Rep. Paul Kanjorski on the TARP on C-SPAN today.

Charles Dean

Here's the video: http://www.youtube.com/watch?v=INAGMSAR ... r_embedded

The more I've read about what happened here, and as pissed off as I was about the "bailout" and what not, I've had this sinking feeling for awhile that history may show that Bernacke's wherewithal to act so dramatically may have saved our economy.

I think about how Indymac collapsed. Indymac's collapse was not because of bad loans or a bad business model. I wrote alot of loans thru them. Indymac folded because of an electronic run on the bank.

Bernacke was a huge history buff on the Great Depression. One of the universally agreed upon things with the Depression was that one of the reasons for so many bank collapses was because of the Fed's failure to act quickly.

I don't want to say this, because I don't want to believe it, but will history end up showing that Bernacke was exactly right about the magnitude of the problem and just how screwed we were without drastic action?

sniglet

Charles Dean wrote:

One of the universally agreed upon things with the Depression was that one of the reasons for so many bank collapses was because of the Fed's failure to act quickly.

Not really... There is considerable debate over what really caused (and exacerbated) the first great depression. Some criticsbelieve it was Fed intervention and government meddling that made things so dire.

Wikipedia wrote:

Furthermore, Rothbard criticizes Milton Friedman's assertion that the central bank failed to inflate the supply of money. Rothbard asserts that the Federal Reserve bought $1.1 billion of government securities from February to July 1932, raising its total holding to $1.8 billion. Total bank reserves rose by only $212 million, but Rothbard argues that this was because the American populace lost faith in the banking system and began hoarding more cash, a factor quite beyond the control of the Central Bank. The potential for a run on the banks caused local bankers to be more conservative in lending out their reserves, and this, Rothbard argues, was the cause of the Federal Reserve's inability to inflate.

http://en.wikipedia.org/wiki/Great_Depression

The more I see the government throwing good money after bad in trying to bail-out the economy I become even more convinced that things will get very bad indeed. This is one of those situations where the less the doctor tries to treat the disease the better. The best thing that could happen is to allow us to reach a bottom quickly, and allow a clearing of all the mal-investments. Unfortunately, policy makers are hell bent on avoiding this.

I have an article on my blog about this very issue (i.e. doing no harm). http://www.surkan.com