10 Reasons We'd Be Better off Without Ben Bernanke
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On Wednesday, the Fed disclosed its highly anticipated report about which banks got the most perks during the Great Bank Bailout and Subsidization period. Long story short, the report, spanning 21,000 transactions from December 2007 to July 2010, did not reveal which banks borrowed what from the Fed's discount window (the part we wanted to know), but confirmed that the biggest banks got the most help from various facilities (the part we already knew). The report is parceled out through a maze of different pages and spreadsheets for inconvenient viewing. But hey - the future of the free world was at stake, the Fed did what it had to do, and things would have been much so worse without fearless Ben, Tim and the boys intervening with trillions of manufactured dollars. Now, Bernanke will breathe a sigh of relief.
Why? Because there will be nothing else for him to weather. That is, until the true ramifications of the reckless banking system subsidization and securities inflation manifests in a broader, scarier version than last time.
Here are ten reasons this dire economic fate is likely, and we'd be better off getting rid of Bernanke long before his term ends in 2020.
1) The Banks Bernanke Made Bigger are Still Bigger
When Bernanke was called to testify before the Financial Crisis Inquiry Commission earlier this fall he declared that "The single most important lesson of this crisis is we have to end the 'too big to fail' problem."
Now, he was the guy that had the power as Fed Chairman to prevent the biggest banks from getting any bigger. Yet, during the fateful fall of 2008, the Fed approved JPM Chase's government-backed acquisition of Bear Stearns and Washington Mutual, Bank of America's acquisition of Merrill Lynch and Wells Fargo's acquisition of Wachovia -- making the biggest banks, bigger. Existing size limits were ignored, allowing these banks to surpass or hit the 10% concentration limits that had been specifically designed to keep a lid on the 'too-big' notion. Similarly, it was Bernanke's Fed that approved the re-classification of Goldman Sachs and Morgan Stanley into bank holding companies - which they still are -- which made the prospect of major bank collapse all the riskier. If he really wants to make the banks smaller, keeping them bigger isn't the way to go.
2) The Great Depression Scholar Act is Getting Old
Bernanke's big claim to economic godliness is that he studied the Great Depression. It just doesn't seem like he studied what lead up to it or exacerbated it. Then, as still now, Wall Street banks were overleveraged. They were sitting on too many risky loans. The Fed was one of their key subsidizing lenders then, as now, and by the middle of 1929, the Fed was worried. So it began raising interest rates (this, according to Bernanke, was the main problem he didn't want to repeat, but he's oblivious to the fact that it was the reckless lending and manipulating, not the interest rate moves, that did the most damage and hid the most problems).
Back in the '20s, the NY Fed began extending more loans to the big banks at the same time they were trying to restrain them from speculative activities. Which of course didn't work. Nicely asking banks not to speculate with cheap money is like asking a hungry lion not to roar. The Fed could have put on the brakes and checked the borrowing of the Wall Street banks, but it didn't. It didn't during the years that Bernanke first took the helm. And, it doesn't now.