"High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets, and the broader economy," Bernanke said in remarks prepared for delivery to the Columbia University School of Business in New York.
Naturally none of this prevents him from a strict whatever-Wall-Street-wants policy of cushy bailouts and rate cuts. What next? Is Bernanke going to boldly state that interest rate cuts to banks don't transfer to individuals or that when the dollar goes down, gas prices go up with each rate cut?
Where the heck were Bernanke and Greenspan, the Fed, and the Republicans when this fragile system was being built up? They're all supposed to be so smart, so how did they honestly think that real estate would always increase? Have they never studied bubble economies before? How did we get stuck with such an incompetent bunch?
Will anyone in Congress, White House or Federal Reserve ever learn? Lehmen Brothers, rumored to be the next Bear Stearns only weeks ago and who just downplayed the seriousness of the subprime loss (surely by coincidence) has just used some more "innovative" financing to move a few billion of absolute shite into cash to help their books, all courtesy of the American taxpayer. Great. Just as they played games and took the country (and beyond) into this recession with funny business, they're doing it again but this time with the backing of the hapless Bernanke and Federal Reserve.
We bail out this bunch of bums and to say "thanks" they do it again. Does anyone in Washington have any common sense? Are they going to let Wall Street pull these games forever?
Deutsche Bank chief economist Norbert Walter is correct with the above comment. Bernanke has become part of the problem. The emergency actions by the Fed have only contributed to the widespread panic. If that is what Bernanke is trying to do, Mission Accomplished in a Bush kind of way. Bernanke and the Federal Reserve are failing miserably in their job of leading. Worse still is that much of the US market media seems to think Bernanke is doing OK. From the outside looking in, there is still so much arrogance and self assuredness, facts be damned.
More from the always interesting German market watcher Silvia Wadhwa.
Now ... I don´t know about you. But when I hear the words "central bank" and "emergency rate cut (or HIKE for that matter)" in one sentence, the word "confidence" does not pop into my mind. In fact I´d rather not hear the word "emergency" from or in connection with central banks or central bankers at all.
American wages have barely moved in decades, resulting in less expendable income for purchasing. The US economy revolves around the American consumer spending. Estimates vary from 2/3 to 70% of the overall economy is from consumers. With less money to spend, the GOP Congress worked with fancy-schmancy financial people on Wall Street to make credit easy. Credit cards for everyone and never pay them off. When that gets maxed out, make it even easier to buy a house (no proof of anything required) and then lower interest rates (thanks Alan!) so consumers can borrow against the value of their house because real estate will *always* go up.
Slight hiccup and some bank we never heard of overseas has a run and needs to be bailed out. No problem, lower interest rates again. This weakens the dollar so oil - which every good American needs for their gas guzzler - becomes more expensive. Hmmm, better help Wall Street make loans easier, so give them billions to make loans at below inflation rates. What? They don't want to give away loans? They want to hunker down and deal with their own funny money deals? Well, lower them again. And again. And probably again. We need consumers to buy, but since they don't save, it needs to be on even more credit. Oh, they don't have any credit or money left because their retirement accounts are crashing and they're afraid to spend more because of the warning signs in the economy and maybe they will lose their jobs?
Well? Cut rates again, maybe that will help. At least it will help Wall Street and that's all that matters. Just tell people that inflation is low, even though it's higher than wage increases. See if that works.
And it ain't pretty. The dollar crashes to yet another new low, oil jumps yet again and all of the major markets in Asia and Europe are selling and deep into red. We are all supposed to be impressed because Bear Stearns execs are being shoved out the door without the usual golden parachute. Sure, it's a start but considering the money they've all made from pushing junk the last few years, it doesn't even matter. Their actions went well beyond not deserving a golden parachute.
But hey, Wall Street can surely drum up a few more laughs about Spitzer. Did you know he had sex with a prostitute? Keep talking about sex so Wall Street, the Fed and Paulson can pull a few more fast ones on all of us.
The weak dollar policy is just crushing consumers and careless comments by Bernanke just don't help. In all likelihood they probably thought they could control the dollar and keep it in a range to help promote exports. It's a misguided policy but certainly one that many subscribe to in politics. Unfortunately for everyone else, the Administration failed in so many other areas and the rug has been pulled from under their feet. They lost any control they had over this situation long ago and the collapsing banking industry is compounding the problem.
When oil tested and broke through the $100 mark, this opened up an entirely new situation. The psychological barrier of crossing $100 is not there any more so it can just as easily push upward to $110 as it can to drop back down to the low $90s. Making matters worse is that the dollar has again become the 98 pound weakling at the beach. It crossed the $1.50 - €1 support level so again, now that it's been crossed it can get worse easier and faster. The end result for Americans: inflation and probably stagflation. Without a fast drop in oil prices (which is of course, possible) along with a jump in income (much less likely) Bernanke and the Fed are implementing policies that are disastrous for most Americans.
