Big Ben

If you’re a careful reader you know that I don’t exactly worship at the altar of Krugthulu.  He has good ideas about economic stimulus but willfully misses the point of Modern Monetary Theory, until you can demonstrate inflation the amount of fiat currency you circulate is meaningless, even though his research and analysis point to exactly that conclusion.

Still it’s useful and handy in some cases to appeal to the authority of his Nobel Prize.  Yes it’s a fallacy but arguments are won by rhetoric, not logic.  I quote him when I agree and mostly ignore him when I don’t.

One thing I’ve never gotten is his infatuation with Benjamin Bernanke (or for that matter Larry Summers).  They all went to the same schools and graduate seminars and had the same teachers so there is familiarity and a collegial aspect I suppose counts for a lot in the halls of Academe and, to be fair, much of what they are saying now that they’re out of the Beltway Bubble of Madness is perfectly sound Samuelson Economics (not that he was particularly Keynesian mind you, just that he had the intellectual integrity not to argue with the proven results of fiscal stimulus).

But I can’t help but remember that when these two cowards (Bernanke and Summers) had a chance in power to put into action the policies that they now say they favored all along they cravenly failed to do so.

Thanks for nothing assholes.

Ben has a new volume of preening mental masturbation out that prompted this assessment from Yves Smith (who is likewise wrong on some things, I only quote her when she’s right, meaning of course that she agrees with me).

Bernanke’s Cockroaches

by Yves Smith, Naked Capitalism

Posted on October 6, 2015

The idea that Bernanke did a praiseworthy job has been widely debunked. Bernanke continued the “Greenspan put” that stoked speculation all across the credit markets, to the point that anyone who was paying attention had heard of the “wall of liquidity” and massively compressed credit spreads by mid 2006. The Fed did even less to enforce the Home Ownership and Equity Protection Act meant to curb subprime lending than the bank-cronyistic OCC did.

As the crisis unfolded, the Fed failed to take the risk posed by the credit default swaps market seriously, even though CDS contagion risk was the most important reason for bailing out Bear Stearns, otherwise too small to be deemed worthy of a rescue. Instead, the Fed went into “mission accomplished” mode after Bear’s bailout.

Worse, after the crisis, the Fed consistently pursued policies to save banks, in particular the bank executive incumbents, and let the cost of the crisis fall on Main Street, particularly workers and homeowners in the bottom 90%. Did Bernanke say a peep when the big financial firms that had just been saved from certain death went to pay their executives and staffs record bonuses in 2009 and 2010 rather than rebuild their equity bases? The Fed was so deeply complicit that it didn’t even attempt a private scolding.

And the central bank was fully on board with the Treasury’s treatment of the mortgage-backed securities market as too big to fail, which amounted to a second, stealth bailout. The refusal to pressure banks to do principal modifications resulted in unnecessary foreclosures, and a massive loss of wealth, not just to homeowners but also to investors in mortgage backed securities. The Fed joined the Treasury and OCC in all of the various bank “get out of liability for almost free” mortgage and servicer settlements. It was thus a full, albeit quiet, partner with the Geithner “foam the runway” program of wrecking borrowers’ lives for the dubious purpose of preserving bank profits.

Bernanke apparently feels compelled to up his game in self-hagiography a bit, since at least some of the public recognizes that he’s an arsonist trying to take credit for putting out a fire, except the fire-fighting wasn’t all that well done, since the rubble is still smoldering years later.

Bernanke conveniently conflates bailing out institutions (which was necessary) with the issue of responsibility, as in holding individuals accountable. The refusal to replace boards and top executives, particularly at institutions with obviously weak leadership (Citigroup and Bank of America were top of the list) was indefensible. Even if there was not enough readily locatable recently retired bank executives to fill the ranks of all the wobbly banks, forcing changes upon Citi and Bank of America would have sent a very powerful message to the rest. And we’ve argued at length, for years, that there was no dearth of legal theories that were simply not even attempted as far as prosecuting bank executives was concerned, starting with the one designed for the task, Sarbanes Oxley.

But what pathetic new line do we get from Bernanke? His feelers were hurt when he read a bumper sticker? People lost their businesses, their jobs, their homes as a result of the crisis, and we are supposed to feel sorry for his wounded feelings when he is called out in the tamest terms possible?

This illustrates how insulated and preening our ruling classes have become, that they are unable even to take mild criticism, let alone a remotely accurate assessment of the job they’ve done. By contrast, as Jim Collins found in his book on true top performers, Good to Great, the heads of those companies did the opposite of the diseased norms exhibited by Bernanke: they gave credit for success to their teams, and took full blame for failure.

The time is past to deal with these intellignce-insulting efforts at revisionist history. When I read a new, improved set of excuses from people like Bernanke, I feel like I’ve walked into my kitchen and turned on the lights after the exterminator paid a visit, only to find cockroaches scuttling all over my counter yet again.


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