Banking Gets Schemed Back?

Sunday, January 31, 2010 , , , 2 Comments

Pic credit: Bedzine

I have to give it to the Europeans, they call it what it is. A scheme. I find it hilarious that they toss the word around as though it holds some regulatory might; a scheme? Really? The ultimate irony being that they're actually calling it what it is. While Tim Geithner is off babbling about "saving the system" the Europeans come out saying we need another scheme.

(yours truly loves a great scheme but not in the European sense of the word)


Some of the world's most prominent bankers have come out in favour of a global bank wind-down fund, a concession from the industry after weeks of fighting proposals for new taxes in the US and Europe.

Josef Ackermann, chief executive of Deutsche Bank (DB), told the FT yesterday: "To help solve the too-big-to-fail problem I'm advocating a European rescue and resolution fund for banks. Of course, the capital for this fund would have to come from banks to a large degree."

Bob Diamond, president of Barclays, also supported the idea of a global levy, which could see banks contribute tens or even hundreds of billions of dollars over a period of years.

"I think every G20 country would like to have an insurance scheme that would help cover the cost of any future bank failure," he told the FT at the World Economic Forum in Davos. "A co-ordinated global system is preferable to an unlevel playing field."

Aww shit, Obama, what does this do to your refinancing plan scheme?


OMG! Obama and the Treasury Pay Off the Visa with the MasterCard

Saturday, January 30, 2010 , , , , , 1 Comments

Already? That was quick!


President Barack Obama will propose making a popular stimulus bond program permanent and expanding its use in the budget plan he presents on Monday, a U.S. Treasury Department official said on Saturday.

He will also seek to lower the level of the rebate the U.S. government pays to issuers on taxable Build America Bonds to 28 percent, the official said. The bonds, created by economic stimulus legislation last year, currently give issuers a subsidy equal to 35 percent of their interest costs.

The bonds "were successful in helping to repair a severely damaged municipal finance market, making much needed credit available at lower borrowing costs for infrastructure projects that create jobs," Treasury Secretary Timothy Geithner said in a statement provided by the official.

"By making Build America Bonds a permanent and expanded financing tool for state and local governments, we're investing in our country's long term economic growth in a cost-effective way," Geithner said.

At the end of 2009, the $2.7 trillion municipal bond market was at a standstill, a victim of the credit crunch. State and local governments rushed to issue the bonds, which were designated for infrastructure, mere months after the American Recovery and Reinvestment Act was signed into law.

By the end of 2009, issuers had sold more than $60 billion and analysts estimate more than $100 billion BABs could be sold this year.

In Obama's proposal, the bonds will be expanded to refinance some debt, to cover short-term governmental operating costs and to finance non-profit hospitals and universities.

The expanded permanent program would begin January 1, 2011, the official said, coming on-line just when the stimulus expires. The stimulus did not cap the amount of BABs that could be sold, but set an end date for issuing the debt.

I am incredibly entertained by the term "revenue neutral" as stated by Aaron Klein, deputy assistant secretary in the Treasury's Office of Economic Policy. Revenue neutral to whom? The "investors" (who bought these?!) who are getting stiffed on their promised interest payments? Hahahaha, they should have known better than to expect OMG Dividends!

They can call it a "level of rebate" but it's really just the interest on the Visa that they're charging to the MasterCard.

Seriously, who bought these??

If you look a little deeper, BABs is a three dollar whore who looked good under the piss yellow light of the alley in an uncertain market. The ratings agencies (all you have to do is slap "Full Faith and Credit of the United States" even though we've got a few dings on the old credit score) were all over it, calling these repackaged muni bonds (who would buy muni bonds as muni bonds?) AAA. My AAAss.

Didn't we fall for that before?

Municipalities are broke. Now they can defer this for another year or two if Obama can keep this up (and yay Bernanke he can!) but that doesn't alter the fact that they are broke.

But you have banks like Regions (RF) trying to loan shark municipalities that are technically insolvent into taking the candy. It's no wonder they're having "loan trouble". Ever seen maggots clean off a carcass? Like that.


I Want Off This Ride

Saturday, January 30, 2010 , 3 Comments

Muni is going up again. I remind dear reader that monthly Fast Passes went from $45 to $55 in July of 2009. From $55 to $60 for the new "Muni only" FP or $70 for the BART/Muni FP (it's included it for as far back as I can remember - before my "jumping through the back door/half-shaved head days") in January of 2010 (p.s. that's still this month). And now again? Already? I didn't even burn through the first Muni only!

SF Appeal:

In an effort to manage a budget deficit the Chron has described as ready to "balloon to almost $103 million," the SF MTA's called a special Board of Directors meeting this Friday at 10 AM to discuss (among other things) the MTA's revised plan to cut Muni service, raise fares, and add new ways to generate revenue.

Here's how not to "make the point" to Muni. What are you going to do? We're fortunate to have what we have even if it is dirty and awful.

The question is, at what point does it become not worth it?

(And if you see a jackass with her Muni pass hanging from her neck - you'll only lose it once, trust me - taking pictures of you with a BB, it's probably because you are asking for it)


Toyota Recall is "Absolutely Stupid"

Saturday, January 30, 2010 0 Comments

I'm not calling it protectionism, I'm just saying you have to get a piece when you can.


Chrysler Group LLC put a new twist on the Toyota Motor Corp. (TM, 7203.TO) recall, offering $1,000 to consumers who trade in their Toyota pickup or sport-utility vehicle and buy a Chrysler, Jeep, Dodge or Ram truck.

The offer is aimed at current owners of Toyota Tundras, Tacoma and Siennas. The $1,000 trade-in bonus will be awarded with a purchase or lease of a Chrysler vehicle.

Toyota's problems continued to mount Friday, as the auto maker said it was recalling 1.8 million vehicles in Europe over its sticky gas pedal. The company has also halted sales of eight of its top-selling vehicles.

General Motors Co. and Ford Motor Co. (F) are already offering customers $1,000 if they trade in one of the vehicles covered in the recall and buy one of their new cars or trucks.

Ford on Friday said it is funneling more money to dealers in hopes they boost advertising to grab Toyota customers.

This is my kind of man on the street. Next time, Earl, throw a fucking in there. Trust me, you'll feel a lot better.


Toyota is sending new gas pedal systems to its factories rather than its dealership service departments, The Associated Press learned Friday. The move angered some dealers who say they should get the parts to take care of the millions of car owners whose accelerators may stick.

Toyota spokesman Brian Lyons confirmed a company e-mail obtained by the AP that says parts were shipped to the automaker's plants.

