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Post by unlawflcombatnt on Aug 18, 2007 15:44:34 GMT -6
from Beat the PressBernanke Bails Out the Banks: Where's the Ridicule?by Dean Baker8/17/07 " Remember all those assurances from Ben Bernanke and his predecessor Alan Greenspan that, first there was no housing bubble, and then more recently that the problems were restricted to the subprime market and posed no larger threat to the financial system?
Bernanke’s actions...indicated that he apparently had not known what he was talking about earlier. He abruptly decided to lower the discount rate on the money that the Fed lends to member banks. This sort of rate cut, between meetings of the Fed’s open market committee, is truly extraordinary. The Fed would not make such a move if Bernanke had been right and the problems in the housing market were relatively small and restricted to the subprime mortgage market. The Fed takes a step like this when its chair is panicking.
The media should be holding Bernanke accountable. The current financial meltdown facing the country would have been far less serious if Bernanke and Alan Greenspan had taken steps earlier to stem the growth of the housing bubble and head off the worst excesses in the mortgage market. Custodians and dishwashers get fired when the toilet is dirty or the dishes are broken. Why is the standard of accountability for the Fed chair so much lower?" Not only should the media hold Bernanke accountable, the media itself should be held accountable for widely disseminating false and illogical assessments of the economy, and for allowing government officials to make such assessments without challenge.
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Post by Grapple on Aug 19, 2007 7:52:42 GMT -6
When people were taking out loans they had little chance of paying back and then had their homes repossessed, the FED did not care
When builders were in a building frenzy throwing up RE that most could not afford and then got stuck with large inventory so they fired workers and shut down the FED did not care
When mortgage companies were rubber stamping loans to anyone who could fog a mirror so they could collect the fees and pass on the toxic paper to whoever would buy it found that no one would buy it anymore so they shut down, fired their workers, filled for bankruptcy, the FED did not care
When the whole bank/bond/derivative/hedge fund system was buying up toxic loans and repackaging it as AAA bonds and then leveraging the whole thing to maximize profits the Fed did not care. However now that they have run into trouble because they were so leveraged that even a modest drop in RE prices is driving them into insolvency then the FED cares.
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Post by jeffolie on Aug 19, 2007 10:06:43 GMT -6
You have not been paying attention to what the Fed has been saying. The Fed does not prevent asset bubbles. The Fed only claims to come to the rescue of the general economy after the shit hits the fan. Ben stated that the Fed can prevent Depressions if it comes fast and hard when a collapse happens.
Another aspect to the Fed is that it dances with the guy that took it to the dance. The Fed is owned by the major banks with the blessing of the government. The Fed steps in to calm the banking waters after the storm creates waves in the banking system.
The Fed looks to correct the bad practices of the banking industry after the practices have done damage. In fact the Fed came out with 'guidance' proposals in the summer of 2005 and enacted them in 2006.
In summary to my rant, obviously the Fed policy is to act after the storm rages and not before.
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