Please vote in this poll using the sidebar.
Ben Bernanke...
- The best man for the job. (24%, 36 Votes)
- Get him out of there ASAP. (76%, 111 Votes)
Total Voters: 147
This poll will be active and displayed on the sidebar through 03.28.2009.
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Wow! At 13 votes Bernanke only has an 8% approval rating.
Humor the economically ignorant, of which I freely admit that I belong, and explain what he is doing wrong and how anybody else could do better. It seems that he was handed a full plate of steaming crap, of which he had no involvement in making, and now he has to help fix the situation.
Can we have a poll for Geithner? =/
Not here to defend Bernanke, in fact he seems to put out an aura of cluelessness, but isn’t the bigger culprit Alan Greenspan, who nurtured the excesses, fanned the flames of the bubble, and set the stage for the collapse?
Bernanke took over in 2006 and did nothing to stop the bubble until it crashed. Now he is dicking around with Geither and Paulson in belief that these assets really are worth 100%, and its just the crazy market that is underpricing them. I guess they don’t read the paper and haven’t noticed the huge amount of foreclosures, non-payments and crushing debt of the people and homes underlying these assets. The market is pricing them correctly, 5-30c on the dollar seems about right to me for any mortgage created from 2003 on.
I have several problems with Mr. B:
He’s too wedded to his original PHD thesis re: depression/deflation, much of which has been shown to be wrong with subsequent analysis.
He’s too interested in being proven right, as opposed to doing the right thing.
He’s too close to his banking buddies, the trees, to see the forest.
Scotsman, you beat me to it, my view exactly.
Bernanke late to the party?
I never get enough of this. Listen to the advice of Kramer at the beginning-end of what to buy? GOOD GOD!
http://www.youtube.com/watch?v=IE9UJQiieu0
This article from 2006 was still in my clip board so I pasted it here. Enter Bernanke, good bye America.
http://www.bloomberg.com/apps/news?pid=10000103&sid=ahRmwL8hrX7c&refer=us
RE: TJ_98370 @ 1 – I’ll add a little more to the Bernanke dis-fest. Bernanke is one of many people over there who are so busy arguing about systematic risk that they seem unable to produce a systematic solution to the problem.
What do we do about enormous crashing banks? We have no general response. How about Citibank? Give them money. What about Bear Sterns? Fire Sale. AIG? As much money as they like.
As scotsman said, he can’t see the forest. He’s been on this longer than anyone else (with the administration change) and should have had a 2 year head start (the imminent crash was discernible in 2006 and obvious by 2007), yet he seems just as confused as anyone else. We need someone who is willing to take bold actions to fix the system not helicopter Ben.
RE: Ray Pepper @ 7 –
Cramer can be good entertainment, but a monkey with a dart board beats his picks:
http://adamsoptions.blogspot.com/2006/05/cramer-vs-leonard.html
Re: Mr. B’s replacement, how about Volker or one of the Fed governers who have opposed bailouts and monetary expansion?
RE: Scotsman @ 10 –
I think we saw what happened when they decided not to bailout BearStearns. Utter chaos, and almost insolvency. Has anyone seen the Frontline on the meltdown. Stunning!
http://www.pbs.org/wgbh/pages/frontline/meltdown/view/
I for one think that the worst was in Sept and that the reason the stock markets are returning is
a) confidence in this bailout/stimulus
b) mark to market rules are about to change and thus change the way these banks are able to report earnings
Unfortunately, I don’t think it matters who is the Fed chairman; they would all do roughly the same. This question is similar to asking who is the best person to manage a genocide. Some things are bad, and will end in tears, regardless of who leads it.
The Fed is a political institution, at the end of the day, which meddles in the economy. This can only lead to encouraging mal-investments in one form or another.
Nouriel Roubini for Fed Chairman! Oh Oh… Peter Schiff! Wait a minute…
I don’t think anyone (even the all knowing bloggers) could have predicted what is happening now. Lets say Ben DID see it in 2006…. any proposal that was big enough / radical enough to fundamentally change the path we were on at the time would have been rejected as utter heresy. This train picked up too much speed and no one (except maybe Greenspan) could have stopped it.