He said the company has not sent parts to its dealers because it has yet to determine whether it will repair — or replace altogether — the gas pedals on the 4.2 million Toyotas that have been recalled worldwide.

Toyota, he said, will announce next week how it will solve the problem, and the repair work should be finished in less than a month.

But some dealers said they should get the parts first so that they can fix the cars already on the road.

Earl Stewart, owner of a Toyota dealership in North Palm Beach, Fla., said his mechanics might not know the details of how to fix the gas pedals, but they know how to install new ones.

"That's absolutely stupid," he said of sending the parts to factories. "It makes no sense at all."


Don't Bust a Nut Over GDP Yet

Friday, January 29, 2010 , , 0 Comments


The U.S. economy crushed expectations by growing at a 5.7% clip in the fourth quarter of 2009, but even as Wall Street rallied on the news there are plenty of warning signs of a slower pace ahead.

A restocking of inventories by American businesses drove a large portion of the fourth-quarter increase, contributing 3.4% compared with just 0.7% in the third quarter when growth was a far calmer 2.2%. Excluding the inventory factor, real final sales of domestic product were up just 2.2% in the October-December period, after rising 1.5% from July to September.

The big impact of inventories is something of a red flag, particularly since the consumer input to GDP was weaker in the fourth quarter than in the prior period, and Dan Egan, president of the Massachusetts Credit Union League, expects the Feb. 26 updated look from the Commerce Department to rein in the estimate.

"[The 5.7% figure] was a surprise," Egan said. "It's an encouraging recovery sign, but there's a difference between Wall Street encouraging and Main Street encouraging." While the data supports arguments that a recovery is building momentum, high unemployment, little job security and limited access to credit are making that story a tough sell to many Americans.

Forbes says "don't rejoice" but I say "stop creaming your jeans, economists" - either way, the point is not to get excited about any of these numbers. How can you even believe any of it? Government stimulus and excessive Fed intervention have distorted the true economic picture beyond recognition. Trying to gauge true economic well-being in this country is like trying to cross-stitch on LSD. Good luck with that.

Before you go prematurely ejaculating all over yourselves, economists, I have three words: shadow government stats.

You're welcome. Now wipe that up.


Via Going Concern: Bernanke's Next Four Years

Today is my final Fed-related column at Going Concern because you jackasses stalk me here on JDA but must be scared of accounting and never go over there. Shame that.

Anyway, the good part is I went out with a bang and thanks to WC Varones was able to throw in a little suggestion of total market manipulation. Yay!

Bernanke’s Next Four Years

Anyway, let’s talk about Bernanke’s confirmation!


Ben Bernanke won the backing of the Senate for a second four-year term as chairman of the Federal Reserve by a comfortable margin Thursday. Even with that storm behind him, Mr. Bernanke faces formidable political and economic challenges made tougher by the bruising confirmation fight.

Yeah, ok, let’s ignore the fact that the Fed spent the last week buttering up everyone they could to get to push Bernanke through. WSJ made it really easy with a chart of Senators who were going to vote for him, who weren’t, and who were undecided. It was a fucking Fed Telethon trying to save Bernanke’s ass and with a 70-30 vote, apparently they won.

Want the rest plus the chart? You better go over to GC to get it. Tricky Fed bastards.


The Volcker Rule


Commodity trading houses are set to emerge as beneficiaries of US president Barack Obama's clampdown on Wall Street as they escape proposed rules designed to hit banks.

Mr Obama's plan, known as the Volcker rule, would stop banks from trading on their own accounts if the business is unrelated to customers, potentially hitting their raw materials businesses. While details are fuzzy, executives at banks and the publicity-shy merchants of oil, metals, coal and foodstuff are bracing for a shake-up of the commodity order.

A ban on proprietary bets could present unique wrinkles in commodities, an important source of trading revenue for banks including Goldman Sachs and Morgan Stanley. Beyond trading abstract derivatives such as futures and swaps, several banks also buy and sell actual shipments of oil, gas, industrial metals and other physical assets.

While the physical trading may be helpful to bank customers, some of this trading is clearly speculative. For example, some leading Wall Street groups last year stored diesel aboard tankers to profit when fuel prices rebounded.

Unlike the banks, commodity trading companies, which include Glencore, Vitol and Trafigura, face no pending rules. The US plan could present a chance to grab market share as uncertainty looms. "Obama's crackdown on Wall Street is largely positive to the trading houses," a senior executive at a large Europe-based trading company told the Financial Times.

"I think it is good for us," added a senior executive at a smaller trading house in Europe. "The banks will most likely cut back on physical business."

Commodity trading has grown among banks seeking a piece of a business long dominated by Goldman and Morgan Stanley.

JPMorgan, after acquiring commodity businesses from Bear Stearns and UBS, is in exclusive talks to buy RBS Sempra Commodities, a joint venture part-owned by Royal Bank of Scotland, the rescued UK bank. RBS Sempra has reduced its reliance on proprietary trading and and now has more customer business, traders say, potentially giving JPMorgan a deeper book of clients.

In energy, the largest of the commodity futures markets, banks already face the prospect of a ban on "speculative" trading under rules proposed this month by the US Commodity Futures Trading Commission.

But it remains unclear how non-US banks would be touched by the rules. In recent years Europe-based banks including RBS, Société Générale, Barclays and Deutsche Bank have received US approval to trade physical commodities when it complements their derivatives businesses.

Blah blah blah.


President Obama is pushing hard for stricter financial regulation, promising in his first State of the Union address that he would not sign a bill that “does not meet the test of real reform.” This has left Wall Street wondering how much Mr. Obama’s regulatory proposal, known as the Volcker Rule, will cut into its profits.

The proposal, named for Paul A. Volcker, the former Federal Reserve chairman, would limit a bank’s ability to trade on its own account and would ban banks from investing in hedge funds and private equity funds. It could put an end to the huge Wall Street profit machines that emerged in the last decade since financial deregulation. Some analysts are already offering estimates about how costly the Volcker Rule could be.

In general, most analysts feel that Goldman Sachs has the most to lose if Congress passes some form of the Volcker Rule. David A. Viniar, Goldman’s chief financial officer, told analysts last week that the firm derives about 10 percent of its revenue from proprietary trading.

As such, Citigroup estimates that the Volcker Rule would cost Goldman $4.5 billion in revenue based on its 2010 estimates, translating to a $1 billion drop in profit. Analysts at JPMorgan Chase said the Volcker Rule would knock about $4.67 billion off Goldman’s future revenue stream, but they came to their projection a different way, estimating that the firm would experience a 20 percent decrease in its overall trading revenue.