Gosh, thanks. While I appreciate the public arguing between Federal Reserve governors on the subject of whether to focus on inflation or Wall Street, it's discouraging to hear Bernanke so willingly point towards another Wall Street gift. During the Bush years, the middle class has been shafted and has not enjoyed the economic benefits that mostly helped the wealthiest Americans. There was no trickle down and they didn't even try to hide behind such false stories as they did during the Reagan years. They simply didn't give a damn.
Now all of the excesses of the Wall Street wet dream, where they were given full authority by Republicans do to pretty much any damned thing they liked, are crashing down. Suddenly, we're all supposed to jump and give Wall Street more free money so we can help them bounce back. Money isn't falling from the sky, it's leaving your wallet to bail these bums out. The same middle class who has footed the bill for Iraq, footed the tax cuts for the rich, more expensive health care, fewer benefits and payed the price for lack of traditional regulation, is being asked to sacrifice - again - so that Bernanke can help Wall Street dig out of the hole they put us in. We're in for a bumpy ride one way or another so let Wall Street fend for themselves and think about the middle class. Inflation and sagging wages are taking their toll, but don't tell that to Bernanke. He doesn't give a damn unless you are Wall Street.
The Labor Department said Tuesday that wholesale prices rose 1 percent last month, more than double the 0.4 percent increase that economists had been expecting.
The January surge left wholesale prices rising by 7.5 percent over the past 12 months, the fastest pace in more than 26 years, since prices had risen at a 7.5 percent pace in the 12 months ending in October 1981.
In his desire to help out Wall Street his policies are brutalizing average Americans who can't keep up with rising costs. This troubled economy is still in the beginning phase of unraveling and Washington is doing its best to drag it out.
This isn't like the S&L crisis of John McCain's 1980s where a few billion could patch things up. We are looking at hundreds of billions of dollars of bad business that were allowed because of GOP policies. It's not as easy as writing a few checks and hoping it will work out. Specific policy by Republicans brought us here and it's going to take a few years to get past this. We now need to decide if we are going to throw good money after bad to Wall Street or help minimize inflation for the general population. At the moment, it's all for Wall Street.
Thanks to AMERICAblog readers John W. and Meredith H. for sending this over. It's a long slide show and parts are NSFW due to language but this is an excellent summary of everything that's wrong about the subprime fiasco. There were obvious conflicts of interest at each and every step along the way and people heard what they wanted to hear. Deep commissions helped pave the way and our traditional oversight and regulations were MIA, because they didn't want to get in the way of the money train.
Think about that as we see Bernanke and the Fed recklessly throw more money at the banks at the expense of everyone else. It's shocking that Democrats had stood by and not challenged these actions. Unless everyone is happy with windfall profits (and then losses followed by bailouts) on Wall Street, we need a radical change in oversight policies. The Federal Reserve in it's current form has failed and continues to fail the American public.
Oh great. He's ready to do whatever it takes to help out Wall Street who are loving his rate cuts (i.e. free money) and his puppet-like behavior. If this means crushing average Americans with a weaker dollar and more expensive oil (notice how it's risen!) he's fine to do so. As long as Wall Street likes him. I can see why Bernanke doesn't have any friends but buying them like this is really painful for the rest of us. Can't he just go on Facebook and find someone who will befriend him?
Given all the dangers facing the economy, the Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," he said, indicating additional rate cuts were likely.
But he said the Fed has to be mindful that growth should pick up later in the year.
Perhaps, but not really a given at this point. Each assessment of the economy in recent months has been worse than the last. There is no shortage of trouble thanks to failed GOP policies but to kowtow to Wall Street - who created these problems and did a brilliant job of selling this junk - and add to the already high inflation is not the answer.
Actually, it's more like they are paying the banks to take the billions. When they auction off $30 billion at 3.010% and inflation is running closer to 4%, they are acting the way the banks were acting towards home buyers leading up to the housing crash. It didn't seem possible that anyone could be worse than Mr Bubble, but Bernanke is indeed worse. Creating the bubbles of tomorrow, with your tax dollars.
It's a good thing Republicans are fighting so hard for rebates for families making up to $300,000 in order to accept a few million dollars worth of unemployment benefits. They really are a shameless bunch and prove once again that they don't have an ounce of compassion in their bones. If only regular Americans had the benefits of members of Congress but they don't. Now the unemployed have to figure out how to get by thanks to the economic destruction that the GOP left in their wake.
With all of the news coming out on the Bush/GOP economy, it's no wonder famed investor Jim Rogers is predicting this recession could be worse than others.
"Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I'm afraid it's going to be much worse," he says. "Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."
