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3 Reasons to Fear Bernanke’s Reappointment

Wall Street will remain in charge if Bernanke is reappointed, argues L. Randall Wray.

There is a lot of speculation over the reappointment of Ben Bernanke to continue to head the Fed, with the Obama Administration pushing hard. Of course, Wall Street is also calling in its favors. It looks like a done deal. The Administration has probably got the 60 votes required in the Senate to remove the hold, and the 51 votes needed for confirmation.

Does it matter? Well, on one level, this is a reward for incompetence — something that is never a good idea. Chairman Bernanke never saw…

January 25

“What you need to know to navigate today’s economic debate.”

Obama to Offer Aid for Families in State of the Union Address (NYT)
President Obama will propose in his State of the Union address a package of modest initiatives intended to help middle-class families, including tax credits for child care, caps on some student loan payments and a requirement that companies let workers save automatically for retirement, senior administration officials said Sunday.

Tell Senate “No” on Bernanke Cloture (NakedCapitalism)
The Administration put on a full court press this weekend to shore up Bernanke’s confirmation vote, which was looking increasingly doubtful as of Friday.

N.Y. Fed E-Mail to…

Grunwald’s defense of Geithner doesn’t wash

Should Geithner get a pass on the AIG bailout? Marshall Auerback thinks not.

It was only a matter of time before someone emerged to defend Tim Geithner and his actions in light of the wrong decision to bail out AIG. Michael Grunwald of Time Magazine (the publication which anointed Ben Bernanke “Person of the Year” in 2009), has likened the attacks on Geithner to someone who “booed Lassie for tracking mud on the carpet after saving that kid in the well”.

In Geithner’s defense, Grunwald trots out the usual “sanctity of contract” arguments: “Nobody has explained how or with what authority anyone…

January 13

Inquiry panel to hear from bankers (Politico)
Even as the White House considers new fees on Wall Street firms to recoup lost bailout funds, the bankers who received those funds will defend their actions before a newly created panel trying to figure out what went wrong.

Drill, Baby, Drill: Reviewing The Advice To The Financial Crisis Inquiry Commission (Baseline Scenario)
The real issue, of course, is the nature of the risk system itself. But this is a big abstract question - and not suited to these kind of
hearings. The Commission needs to find concrete issues that people can relate to much more broadly, and bonuses…

Bill Black demands release of AIG emails–calls them ‘black box’ of financial crisis

This morning, Roosevelt Institute Braintruster William K. Black talked to Bloomberg’s Amy Liu about Timothy Geithner, Ben Bernanke, and the growing scandal over AIG emails. Black, along with Eliot Spitzer and Frank Partnoy, has been calling for the release of AIG emails on New Deal 2.0 for weeks. As they put in in last Friday’s post, the emails released to Darrell Issa spanning 5 months are just a glimpse (see “Tip of the Iceberg”) of what will be revealed if 10 years of documents are released to the public. In December, the three wrote an op-ed for the NYT insisting that the public…

Fire Geithner Now!

Randall Wray on why President Obama needs a new economic team, starting with Tim Geithner.

There is a growing consensus that it is time for President Obama to fire Treasury Secretary Timothy Geithner. While he is at it, he needs to clean house by firing Larry Summers, by banning Robert Rubin from Washington, and by appointing a replacement for Chairman Bernanke. It is time for a fresh start.

Geithner is facing renewed scrutiny due to his questionable actions while at the NYFed. As reported on Bloomberg and in the NYT, secret emails show that the NYFed under Geithner’s command prohibited AIG from…

Bernanke and the Fed’s Failure on Subprime Regulation

Just recently, Federal Reserve Chairman Ben Bernanke blamed part of the recent financial crisis on a lack of consumer protection carried out by the Federal Reserve. Bernanke (my underline):

What policy implications should we draw? I noted earlier that the most important source of lower initial monthly payments, which allowed more people to enter the housing market and bid for properties, was not the general level of short-term interest rates, but the increasing use of more exotic types of mortgages and the associated decline of underwriting standards. That conclusion suggests that the best response to the housing bubble would have been regulatory,…

When Will Ben’s Bubble Burst?

Financial bubbles are certainly interesting phenomena, though it’s very difficult to predict when they will pop. For the last two and half decades, the American financial system was systematically deregulated and we faced various bubbles. Each one progressively larger, each popping met pretty much the same way, increasing debt through the largess of the Fed and blowing up a new bubble in a larger sector. The popping of the securitization, derivatives, and real estate bubbles led Chairman Bernanke to vigorously blow the largest bubble yet. This bubble grows across global currency and other financial markets. When it pops and what…

Ben’s Bet

FT has a good piece with Chinese premier Wen Jiabo on the value of the renminbi, and as those concerned about global currencies say, “When Mr. Wen talks, people listen.”– Ho, Ho Ho. Mr. Wen states plainly that calls for appreciating the value of the yuan’s only “purpose is to hold back China’s development.”

Now, we saw Professor Bernanke on the front of Time taking George Washington’s place on the dollar, people think he has a lot of control. Mr. Bernanke’s policies have devalued the dollar and outside of global financial markets, the one great beneficiary are the Chinese. As FT states,

China dropped…

Bubblicious Bernanke

The Washington Post has a real good piece of journalism on why Ben Bernanke should not be reappointed Fed chief. It’s not correct to say it was the Fed’s failure, but more importantly and accurately, the Fed’s culpability in bringing about the whole bubble, of course bubbles don’t exist in Econ 400 and above. Yves Smith has some good comments.

Make no mistake, everything the Fed has done in response to the popping has been an attempt to blow a larger bubble with global currencies, keep that in mind as the coronation of Mr. Bernanke goes forth.