I could pretend to care about this but... Meh. (Really I'm just a tad distracted. Stunned by Bernanke news? Not quite.)


Making Home Affordable or Just Pushing More Paper?

Thursday, January 28, 2010 , , 3 Comments

I was going to take some time to write a nice thoughtful post about Bernanke's second term but I decided that the money-printing prick has had way too much facetime on JDA lately and frankly I'd be happy not seeing his neck beard at all for another 4 years.

CNN Money:

Under fire for the low number of people receiving long-term mortgage help, the Treasury Department on Thursday announced new guidelines that will require applicants to provide all paperwork before getting a trial modification.

The new policy will make it harder for troubled homeowners to start the process, but it should make it easier for them to qualify for permanent assistance under President's Obama foreclosure prevention plan.

The administration's $75 billion housing effort has been plagued by paperwork problems since it launched last April.

Borrowers complain that their loan servicers constantly ask for additional documents and lose their forms. Servicers, meanwhile, say that borrowers are not handing in all that's needed.

The new rules, which start June 1, will effectively shift the paperwork burden to the start of the process.

"They aim to make it easier and quicker to provide permanent modifications," said Treasury Assistant Secretary Herb Allison. "These changes also will enable servicers to process more efficiently and handle more volume effectively so we can help more people more rapidly."

Distressed borrowers will have to fill out a three-page request form that asks them to explain their hardship and list their income and expenses. They will also have to sign an IRS 4506-T form that allows servicers to pull their tax returns. Both forms are available on the Making Home Affordable program's Web site.

Yay, more bureaucratic paperwork under the guise of "help"! That's awesome!


Happy Confirmation Day, Ben Bernanke?

Thursday, January 28, 2010 , , , 2 Comments

(h/t Ex-SKF)

Happy almost-totally-guaranteed-to-be-a-good-day to Ben Bernanke. Now come sit on my lap and let me tell you a story.


On 16 February 2006, the governor of the Reserve Bank of Zimbabwe, Gideon Gono, announced that the government had printed ZW$20.5 trillion in order to buy foreign currency to pay off IMF arrears.[51] In early May 2006, Zimbabwe's government announced that they would produce another ZW$60 trillion.[52] The additional currency was required to finance the recent 300% salary increase for soldiers and policemen and 200% increase for other civil servants. The money was not budgeted for the current fiscal year, and the government did not say where it would come from. On 29 May, Reserve Bank officials told IRIN that plans to print about ZW$60 trillion (about US$592.9 million at official rates) were briefly delayed after the government failed to secure foreign currency to buy ink and special paper for printing money.

On 27 June 2007, it was announced that central bank governor Gideon Gono had been ordered by President Robert Mugabe to print an additional ZWD$1 trillion to cater for civil servants' and soldiers' salaries that were hiked by 600% and 900% respectively.[53]

Clearly Mugabe was responsible for the hyperinflation. The causes were those always present in these events. A weak economy, large government budget deficits, inability to borrow funds combined with the political decision not to cut Government spending. Governments are reluctant to lay off government employees, especially those related to the armed forces. The latter might invite a military coup. The only source of funding left is the creation of new money.

The entire article is recommended reading as we throw around "Zimbabwe" a little too loosely when referring to Federal Reserve Chairman (soon to be repeat, let's keep it real) Ben Bernanke. He's got a long way to go to reach Gono status but he could easily find himself there.

He owes Washington one hell of a favor, you think they aren't going to try to cash that in?

Early congratulations, ZB. FOUR MORE YEARS! Wooo hope and change YAY!!

(really, though, Zimbabwe is on the mend. It's possible. As Skeptical CPA might say, Kill the Fed!)


My Inbox is Dangerous

Wednesday, January 27, 2010 , , 1 Comments

And you wonder why I have 5970 unread emails.

This is the sort of stuff I've been getting lately. Am I the only one? Smells like desperation to me.


The FOMC's Lone Dissenter Takes All?

Kansas City Fed President Thomas Hoenig lived up to expectations as the second coming of Jeff Lacker and dissented on a rate hike that might never happen (pffft) but beyond that, why am I even covering this? Who cares?

Some economists do but I think we've learned that they're just as clueless as everyone else.


"This is the first step toward a slightly more hawkish-sounding Fed," said Camilla Sutton at Scotia Capital.

"I think this is a little bit of culture shock for the market," said Jefferies Chief Financial Economist Ward McCarthy of Hoenig's dissent in FOMC statement. "I think this is the starting gun...dissent going forward may not be that uncommon."

"This is not an insignificant turn of a phrase and surely reflects the concern of several voting Fed members regarding building inflationary pressures," said Dan Greenhaus of Miller Tabak.

"My translation: The financial emergency that brought the fed funds rate to almost zero in Dec '08 is no longer here and thus the Fed should adapt to a different, though still difficult, economic situation," says Miller Tabak equity strategist Peter Boockvar. "[Hoenig]'s only one but at least there is some pushback to the extraordinary easy money policy that Ben [Bernanke] only seems to know. We'll see how long he's the only one."

"We don't view Hoenig's vote as an important policy signal--he is too much of an outlier," said Morgan Stanley economists.

Please, Hoenig has some showing off to do and it's the first meeting of a new voting year, someone had to slap a large pair of cojones on the conference table to set the tone as it were. *yawn*

If he's got any attention whore in him, this ought to be getting him worked into a lather as we speak (via WSJ as well):

A single voice of dissent among Federal Reserve policy makers ignited a wave of selling Wednesday of short-term U.S. interest-rate futures contracts.

By selling futures, traders raised expectations for higher short-term rates this year, and they increased their bets for an increase in the key U.S. federal-funds rate late this summer or early autumn.

The Federal Open Market Committee announced Wednesday that it would keep the short-term funds rate at a lowest-ever range of 0% to 0.25%, where it has stood since December 2008.

The Fed barely altered language from previous policy statements about the economy, but the decision was not unanimous.

Kansas City Federal Reserve Bank President Thomas Hoenig dissented. He argued that economic and financial conditions had improved enough "that the expectation of exceptionally low levels of the federal-funds rate for an extended period was no longer warranted,"

The market's reaction to Hoenig's opposition represented a shift in traders' sentiment away from short-term rates holding at very low levels. Now the less-unified Fed provided a catalyst for pricing in higher yields even though "we would argue against reading too much into this particular dissent," said analysts at Action Economics.

All I have to say about this is that I'm glad Richmond has a vote again in the same year the Mayans predicted the end of the world. That's all I'm at liberty to discuss at this time and will be in the bunker auditing my gold bars and food stores should anyone need me.

