"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?
But remember, they love the free market. That's what Wall Street and the GOP tell us anyway. Just make sure the "free" is free money from taxpayers. What a sad bunch of freeloaders. The only thing that's worse is that nobody is getting serious yet about the strings that ought to be attached. If we're going to subsidize these bums then what are we getting in return? Another CEO making millions in stock sale profits? Sorry, not interesting.
What is so difficult about talking money now, as in today? Give me specifics about the new regulations that will safeguard our investments. Tell me how we're going offer plans to help investors from getting ripped off by Wall Street charges on their retirement plans. Maybe even put a hold on executives from selling any of their shares until we have a clear picture of what is happening. These are extraordinary times so let's not miss the window. Let's talk about this now. Today. Not tomorrow. Today.
The costs of such a lopsided system of incentives are by now clear. Better regulation of mortgage markets would help avoid repeating current excesses. But more fundamental correctives are needed to curb financiers’ appetite for walking a tightrope. Some economists have suggested making their remuneration contingent on the performance of their investments over several years — releasing their compensation gradually.
That’s an idea worth studying. Certainly, trying to put specific limits on bankers’ salaries is a nonstarter. But until bankers face a real risk of losing their shirts, they will continue blithely ratcheting up the risks to collect the rewards while letting the rest of us carry the bag when their punts go bad.
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.
Worse still, he compares the Fed mistakes to mistakes made in post-bubble Japan. Jim Rogers is not just any investor, but the co-founder of the Quantum Fund with George Soros.
"They (the U.S. central bank) are printing money and are trying to prevent the recession -- they are putting on Band-Aids," he said ahead of an investor conference in Dublin.
Rogers said the central bank was making the "same mistakes" Japan did in the early 1990s before its credit-inflated bubble economy burst.
"The Japanese did it and the Japanese still have not recovered 18 years later," he said.
"As long as the (U.S.) central bank and the federal government keep making the mistakes, you will have a longer period of slowdown and it will be perhaps one of the worst recessions we have had in a long time in America," he said.
But please do not call this a government bailout. Just because banks are "borrowing" tens of billions from US taxpayers below inflation rates under new conditions (which are troubling) doesn't mean it's a handout. Hundreds of billions down the drain, but all is forgiven. Take one guess who is getting stuck with the bill? Surprise! It's you!
“The TAF ... allows the banks to borrow money against all sort of dodgy collateral,” says Christopher Wood, analyst at CLSA. “The banks are increasingly giving the Fed the garbage collateral nobody else wants to take ... [this] suggests a perilous condition for America’s banking system.”
The Fed announced the TAF tool on December 12 as part of a co-ordinated package of measures unveiled by leading western central banks to calm money markets.
The measure marks a distinct break from past US policy. Before its introduction, banks either had to raise money in the open market or use the so-called “discount window” for emergencies. However, last year many banks refused to use the discount window, even though they found it hard to raise funds in the market, because it was associated with the stigma of bank failure.