Rogers looks at the Fed's willingness to add liquidity to an already inflationary environment and sees the history of the 1970s repeating itself. Does that mean stagflation? "It is a real danger and, in fact, a probability."
Oh great. Yesterday we heard the Fed was going to cut interest rates next week by 1/2 point - in addition to the panic 3/4 point cut - and now Wall Street is counting on yet another 3/4 point cut. This means that the Federal Reserve will be lending money at 2.75% compared to the 4.1% inflation from last year. Bernanke wants to give away money which may eventually help Wall Street, but it's going to be painful for everyone else. He's in complete panic mode and will drag us all down just because he's in over his head with this job.
The Fed is supposed to lead and not be bounced around by the market. All we have today is a follower who is more interested in what Wall Street wants today instead of thinking about the long term issues. Can we get a re-count on his nomination?
The next president needs to sack Bernanke after his wobbly kneed move yesterday. How could anyone see it as anything other than complete panic? Business leaders are chiming in with plenty of valid criticism. Even at rates of 3.5% (with more expected next week) cash is available for well under the rate of inflation which is at 4.1%. How is this not going to promote even more inflation? Inflation may not be an issue for the Wall Street wealthy but is sure is for everyone else.
“We have a market-friendly Fed possibly injecting a lot of liquidity in the system which will set us up for another bubble economy,” said Stephen Roach, head of Asia for U.S. investment bank Morgan Stanley (MS.N).
“I’m sort of worried that all they did yesterday was to hit the snooze button. (This is) excessive monetary accommodation that just takes us from bubble to bubble to bubble.”
Lawrence Summers, a former U.S. treasury chief, was critical too: “It’s hard to give a high grade (to central banks) for what’s happened in the last six months.”
With costs skyrocketing, this presents major problems for the Federal Reserve. If they lower rates too much, they can add to the inflation difficulties. If they don't take action or increase rates, then you have a credit problem. This is all the doing of Bush, the GOP and Mr Bubble who have left us with this headache.
The Labor Department reported that wholesale inflation was up 6.3 percent for all of 2007, reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil.
What is bizarre is that "core inflation" was steady last year at 2% so as long as you don't purchase food or energy, you'll be fine. If you do, well, good luck keeping up.
While Bush says everything is fine with the economy, the Fed has increased its future cash injections by 50% so that banks can maintain proper liquidity. Ignore the high fuel prices, forget about the housing crash, don't even think about the employment numbers and for heavens sake, pretend as though we do not have a credit crisis in America. All done? Great. Now you too can be just like George Bush. Not a problem in the world. Heck, with this great strategy of ignoring the facts on the ground, it's no wonder he's once again talking about tax cuts.
Taking action to help the economy (which Bush says is solid) makes perfect sense. If ever there was a moment to take the keys away from Bush it's now. For him to stand up and say the "economy is on a solid foundation" should be all we need to hear from him. The Democrats - especially the presidential candidates - are going to have to step up and provide their own plan. Leaving these decisions up to the idiot who created them would be painfully foolish. Do the Democrats have it in them to take on this challenge?
A few years too late, but fine. It has to be addressed and with Congress breathing down the backs of the Fed, there is suddenly great interest. On the flip side, just what do you think Wall Street is thinking now that they are being assisted with a bailout plan? So the lesson learn by Wall Street is to get while the gettin' is good and then Uncle Sam will bail everyone out? Same goes for the buyers who jumped on to the bad loans and are now asking for a bailout.
The Fed needs to quit propping up every bad business idea that comes out of Wall Street and start thinking about consumers. Congress is going to have to promote the issue of responsibility as well because bail outs are only showing support for failures to accept personal actions. There should be no doubt that plenty of people were tricked into bad loans, but there were also plenty of people who did not make the jump into the market because they had reservations.
Should those people and the people who acted responsibly be punished? We needed a voice when this problem was unfolding, both on the issue of Wall Street greed and buyers blissful ignorance that defied traditional logic. It is getting there, slowly, but we need to quit doling out bailouts like this unless we want to create more trouble later. If Congress wants to give free money to everyone, fine, but that's not what they are doing. They are rewarding both rich and poor who gambled and lost.
The Fed cuts interest rates, leading many to ask how long until we hit $100 per barrel for oil. For an economy that is reportedly doing well, why the cut?
Besides showing a lack of faith in the economy, the Fed hints at another cut should be setting off alarms about the risk inflation. Wall Street may be celebrating with this news but it doesn't sound so great for the bulk of Americans. Despite some of the glowing reports about the jobs report for September, the numbers reported were still soft and barely over 100,000 though that seems to be a reflection of just how low the bar has been set during this administration. If you can't even keep up with the average incoming each month - and this has rarely happened in recent years - then it strikes me as laughable that some are celebrating but celebrating failure is what the GOP is all about.