The January FOMC statement may be found via the Board of Governors here:

Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit will be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.

What I wouldn't give to have been a fly on that wall, if for no other reason than to capture the dirty ass looks Bernanke was getting, even (or especially) from those who have been recently caught in public rubbing his balls.


Quote of the Year: "The Fed is a Firefighter, Not an Arsonist"

You can't make it up.

Bullard: Fed is a firefighter, not an arsonist (

James Bullard, president of the St. Louis Federal Reserve Bank, thinks the attacks on the Fed are a part of general public displeasure with the state of the economy. He told me in an interview on Friday:

The debate took an unsettling turn in the second half of 2009 when the Fed went from being a heroic firefighter in the economy, which is my view, to being somehow the scapegoat for everything that has happened.

We’re used to it (criticism); we have thick skins. But to talkabout wholesale restructuring of an institution that has served the nation very well makes me nervous, and it should make anybody who’s worrried about the future of the economy nervous.

Bullard estimated that the Federal Reserve already spends 425,000 hours a year on internal and external audits (full disclosure here: I’m married to one of those internal auditors) and makes minutes of the Federal Open Market Committee public after a three-week lag.

A) reporters are not held to the same standards of independence (in appearance, in this instance) as CPAs so I'll let that "disclosure" go

B) cry me a fucking river, the Fed as scapegoat. That's hilarious. What happened to "we saved you pathetic bastards"?


The Economic Rhythm Method

Wednesday, January 27, 2010 , , , 2 Comments

Alright, who is going to be whispering gossip about Bernanke at FOMC?

Good question. Even the usual suspects are coming out in support of the bastard. It's a natural survival tactic, I suppose.


The Federal Reserve may take a chance the housing market can stage a comeback without its support by announcing today it will stick to the plan to end a $1.25 trillion program of mortgage-debt purchases in March.

Fed Chairman Ben S. Bernanke and other policy makers meet after the sixth straight monthly gain in home prices in November added to signs housing is stabilizing. With financial markets rebounding, the central bank has said it plans to end emergency aid to bond dealers and money markets by Feb. 1.

The Fed will probably acknowledge growth accelerated last quarter while noting that tight credit and unemployment near a 26-year high still pose risks to the recovery. Officials are likely to maintain a pledge to keep interest rates low for “an extended period” as they look for evidence of a sustained expansion that will create jobs without raising inflation expectations, former Fed governor Lyle Gramley said.

“The Fed wants to sit still until the smoke clears,” said Gramley, a senior economic adviser to Potomac Research Group. “To change the ‘extended period’ language would send a signal to markets that a tightening is not far off, and I don’t think the Fed wants to do that,” Gramley said. He doesn’t expect a rate increase for at least six months.

The Federal Open Market Committee, gathering while Bernanke awaits a Senate vote on whether to confirm him for a second term, is scheduled to issue its statement at around 2:15 p.m.

Regional Fed presidents have differed over whether to continue buying mortgage-backed securities after March 31, with James Bullard of St. Louis saying the central bank should create such an option and Philadelphia’s Charles Plosser saying the purchases should end as scheduled.

Ready or not, I think they're pulling out.

[St Louis Fed President James] Bullard, who votes this year on policy, said in a speech in Shanghai this month the Fed should adjust asset purchases based on changes in the economy. Chicago Fed President Charles Evans told reporters Jan. 13 that the central bank would consider expanding purchases “if conditions were to deteriorate.”

In contrast, Kansas City Fed President Thomas Hoenig, who also votes on policy this year, said in a Jan. 11 interview that “the private market now is healing” and the program should end. Richmond Fed President Jeffrey Lacker said last month, “I think we have to move over time away from channeling resources to the housing market.”

Does this mean that the Treasury will have to come up with its own unlimited housing bailout?

Besides, sometimes pulling out calls for pushing back in harder (Barron's, November 2009):

Come the end of March, the Fed will stop purchasing MBS, notes Poggi, and the result of that is “mortgage rates would spike from recent all-time lows (30-year at 4.83%), further damaging the weak refinancing market,” writes Poggi.

The solution, writes Poggi, is for the Fed to use “reverse REPOs,” in which the Fed sells MBS to investors with the promise it will buy them back at a higher price down the road. That would assure a low-risk return, which would keep financing alive for MBS until credit returns to the market more broadly.


Reverse repos are one tool the Fed has at its disposal when the economy and financial markets have improved enough for it to drain cash from the system. The Fed uses short-term repurchase and reverse repurchase agreements to temporarily affect the size of the Federal Reserve System's portfolio and influence day-to-day trading in the federal-funds market.

The operation comes on the heels of a series of reverse repo tests that have been done by the bank over recent weeks.

"The idea is they want to get all their ducks in a row and be ready (to pull cash) when the time is necessary," Mr. Jersey said, adding that there's no point in doing large scale reverse repos as long as the Fed is still purchasing assets.

The Fed is in the process of buying nearly $1.75 trillion of Treasury, agency and agency mortgage-backed securities through its securities purchase programs.

Like I said, there's pulling out and then there's pulling out.

Single fap. *yawn*


Zimbabwe Ben as Villain of the Year

I was too busy jerking myself off over JDA showing up on Time that I forgot to counter Michael Grunwald's argument that "right-leaning hawks" are unfairly critical of Zimbabwe Ben. Oh please, Grunwald left a bloody steak hanging right in front of my cage, how am I supposed to pass that up?

Now that the recession seems to be over, hawks are badgering him to start tightening the money supply to avoid inflation and an overheated economy. Bernanke's response is simple: What inflation? There's little evidence in the data, and even a cursory review of the morning papers suggests that the economy is still underheated. Bernanke repeatedly stressed that the big problem today is high unemployment, that places like Dillon are suffering, that persistent joblessness can create ripple effects that damage families, communities and the nation for generations.

O rly? That's absolutely hilarious. I point Grunwald to the post I did just two days ago (the one he links to is from December... so maybe he'll get to blind ass Bernanke a month from now):

What Bubble, Dr Bernanke?

Check this out, Washington Post October 27, 2005:

Bernanke: There's No Housing Bubble to Go Bust
Fed Nominee Has Said 'Cooling' Won't Hurt

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

And you believe this asshat when he tells you inflation is not a concern now? It's not like he missed a temporary blip in the massive macro framework of the economy that could have been easily bumped-off with a quick rate adjustment. The guy missed the fucking largest bubble in American history. Need more reasons why we rail on Bernanke?