By johnnybigspenda @ 13:
Wrong, Eleua has been very close to predict what is happening. He’s obviously a smart guy but you would think that the FED chairman should be in a slightly better position to do the same if he’s not incompetent, arrogant and unable to admit being wrong. Hello Ben Bernanke.
Actually, I think there were PLENTY of people who saw there was a catastrophe around the corner. Tooting my own horn, I was blogging about the problems with credit bubble in 2004 and 2005. I even sold my Bellevue home in 2003 because I thought things were getting ridiculous (I have been renting ever since). However, top marks need to go to Bob Prechter, who has predicted this downturn to a T. He is pretty much the ONLY person who was calling for deflation.
The only ding on Bob is that he was ahead of the game some 7 or 8 years, and a lot of people stopped listening to him cry wolf when nothing bad happened, year after year.
I agree that NOTHING could have been done in 2006 to prevent the disaster. That said, there is plenty governments and central banks can do to prevent things getting worse than they have to. Unfortunately, this is not what’s happening. Rather than letting the economy correct on it’s own, and having prices fall to new sustainable levels, policy makers are doing everything they can think of in a futile attempt to artificially prop up asset values.
By b @ 4:
The bubble had already burst in 2006 in many places of the country. It just took a while for it to happen here.
That said, the response has generally been slow and erratic.
Do any of you understand what actually happened in the financial markets and what Bernanke and the Fed are doing? Take my advise, some devaluation of the dollar and some future inflation is a small price to pay to avoid even a small (say 5%) risk of a melt down of the financial system. If the major financial institutions had all gone down last fall, there wouldn’t have been anyone left to buy the assets of the institutions taken over by a new RTC. Credit could have completely dried up, there wouldn’t have been any mortgage lenders and payroll checks could have bounced for millions of people. Once there were no lenders left, real estate prices would have tanked even worse. With all due respect, saying that you saw “the bubble” at some point in time before the Seattle real estate market started to turn down isn’t going to win you the Noble Prize in economics. I’m not a Greenspan fan but while he was still at the Fed (probably in 2004 or 2005, Greenspan said in his public testimony that there was a real estate bubble, just like he said there was irrational exuberance in the stock market in the late nineties. But in both cases he still kept short term rates low because of concerns about the economy and little risk of inflation (other than the stock market in the late nineties and real estate in this decade.) If you know that real estate in this area (at least as long as records have been available) has appreciated on average at a rate of about 6 percent (a few points above inflation) and believe that markets generally revert to the mean, you come to the conclusion that the probability was that after a few years of double digit gains with little CPI inflation, the King County market was likely to endure several years of little or no gains and probably even back up some. That is what happened in King County in the early 1990’s after two years of 20% increases in 1988 and 1989. I was telling people that in 2004. That doesn’t make me a genious, it just makes me old and moderately observant. I also practiced real estate law for 25 years and have a graduate law degree in taxation. After the national real estate market started to collapse, local economists and real estate companies were telling people here that real estate prices would be supported because the local economy was strong and that due to growth management, land was scarce. They were right until about early 2007. If you think you saw the problems in the King County real estate market, ask your self when you first understood what people ment when they used the terms “credit default swap”, “collateralized debt obligation”, and “mortgage backed security” and when you knew that underwriting in the mortgage industry had been corrupted by bond rating companies like Moody’s and Standard and Poors giving AAA ratings to securities backed by mortages that were based on stated income with little or no down payment and that AIG was insuring those securities with credit default swaps so that the rating companies would give the securities a AAA rating. If any of this is news to you, you have no business commenting on Bernanke without doing a little more homework. Did you know that in 2000 the securities market accounted for about 10 billion in mortgages but that by 2006 the amount had grown to approximately one trillion (I think that’s both residential and commercial). If any of this is news, watch the CNBC special “House of Cards.” I think they go through this stuff. Last year the amount of mortages financed by the securities markets had once again decrease to about 10 billion. That’s a lot of real estate deals that will go unfunded unless helicopter Ben prints some money and spreads it around. With all due apologies, the dates and numbers in this comment are from memory and may be slightly off but are generally accurate. I see the Feds current policies, including low short