Blame for the Financial Crisis: Dallas Fedhead Fisher on Goldman, Easy Money, and Those Darn Debt-Ridden Kids, Part 2

If only Delilah could cut his beard...

Yesterday we took a look at Dallas Fed President Richard Fisher's thoughts to the Washington Association of Money Managers last Thursday and determined that Fisher believes the debt-ridden idiots who loaded up on easy money should bear some of the blame for the financial crisis. Fisher might have hinted at the Fed's responsibility in the matter but in a classy way, of course, pointing to the easy money itself without directly pointing at homicidal maniac Alan Greenspan.

What we did not get into, sadly, was the "blame conspiracy" which Fisher playfully dropped amongst his points on bloodthirsty bankers and the complications of exotic credit instruments packaged to feed investors' hunger for securitized debt. God forbid I just let this one go without giving it its due.

Who is to blame? Well, if you had been listening to the radio on Feb. 26, 1933, you would know the answer. You would have heard a crazed Father Charles Coughlin, pastor of the Shrine of the Little Flower in Royal Oak, Mich., rail against "the Morgans, the Kuhn-Loebs, the Rothschilds, the Dillon-Reads, the Federal Reserve banksters, the Mitchells[1] and the rest of the undeserving group, who without … the blood of patriotism … flowing in their veins have shackled the lives of men and of nations with the ponderous links of their golden chain."

I am not familiar with Coughlin nor his opinion but he is described around the Internets watercooler thusly: "A Roman Catholic priest first, radio personality second, and political activist third, Charles Edward Coughlin was a pioneer in radio talk who used the medium to promote his church, his religious beliefs, and his political agenda."

I like him already with such insight into the "ponderous links of their golden chain." What happened to the great speakers of our age, anyway? Even the man who rose to the highest public office in America partially due to his ability to give an amazing speech (bah! Where has Obama's silver tongue gone now?) now offers little more than winners like "the proof of the pudding's in the eatin'." What, sir?!

Fisher continues:

Advance the tape 76 years. If you substitute Goldman Sachs for the Rothschilds, Lehman Brothers for Kuhn-Loeb, AIG for Dillon Read, Ken Lewis or John Thain for "Sunshine Charlie" Mitchell and keep the text about Federal Reserve "banksters," you will have captured the liturgy of invective heard from Father Coughlin's contemporary secular cousins. Nothing is new under the sun; old prejudices and conspiracy theories never die.[2] On airwaves and in the blogosphere, on editorial pages and even in the halls of Congress and foreign parliaments, critics are casting about for whom to blame for "shackl(ing) the lives of men" and women from Bethesda to Beijing with the "ponderous links" that took us to the very edge of the abyss of global economic collapse.

Fisher is right, the old prejudices do not die - and perhaps this is because the sources which leave themselves wide open for criticism by operating behind the curtain (hellllo, Federal Reserve I'm talking to you!) do not die. Were Fisher's Federal Reserve System to embrace true transparency as opposed to a bastardized version of such convenient only for soundbites, perhaps the blogosphere and the pundits could lay off.

Keep dreaming.

The Fed cannot expose itself - were it to do so, it would become painfully obvious almost instantaneously that this institution is a crime against the Constitution of the United States, sanctioned and blessed by Washington to exercise continued theft of wealth and prosperity via reckless monetary policy and the alchemy of money creation.

Conspiracy theories, Goldman Sachs, inflation concerns, and the failure of the bond market; Fisher certainly took a bold step towards transparency in this one. He insists the FOMC is more than equipped to handle any monetary disaster in the waiting, though I imagine rampant inflation is the boogeyman hiding in each of their closets, fangs glittering in the dark, a low growl coming from under the bed. Is he supposed to be talking about this stuff out loud like this? Isn't that against some Fed directive that insists "deny, deny, deny" is the best way to deal with the noisy concerns of Fed critics?

Of course, any student of history knows that throughout time, governments unwilling to face the music and fund their liabilities have turned to monetary authorities to print their way out of their predicament. We all know by heart the pathologies that afflicted Weimar Germany, Argentina and other countries. And we have daily reminders from bond vigilantes like Bill Gross about the prospect of losing our AAA rating. This cannot be allowed to happen in America.

I can tell you that the FOMC is well aware of the doubts being voiced about its intentions. I can also tell you that nobody I know on the committee wants to maintain our current posture for any longer and to any greater degree than is minimally necessary to restore the efficacy of the credit markets and buttress economic recovery without inflationary consequences. Indeed, as I speak, we are studying ways to unwind our balance sheet in a timely way.

Thank you, Captain Obvious. I cannot possibly imagine that any FOMC member actually enjoys any of this; the endless criticisms, the buzz of the pundits, America poised to point its pissed-off pitchforks at the Fed when up until now they operated essentially in the dark. One does not become a central banker for the fame and fortune - now they can't even go to Starbucks without getting recognized.

As the Book of Volcker warns, the Federal Open Market Committee can ill afford to be perceived as monetizing debt, lest we come to be viewed as an agent of, rather than an independent guardian against, future inflation and drive real interest rates higher.

Too late, RF, the Fed is carelessly waving around its magic wand of funny money, monetizing any and everything that isn't nailed down. I have already referred to this as looting the ship, though certainly Fisher and his colleagues have an alternate perspective. No one is comfortable with the Fed's current monetary policy, least of all the Fed. Great. That's reassuring.

The conspiracies would likely fade were the Fed to be honest about its position, its impotence, and its objective. It is speeches like these which, to some extent, give me a sense of hope that central bankers aren't entirely clueless nor intent on obscuring the issues; not that I'd be so ignorant as to believe this is what we should expect from the Economic Demolition Team in the future - especially if Larry Summers skeezes his way into Ben Bernanke's spot in 2010. No, one should expect nothing but extended obfuscation and treason in that event.

So don't worry, Richard Fisher, the blogosphere will be here Fedbashing you and your cohorts so long as you continue giving us the ammo to do so. Nothing is new under the sun after all, right, RF? Your words, not mine, homie.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.