K. I have plenty. Hope you have some time. (bwhahahaha, get it? Time? Fuck it, nevermind)

You Can't Fake a Good £. Trust Me.
Senator Bunning Puts the Smack Down on Bernanke, Calls Him "a Failure"
Not So Fast, Zimbabwe Ben: Bernanke Confirmation Gets C*ckblocked in the Senate
Bernanke's Second Term: What Does the Fed Have to Give Up to Get It?

That's only December. Shall I continue?

Need more reasons? K, let's stop being narcissistic. Even known Bernanke ball-rubber Paul Krugman blasts him for missing the bubble via NYT. LMAO! That's when you know it's bad:

Following up on a point I made in Atlanta (along with many others), David Leonhardt takes Ben Bernanke to task for failing to concede that the Fed, himself included, missed the bubble.

But it’s actually a bit worse than that: Bernanke’s presentation suggests that the Fed is still using some of the flawed methodology that helped it miss the bubble.

Way back when, here’s what I wrote:

Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

In Flatland, which occupies the middle of the country, it’s easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don’t really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can’t even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence “zoned” - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.

When I wrote that I was thinking in particular of studies at the Fed that tried to rationalize aggregate national prices, but clearly had no explanation of the much bigger price increases in coastal areas.

That should be sufficient evidence to demonstrate my position. Let me know if you need more, I can pretty much keep this up forever. xoxo

p.s. Villain of the Year was not Ben Bernanke. For a sixth year running, it was George W Bush. You won't catch me making excuses for either of them.


The Threat of Fed Rate Hikes and the Constant Hum of Distortion

Let's not get too worked up over this whole Bernanke confirmation deal, there's still the issue of the Fed pulling out to attend to. Anything else is merely a distraction.


The Federal Reserve may now start pointing to the interest rate paid on reserves as its primary monetary-policy tool, economists at Bank of America Merrill Lynch said.

What is generally referred to as the Fed’s benchmark rate is the target overnight interest rate between banks. That fluctuates on any given day anyways, depending on short-term money market trading and activities by the Fed to push the rate up or down. It’s hovered around 0.12% for the past month at least.

The possibility of paying interest on reserves has been suggested by some Fed officials as a way of draining liquidity from the financial system to help assuage fears of runaway inflation when, or if, the economy ever gets back up to speed again.

Bank of America said the Fed will also shift from aiming for a target fed funds rate, to announcing a range, like it is now, at zero to 0.25%. The interest rate paid on reserves would stay at the upper end of the fed funds rate, Bank of America’s Ethan Harris wrote in a note Tuesday.

Mish had a great piece on December 14th on Fed distortions, specifically the fact that its very existence throws off markets. No kidding!

The Observer Affects The Observed

The Fed, in conjunction with all the players watching the Fed, distorts the economic picture. I liken this to Heisenberg's Uncertainty Principle where observation of a subatomic particle changes the ability to measure it accurately.

To measure the position and velocity of any particle, you would first shine a light on it, then detect the reflection. On a macroscopic scale, the effect of photons on an object is insignificant. Unfortunately, on subatomic scales, the photons that hit the subatomic particle will cause it to move significantly, so although the position has been measured accurately, the velocity of the particle will have been altered. By learning the position, you have rendered any information you previously had on the velocity useless. In other words, the observer affects the observed.

The Fed, by its very existence, alters the economic horizon. Compounding the problem are all the eyes on the Fed attempting to game the system.

Yes but isn't the Fed trying to throw the signal to game the system back?


FDIC's Bair: Don't Look at Us, It's Not Our Fault!

Of the four horsemen of the financial apocalypse (Mary Shapiro, Ben Bernanke, Sheila Bair, and Tim Geithner, of course), Sheila is the only one who I have the slightest amount of faith in. She's got her head screwed on straight and one hell of a shitty job, which might explain why she's out at the end of her term. Were Bernanke half the brainiac she is, he'd follow suit and say screw a Senate confirmation instead of sending his loyal minions to evangelize his greatness.

South Florida Business Journal:

Reacting to President Barack Obama’s recent proposal to impose limits on the size and scope of banks, Federal Deposit Insurance Corp. Chair Sheila Bair said during a visit to Miami Monday that institutions should wall off their non-bank financial activities from their insured deposits.

On Thursday, Obama said he wants to prevent financial institutions that own a bank from also owning, investing in or sponsoring a hedge fund, private equity fund or proprietary trading operations that are not related to serving their customers. The president also said that large financial firms could not increase their national market share of assets other than insured deposits beyond a certain point.

Just before speaking to the Florida Banker’s Association on Monday night, Bair said she hasn’t seen enough details of Obama’s proposal to say whether she supports it or not. She said financial institutions could do a better job of walling of their FDIC-insured banks from some of their more risky financial activities so that the banks aren’t hurt by losses in those areas.

“The bulk of these problems actually occurred outside the insured deposit banks. Just look at Lehman Brothers and AIG,” Bair said.

Wait for it.

Bair, who plans to leave office after her term expires at the end of this year, said the number of bank failures this year should exceed the 140 failures that occurred in 2009. Fourteen of those bank failures occurred in Florida. The FDIC has projected that bank failures would cost its insurance fund about $100 billion from 2009 through 2013.

Since some of the troubled banks are fairly small, Bair said the FDIC might package them to attract more bidders.

As we already know, Obama's proposed bank reforms might make it harder for the FDIC to unload crap assets that no one else wants so we can go ahead and guess that Sheila isn't going to support the move because wild speculation is generally the way to go when you're talking about financial doomsday.

This might be an excellent time to go all shameless self-promotion and remind you all that the Bank Fail Friday team is on duty as always bringing you all the hot bank failure action each and every Friday, even if that means from my BlackBerry on the ride home from work. Tricky FDIC bastards.


JDA Does Time

Tuesday, January 26, 2010 , , 1 Comments

I will totally take "right-leaning hawk" any day.


Now that Bernanke has gotten us past the crisis, inflation hawks and doves alike are trashing him for unbalancing the Fed's "dual mandate" to stabilize prices and maximize employment. The mostly right-leaning hawks rail about Helicopter Ben, Zimbabwe Ben and the Villain of the Year, whose cheap printed money is driving us to hyperinflation. It's true that Bernanke drove interest rates down to zero and tripled the Fed's balance sheet to avert a depression; he has also bought more than $1 trillion worth of mortgage-backed securities to lower mortgage rates, boost housing prices and pull us out of recession. Now that the recession seems to be over, hawks are badgering him to start tightening the money supply to avoid inflation and an overheated economy. Bernanke's response is simple: What inflation? There's little evidence in the data, and even a cursory review of the morning papers suggests that the economy is still underheated. Bernanke repeatedly stressed that the big problem today is high unemployment, that places like Dillon are suffering, that persistent joblessness can create ripple effects that damage families, communities and the nation for generations.

