left high in the first place to eliminate the non-member bank competition they just screwed up and missed the turn. To big to fail is what this is all about.
WSJ - Citigroup Model Is Left Shaken By Credit Crunch
Citigroup Model Is Left Shaken By Credit Crunch - WSJ.com
Q3 2007 Citigroup Earnings Conference Call Transcript
http://online.wsj.com/public/resources/documents/c-transcript-2007-10-15.pdf
Anonymous - there is enough dicking going on Congress should put Larry Craig on it pronto.
Accrued Interest finds this to be a scene straight out of Don Corleone's gang..
SivieMae
There is NO decoupling! Move on. Next show.
HONG KONG (Thomson Financial) - Hong Kong shares turned higher in midmorning trade Tuesday, lifting the main index to record levels, as investors shrugged off concerns over the subprime mortgage crisis and picked up Chinese oil and telecommunications stocks.
"The market is driven by a lot of money from China. The situation in the US is under control and the worst is over for the subprime crisis," Joseph Lau, managing director at Tai Fook Asset Management.
"Demand for Chinese stocks listed in Hong Kong is greater than supply. Chinese companies are trading at a discount in Hong Kong compared to their mainland counterparts," he said.
The Hang Seng Index was last up 171.79 points or 0.6 percent at 29,712.57, after surging to a new all-time high of 29,795.63.
Didn't Greenspan tell us how derivatives increased the liquidity in the markets and helped reduce risk by allowing players to diversify their risk? I think he said that to Congress at one of the Humphrey Hawkins reports to discourage them from enacting oversight of the derivatives industry. They should have reasonable oversight and some sort of transparent pricing. They can get a price on that junk, just not a price that allows the bankers and IBs to get their HUGE $$$ bonuses. The hedgies should be forced to give back their carry (20% in most cases) on the "imagined" profits they are reporting based on the ficticious pricing. Power corrupts. Absolute power corrupts absolutely.
Yippie!
China flexes its power in a democratic world..
Oct. 16 (Bloomberg) -- China Citic Group, an investment arm of the nation's cabinet, is seeking to buy a stake in Bear Stearns Cos., the fifth-largest U.S. securities firm, a senior government official said.
Beijing-based Citic Group is among Chinese financial institutions seeking to accelerate expansion abroad by making acquisitions, Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, said at the party congress in Beijing today. He didn't give any details.
Fed meeting is on October 30 and 31st. So the decision is read on Halloween. My bet is no cut as the Fed will state that while the economy is underperforming due to the drag of the housing market; overall credit liquidity, economy, inflation, and stock markets are fine. No cut should translate to a market drop but a dollar short term rise. I expect the next fed meeting will have another cut.
"It is going to take a while for investors to appropriately value these assets."
Right. Lemme guess, Big B, two years ago all these assets were valued appropriately, and now they're not. Right?
Looking at this administration's track record, this could only be the beginning of a bailout.
Paulson's Credit Push Earns Jeers From Free-Market Adherents
Paulson Credit Push Earns Jeers From Free-Marketers (Update2) - Bloomberg.com
Spread the Word,
I am with you on this. Bernanke & Paulson know exactly what is going on.
I continue to be amazed by the gymnastics & the government's tacit approval of same. Level 2 & Level 3 accounting, Six 23A brokerage affiliate exemptions, total abandonment of reg FD compliance to disclosure of material events, off-balance sheet liabilities with recourse to the parent, suspect 3rd quarter financial statements, likely Sarbox violations. WTF is going on in Washington?
You can't tell me that otherwise forthright Americans watch this going on don't start thinking about defaulting on their house because the system is so skewed to the owners of capital.
Any other industry would have gotten the death penalty by now.
Money Supply!!
So what happens when the domestic US money supply moves up (a whooping!!) 24% from August 06 to August 07.
Lotsa dollars. Lotsa dollars. Lotsa pesos!
Kinda hard to rein this in in short order!
Pump it up. Lotsa dollars.