term rates as being like putting a diver with the bends in a hyperbaric chamber or giving a drug adict methodone. You need to do it to keep the patient alive before you can cure the problem. Without low short term rates, mortgage money would be even more expensive and more scarce, and real estate prices would fall even farther. As real estate prices fall, the collateral for the mortage portfolios of financial institutions fall, and mortaged backed securities they purchased become worth even less. If the value of loans and mortage backed securities owned by financial institutions become worth even less, most if not all major financial institutions will eventually fail to meet their capital requirements and be taken over by the FDIC. And if you don’t believe in the possibility of runs on banks like you learned about when studying the depression in high school, then consider this: the reports I heard were that Washington Mutual claimed 19 billion in withdrawals in the 10 days to 2 weeks before they were taken over and sold by the FDIC. Lots of people saw the bubble, but few if any saw the rise and fall of the mortage backed securities industry and what it would do to the real estate and mortgage markets. If they did, do you think that Lehman Bros, Bear Stearns, Merrill Lynch, Indy Mac, Wachovia, Washington Mutual, AIG, Freddie Mac and Fannie Mae would all have crossed the event horizon and been sucked into the current economic black hole? Don’t tell me you know more than Ben and you saw it coming. If you saw it coming why didn’t you make a fortune shorting Washington Mutual’s stock last year? I agree with those (and I think that Jim Cramer is now among them) who say that Bernanke and Gaithner have taken a depression off the table, all other things being equal. My apologies to anyone I may have offended with my tone and for any spelling mistakes and typo’s, I’m just a one eyed man and I don’t see everything.
WTB: Paragraphs
@ One Eyed Man
6% a year appreciation for residential real estate is far too high, I frankly wouldn’t put too much stock in the appreciation data since 1997 or even further back given the loosening of credit standards in the late 90s. The 100 year average is little above the rate of inflation, that is 3.4%. Two things drive the cost of residential real estate, population growth, and income appreciation. I don’t think either population growth or income appreciation in the PNW has equaled 6% this last decade. I think as time goes on and more information is uncovered people will begin to realize the seeds of this catastrophe had been sowed farther back then most people in the general public realize.
RE: Lake Hills Renter @ 18 – RE: Lake Hills Renter @ 18 –
My apologies Lake Hills Renter. That was rude of me. 11:00 pm is late for me, I was in a hurry and venting frustration because I think Bernanke is doing a better job than most people give him credit for.
No worries, I was just being the typical snarky me. =)
I read what you had to say even sans line breaks, but am waiting for someone more knowledgeable than I about economics to present counterpoints and continue the discussion. Thanks for taking the time to present your ideas, no matter how unpunctuated. =)
RE: Lake Hills Renter @ 21 –
Bernanke should have kept interest rates up and killed the market. Greenspan gave the President the illusion of an economy that the President wanted. Things were going out of control and it was Bernanke’s job to stand fast for the American economy. Instead he began lowering interest rates as everything collapsed around him.
He could have held out and blamed Greenspan. He could have been a hero, whistle blower, and gotten a jump on a recovery. He could have been shocked at what these corporations were doing. Instead he was a sympathizer, collaborator, and architect of, in my opinion, of a cover up.
RE: David Losh @ 22 –
David, in my opinion, the short answer to why Bernanke lowered rates is to decrease the systemic risk of a complete collapse of the financial system. I know some people don’t believe in systemic risk. The fact that over 75% think Bernanke should be replaced means to me that the vast majority clearly don’t share my opinion. I can give an explanation of why I believe in systemic risk and why lowering rates has decreased it, but it would involve a somewhat lengthy explanation of my understanding of how the banking system works. The bad news is that I consider my understanding of how the banking system works to be rudimentary and in all probability not totally accurate. The unfortunate good news is that I think my understanding of the system is probably better than about 98 or 99% of the adult population.
I never worked inside the financial arm of a bank or S & L but I did represent some smaller financial institutions as legal counsel prior to the savings and loan crisis in the 1980’s. Checking facts to increase the accuracy of my explanation would also be a little time consuming. The explanation would probably take at least a page or so and I know its unlikely that anyone wants to read through another page of my crap. Let me know if you’re interested and I’ll put it together. But be prepared to put on some hip boots and hold your nose while you wade through it.
By David Losh @ 22:
That’s what he’s trying to avoid because it failed so miserably in the late 70s, early 80s. This may fail too, but that’s expressly what he’s concerned about.