Go, ZB, go!

Update: it has been brought to my attention by WC Varones that Skeptical CPA is the one who originated Zimbabwe Ben as far as we are concerned so let us give credit where credit is due. Thanks, Pop!

Update again: WCV was kind enough to give JDA a good rub for a job well done and pointed out that this may be the first time the name Zimbabwe Ben came to mainstream media. How does @ZimbabweBen feel about that?


The NY Fed + AIG + the SEC = The Crime of the Century

If ever there was an appropriate use for this...
(thanks to TRB and Fund My Mutual Fund for the reminder)

Editor's note: For those of you without the attention span to get through this or like Caleb who think I tend to "run long", let me sum this up for you in as few words as possible: the emperor has no clothes and we kind of busted them. Now what? Who the hell knows. That's why you have to read it.)


A U.S. bailout watchdog has launched two new investigations into the New York Federal Reserve Bank's actions on insurer AIG's (AIG.N) disclosure of payments to banks after its 2008 rescue, excerpts of prepared congressional testimony showed on Monday.

Neil Barofsky, the special inspector general of the Treasury's $700 billion Troubled Asset Relief Program, said he would launch a probe into whether there was any misconduct relating to public disclosure of the $62.1 billion paid to retire credit default swaps with banks.

Barofsky announced the investigation in excerpts of prepared testimony to the U.S. House of Representatives Oversight and Government Reform Committee. The excerpts were obtained by Reuters. [yay! SIGTARP is back! Now with 45% more cojones!]

Barofsky is among witnesses due to testify on the AIG matter before the panel on Wednesday.

Also appearing at the hearing will be U.S. Treasury Secretary Timothy Geithner, who ran the New York Fed at the time of the American International Group bailout in 2008, and Thomas Baxter, the New York Fed's general counsel.

Barofsky said he would also launch a second probe into the New York Fed's level of cooperation with a prior audit conducted by his office into the AIG payments to U.S. and foreign-owned banks.

Remember when all those emails circulated surrounding Fedgate proving that Federal Reserve officials knew Merrill Lynch was a mess but forced Bank of America to take them anyway? Need I rehash "scary and ugly"? I think not. And what happened with that? Not a fucking thing.

(Quick refresher:
Merrill Lynch was also melting down, however. "Merrill is really scary and ugly," wrote Mac Alfriend, senior vice president of banking supervision and regulation at the Richmond Fed. Bank of America's headquarters in Charlotte, N.C. is in the Richmond Fed's district.)

What will happen with this?

Not a fucking thing.

Indictments or it didn't happen, stop pretending to be hard on crime. The regulators are on it, what kind of sick joke is this? Oh, sorry, the SEC was totally in on it, I must have misheard the statement when I thought they said they would be preventing (not participating) in financial crime.


Email disclosures by AIG, responding to subpoenas from the House Oversight Committee, have revealed that the New York Federal Reserve requested that information about the AIG bailout be kept secret as if it were connected to national security.
U.S. securities regulators originally treated the New York Federal Reserve’s bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.

The request to keep the details secret were made by the New York Federal Reserve — a regulator that helped orchestrate the bailout — and by the giant insurer itself, according to the emails.

The emails from early last year reveal that officials at the New York Fed were only comfortable with AIG submitting a critical bailout-related document to the U.S. Securities and Exchange Commission after getting assurances from the regulatory agency that “special security procedures” would be used to handle the document.
As Ryan Grim notes, these are basically unprecedented steps to keep secret the details of the AIG deal with counter-parties. The emails tell a story of strictly enforced secrecy and massive PR efforts to get securities regulators and Congress to stand down on disclosure. It paints a picture of the Federal Reserve as evading not only the oversight responsibilities of Congress, but any effort to offer insight into their activities whatsoever. And the SEC eventually agreed to the request:

The SEC, according to an email sent by a New York Fed lawyer on January 13, 2009, agreed to limit the number of SEC employees who would review the document to just two and keep the document locked in a safe while the SEC considered AIG’s confidentiality request.

I'm ill just reading that. Someone email the DoJ. Tweet that shit. Something.

Business Week:

American International Group Inc., the bailed-out insurer, included the word “redacted” more than 1,000 times in regulatory filings tied to agreements for paying banks that bought credit-default swaps from the company.

The insurer, asked by the Federal Reserve Bank of New York to limit disclosure, excluded a list of banks and collateral postings from a pair of 2008 filings, and then sought confidential treatment for the document in 2009 before making redacted versions available to the public.

The House Oversight and Government Reform Committee has ordered the New York Fed to turn over e-mails and phone logs from Timothy F. Geithner tied to AIG’s rescue in 2008, when he led the regulator. Lawmakers have criticized AIG’s rescue, which swelled to $182.3 billion, as a “backdoor bailout” of banks including Goldman Sachs Group Inc., and Geithner, now Treasury secretary, agreed to testify before the panel.

Business Week also has the timeline:

Dec. 2, 2008: AIG submits a regulatory filing detailing the terms of the Maiden Lane III agreement.

The filing contains a so-called shortfall agreement between Maiden Lane III and AIG listing terms of payments should the vehicle need more funds. The accord refers to Schedule A, the document listing counterparties, collateral postings and market declines on the derivative contracts. The Schedule A isn’t included.

The filing states that on Nov. 25, “ML III bought approximately $46.1 billion in par amount of Multi-Sector CDOs through a net payment to CDS counterparties of approximately $20.1 billion, and AIGFP terminated the related CDS with the same notional amount. The aggregate cost of the purchases and terminations was funded through approximately $15.1 billion of borrowings under the Senior Loan, the surrender by AIGFP of approximately $25.9 billion of collateral previously posted by AIGFP to CDS counterparties in respect of the terminated CDS and AIG’s equity investment in ML III of $5 billion.”

Dec. 21, 2008: AIG sends a draft of its regulatory filing detailing the purchase of additional CDOs to New York Fed lawyers. “Counterparties received 100 percent of the par value of the Multi-Sector CDOs sold and the related CDS have been terminated,” the draft says.

Dec. 23, 2008: The New York Fed sends AIG a marked-up version of the filing draft, crossing out the explanation of AIG paying 100 percent.

The New York Fed also crosses out a reference to an amendment of the company’s shortfall agreement and asks if including the amendment is “necessary or helpful?”

Dec. 24, 2008: AIG submits filing saying it retired another $16 billion in credit-default swaps after buying the underlying securities through Maiden Lane III, bringing the total collateralized debt obligations purchased to about $62 billion.