Roubini has an incitefull analysis, on his blog, of the proposed "super conduit" for saving SIVs
Nouriel Roubini | Oct 15, 2007
RGE - Nouriel Roubini's Global EconoMonitor
"What should we make of the SIV rescue plan, the so called Master Liquidity Enhancement Conduit (MLEC), also informally referred to as the Super-Conduit? Does it make financial and economic sense? Is it all a smoke and mirrors con game or a serious attempt to deal with the liquidity crunch in the SIV/ABCP market? Is it another case of moral hazard with the US Treasury playing a critical role or is Treasury only solving the collective action problem of coordinating the actions of many players? And is this just another musical chairs game or dont ask, dont sell game reshuffling SIVs assets and liabilities with nice fees for the participating dealers with no financial effect on the underlying illiquid assets or a way to defrost such illiquid assets? And how similar is this rescue plan similar or different to that of LTCM? Is this effectively a scheme to bail out Citigroup that is the most SIVs-exposed US bank? And are the implicit claims of Treasury and the Fed that this is not a bailout where there is no public money at risk credible?"
Roubini goes on to propose answers to nearly all the above questions. He indicates the plan has much in common with the rescue of LTCM with some differences...unlike LTCM, much of the underlying assets in the case if SIVs are of dubious value when marked to market, and so he surmises the plan is not likely to work.
On the same news, different news channels takes different headline takes:
CNBC: Fed Is Ready to Act to Ensure Smooth Markets
Bloomberg: Bernanke Says Housing to Remain `Drag' on U.S. Growth
CNNMoney: Bernanke has warning for Wall Street
50 Cent - Straight To The Bank Music Video (with Houston's skyline)
YouTube
- 50 Cent - Straight To The Bank MUSIC VIDEO
About gold coins:
"The annualized inflation rate is 8.4% from that increase alone. Of course if we figure it from the $799.95 price in effect for the 2006 proof we are looking at 12.5%!!!"
Yeah, well, you could buy a 1.1 ounce gold eagle (one ounce gold) for $450 two years ago. You're talking approximately 60 percent appreciation over that time.
Which doesn't mean that another 60 percent is guaranteed, nor that the current appreciation will remain intact; to assume such things is bubble-think.
Academic is right. Almost any professor of high standing within a real university does not give a crap for rich Wall Street types. The underlying value systems are different and the standard of achievement is superior and much more competitive within academia. The 'position' part of 'money and position' means something completely different within the academic world.
To avoid a possible flame-war I should have said 'The underlying value systems are different and the standard of achievement is viewed as superior and much more competitive within academia.
wetzel:
Thanks for the added words. By position, we might all agree that President of the US is a high position. Since academics value achievement based on intellect, creativity and insight, just because someone is President does not lead to an iota of respect. Although people with money might be admired, this would be because of their abilities and forsight. On the other hand, slick Wall Street types who got there by their abilities at manipulation and administrate hardly merit notice.
National Retail Federation forcast (NRF) differes from CNBC's???
NRF:
Consumers will probably increase their spending by 3.7% on average to $923.36 each, compared with a 7.2% gain last year
CNBC Talking heads
Americans plan to spend an average $839 during the holiday season, up 17.6% from last year, the survey
You should all read Nouriel Roubini's take on the Super SIV conduit...but you will get a sufficient understanding of his position on the matter from this last paragraph of his...
"It took the September 18th Fed Funds cut to cheer the stock markets and bail out the financial system in the attempt to bail out the real economy. It would take much more action by the Fed to make this half-baked scheme fly. With the CDO market being now a zombie, the sub-prime mortgage market being effectively dead, the ABCP market being now comatose and even highly rated asset backed securities in the $400 billion of SIV being altogether frozen it will take more than an half-baked $75 billion rescue plan to resolve the current liquidity and credit crunch that will get worse once the roll-off of the SIVs liabilitities surges in the months ahead. How about being honest and starting to accept some of the existing and unavoidable losses on such toxic assets rather than fudging them by trying to put them in another shell scheme? Stock markets have been recently cheered by banks recognizing a whole $18 billion of losses when the actual numbers will eventually be for subprime alone between $100 billion and $200 billion. This mess was in part caused in the first place by the opacity and lack of transparency in financial markets. So it will take a lot more transparency rather than half-baked shell games of reshuffling assets and liabilities while charging more fees in the process to restore investors confidence."
Stuart
how bout posting Roubinis entire piece? the link to him isn't working.
idoc
this should work
RGE - Nouriel Roubini's Global EconoMonitor
...or search engine "rge monitor roubini"