The filing omits the sentence that said “counterparties received 100 percent.”

The filing has the amendment to the shortfall agreement, which mentions Schedule A without including it.

Now the SEC knows it only gets one Bernie Madoff and this one is a whole hell of a lot bigger because it is our own Federal Reserve System working against us. Start with their indictments and work your way down, DoJ. You're welcome. I will even volunteer my own personal time to help you type up said indictments at 110 WPM, and I'm sure Skeptical CPA would volunteer to help perform the audits. Let's go, motherfuckers.

At the point that this whole deal crossed the SEC's desk, they should have seen something fishy and acted on it. Instead, they became accessory to the crime. Obvious? Yeah, pretty much if yours truly and her tattooed hipster ass can figure it out. It doesn't take an expert.

National security, LOL. Foreign central banks, LOL.

Keep taking it, America. When your ass starts getting sore, don't come crying to me, I tried to tell you all along.

Meanwhile, the guy who couldn't see the largest housing bubble in history (please do not miss the video of Bernanke in denial at that link from WCV) is fighting to get 4 more years at the Fed and getting all his Fed homies to go run PR for him all over the place. What does he know about the NY Fed and AIG? Let's make that a condition of his second term. Spill, you bastard.

I mean it's not like we even need Bernanke to admit any of it, is it obvious yet or do I have to keep putting links here?


American International Group Inc. submitted four rounds of regulatory filings in six months, with more than 1,000 redactions, as the Federal Reserve Bank of New York pressed the insurer to withhold data about bailout payments to banks.

The insurer made an initial filing on Dec. 2, 2008, about Maiden Lane III, the taxpayer-funded vehicle that bought assets from AIG’s trading partners. After the Securities and Exchange Commission asked for more information, AIG amended December filings three times. The last set of amendments, in May 2009, included more than 400 redactions, and the SEC granted the company permission to withhold the omitted data until 2018.

Naked Capitalism would like to know why the Fed is so desperate to keep Maiden Lane details secret and so would I. So? You want Bernanke, you give us Geithner and the NY Fed. Isn't that fair? We'll take stupid and blind (seriously, please don't miss the "retro" video of Bernanke) but evil and conniving has totally got to go.

We all saw what you did there, NY Fed.


OMG! Obama Gets Tough on the Deficit. Or Not.

Tuesday, January 26, 2010 , , , , 1 Comments

San Jose Mercury News:

President Barack Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.

The officials said the proposal would be a major component both of Obama's State of the Union address Wednesday and of the budget he will send to Congress next week for the fiscal year that begins in October.

The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, including air traffic control, farm subsidies, education, nutrition and national parks.

But it would exempt security-related budgets for the Pentagon, foreign aid, the Veterans Affairs and homeland security, as well as the entitlement programs that make up the biggest and fastest-growing part of the federal budget: Medicare, Medicaid and Social Security.

The payoff in budget savings would be small relative to the deficit: The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time.

Wait a second here, slick, weren't we just talking about raising the debt ceiling YET again not even a month and a half ago?


At least someone in America isn't feeling a credit squeeze: Uncle Sam. This week Congress will vote to raise the national debt ceiling by nearly $2 trillion, to a total of $14 trillion. In this economy, everyone de-leverages except government.

It's a sign of how deep the fiscal pathologies run in this Congress that $2 trillion will buy the federal government only one year before it has to seek another debt hike—conveniently timed to come after the midterm elections. Since Democrats began running Congress again in 2007, the federal debt limit has climbed by 39%. The new hike will lift the borrowing cap by another 15%.

But then you have guys in the Treasury talking sense for once about cutting off the crackpipe and hoping housing can float on its own in America without unlimited government subsidies. Are we counting the unlimited Fannie/Freddie bailout that Tim Geithner granted over the Christmas holiday in these figures? Just wondering.

(Un)Real Estate:

In case you missed this Christmas stocking stuffer, the federal government has given unlimited financial backing to housing finance bigwigs Fannie Mae and Freddie Mac. These two government backed companies are essentially guaranteeing a majority of home loans made the past year. Here's one housing expert who considers this horrible news:

That noise you heard emanating from your chimney on Christmas Eve wasn’t Santa Claus’s sack full of gifts: it was an unlimited contingent liability, gifted to you, the taxpayer, hitting your hearth when you were sitting down to a holiday feast. Because a $400 billion limit just wasn’t enough.

And no, I’m not talking about the healthcare monstrosity passed by the Senate on Christmas Eve. I’m talking about the Treasury’s stealth, Christmas Eve-post market “announcement” that (a) Fannie Mae (FNM) and Freddie Mac (FRE) would no longer have credit lines of a mere $200 billion each, but would instead have unlimited lines from the Treasury, and (b) they are no longer under any immediate obligation to reduce their massive mortgage security portfolios.

I don't buy it. Let's see if the rest of the world does. I mean that's the point of all this, right? OMGObama getting tough on the deficit! We're serious! Seriously!

Yeah ok. I'll believe it when I see it. Maybe that spiel works for 6th graders but JDA ain't buyin what you're selling, sir.

So, Mr President, which is it? Unlimited bailouts or tough on excessive spending? You cannot choose both. You must really think we're stupid to think anyone will fall for this. And don't look to the Fed to save you, they're sick of your shit too.


The Filthy Fed Slaps Back

Financial Armageddon's Michael Panzner got in a few Fed digs in today's My Six Cents on Bernanke and the Fed (are those inflation-adjusted?) and I'm not simply reposting here because he was kind enough to give yours truly top billing in his post. OK, maybe a little. Whatever. As many of you already know, MP is not only an opinion I admire but a friend and since none of the financial blogosphere seems to be able to resist giving Bernanke's confirmation our full attention, his thoughts are even more relevant than usual. Go read it. (As for me, he's referring to my interpretation of his thoughts from a recent interview, the meat of which may be found via Going Concern here and here. Yeah yeah yeah, it's an accounting tabloid but I swear I won't trick you with debits and credits once you drag your sorry ass over there, just go):

When asked to take a guess as to when the Fed would finally raise interest rates, Panzner gave an interesting answer. “In my view, the Fed is no longer in control – of the economy or its destiny. For the most part, market and other forces, not the FOMC, will determine what happens to interest rates in future.” So I guess it doesn’t matter when they’ll raise rates, markets are no longer listening. Or are they?

Got to give MP style points for stealing the Fed's own "in my view". Oh so much win.

Meanwhile, we've got some other "respected" opinions weighing in and fuck is it ugly.

Wait a minute, what's this? Dallas Fed President Richard Fisher coming to rescue Ben Bernanke in the WSJ?

Teddy Roosevelt once remarked of a financial crisis: "When people have lost their money, they strike out unthinkingly, like a wounded snake, at whoever is most prominent in the line of vision." Late last week, we saw the Senate strike out at Federal Reserve Chairman Ben Bernanke. His nomination for a second term was the first to come into Washington's line of vision in the immediate aftermath of Republican Scott Brown's win in the Massachusetts senatorial election.

Really?! Really?!?! Here I thought Richard Fisher was a pretty clever guy - surely he knows that that entire statement is total bullshit.

Fisher's op-ed, "Congress Is Politicizing the Fed The assault on Ben Bernanke is part of a larger trend that is undermining the central bank's independence", cannot be construed as anything but a desperate stab in the dark at saving their own asses, and frankly comes off as far more contrived a performance than JDA is used to seeing in her 2nd favorite Federal Reserve President. Don't make me start cozying up to Janet Yellen some more, dude, I thought we were cool.

But hold the fucking phone, is this the Fed punching back? Chill out, Fisher, you're getting me worked into a lather over here:

The burden of making the tough decisions needed to make our country's economy sound again falls on the sole body responsible for taxing and spending our money: Congress. For too long, Congress, under both Republican and Democratic leadership, has chosen the easy path of kicking the fiscal can down the road. Our elected representatives must now find the resolve to set aside partisan bickering and get us out of this frightful financial predicament.

The impulse to use Mr. Bernanke as a political punching bag raises the specter that, instead of doing the right thing, Congress may seek to pressure the Fed to print its way out of this crisis. We know from history that when fiscal authorities attempt to monetize their debts, the result is inevitably inflation.

Even before the Massachusetts election, there were several bipartisan proposals before Congress that recommended putting the Federal Reserve under congressional authority. These acts sound agreeable at first blush, but, as Winston Churchill once said, "In finance, everything that is agreeable is unsound."

Did anyone else feel that? My cheek is throbbing just thinking about the bitchslap we all got for coming down on poor, helpless Dr Ben S Bernanke who is merely a pawn in a game of Regulatory Rumble in which the biggest bitch gets all the shit while the real villains get away with murder. Yes, that means you, Alan Greenspan.

I'm not going on record as saying the Fed slaps back but, uh, I'd watch that backhand if I were any of you out there bitching out Bernanke. Just sayin.

I'm likely going to get a lot of shit for saying this from the financial blogging contingent but I get what Fisher is trying to do. He could have done it a little more subtly but I guess that's just how Texas boys get down, making it real obvious just in case we missed it. Still, pointing out the H.4.1 is a little too obvious and personally I'd liked to have see Fisher put in a little more show and a little less duh. That's just me.

Come on, if you're going to slap back at least do it like you mean it, RF. Yawn. A girl's really going to need to get another hobby if these bastards keep this up...


What Bubble, Dr Bernanke?

Epic h/t to our friend Jeff (who is known to squeal "I love you, JDA!" with more enthusiasm than just about anyone I know) for pointing us to this one. It's fitting.

Check this out, Washington Post October 27, 2005

Bernanke: There's No Housing Bubble to Go Bust
Fed Nominee Has Said 'Cooling' Won't Hurt

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

Bernanke's thinking on the housing market did not attract much attention before Bush tapped him for the Fed job Monday but will likely be among the key topics explored by members of the Senate Banking Committee during upcoming hearings on his nomination.

Many economists argue that house prices have risen too far too fast in many markets, forming a bubble that could rapidly collapse and trigger an economic downturn, as overinflated stock prices did at the turn of the century. Some analysts have warned that even a flattening of house prices might cause a slump -- posing the first serious challenge to whoever succeeds Fed Chairman Alan Greenspan after he steps down Jan. 31.

Bernanke's testimony suggests that he does not share such concerns, and that he believes the economy could weather a housing slowdown.

Not to be outdone, Fund My Mutual Fund had an excellent post over the weekend on the spectre of Bernanke's second term (pffft) and included a video that has long-been a JDA favorite:

Remember this Fed head job is apparently not about being accurate or having any prescience in economic forecasts.. it's not about the fact you said Fannie and Freddie are just fine in early 2008.. it's not about the fact you did not believe housing prices could fall nationwide; it's not about the fact you denied a recession as we were heading full bore into one; it's not about the fact your institution's regulation was a farce (yet you want more regulatory power!), it's not about the fact you promised us that you would not bailout speculators at a Jackson Hole, Wyoming speech in 2007.

It is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences of their financial decisions. - Ben Bernanke, August 2007.

It's not about having a good track record is it? It's all about your big firehose Ben -, and as long as you make all our problems go away with more paper money creation - you are Wall Street's hero. *We heart Ben*

Who's your Daddy?

In case you missed it, here is our prescient Fed Chairman babbling on about the same concerns he totally missed above. Bubble? What bubble?


Central Banker Groundhog Day

Via the New York Times, July 11, 1914 (not even a year after the birth of the Federal Reserve, which Paul Warburg himself - above - engineered with a few close friends like our buddy JP Morgan):

He told the New York Times correspondent that the new currency law had been thoroughly studied and was well understood by leaders of finance here. The bill had been followed with great interest during its various stages, he said, and it was agreed that everything depended upon the men who were to administer the law.

In the hands of inexperienced men, he added, it might lead to dangerous inflation. The men nominated for the Reserve Board were not known here except, of course, Mr. Warburg, who Mr. Untermyer said, was widely known and highly respected both here and throughout the Continent as a profound student of world finance.

The Hill, January 23, 2010:

Senate Majority Whip Dick Durbin (D-Ill.) cast his lot for Bernanke one day after Majority Leader Harry Reid (D-Nev.) said he too would vote for a second term for the Fed chairman.

“I will vote to confirm Ben Bernanke to continue to serve as Chairman of the Federal Reserve," Durbin said in a statement. "I saw Ben Bernanke under fire, facing our nation’s most serious economic crisis since the Great Depression. We need his steady hand as we build our economy and create new jobs across America."

Durbin's announcement came on a day when President Barack Obama made calls to senators to ensure that Bernanke's nomination will clear the upper chamber when it comes up for a vote.

Ever get the feeling like you've been here before?

So if Bernanke is feeling a bit anxious about his chances (as if he isn't going to get confirmed... come on, let's be real, no one's cutting off the crackpipe like that), perhaps he should channel the spirit of Paul Warburg for a little advice on how to appease the unwashed masses long enough to accomplish whatever it is he's trying to pull off.

The definition of insanity, anyone?