Flashback to a day of unadulterated insanity. You can thank Obama and the Senate for the monster who still roams the Fed.
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Proving that job performance is irrelevant in Washington, Obama today reappointed Bernanke to a new 7-year term as Fed Chairman.
Can't say that this is surprising news, given the signals of late. But still it is remarkable in the context of Bernanke's massive failure as the architect of the U.S. financial collapse. On a day when most are praising the Fed chairman, we will look at his many and massive failures instead.
As you will hear in the collection of videos and stories linked below:
- B-52 failed to recognize asset bubbles of all types, and even encouraged irresponsible 2/28 mortgages and low teaser rates in 2007 at the start of the sub-prime implosion.
- Failed to shut off the free-money spigot still gushing from the Greenspan years.
- Failed to provide a framework for adequate regulatory oversight of Wall Street (yet Obama now wants to give the Fed more oversight and regulatory authority).
- Failed to control or even understand the build-up of risk within the system caused by derivatives and securitization.
- Failed to reform the inherently conflicted credit-rating structure that perpetuated the risk and securitization build-up.
- Failed to understand the nature of the crisis when it first broke in the Spring of 2007 (Bear Stearns sub-prime, hedge fund implosion). The famous meltdown clip from Cramer on Bernanke sums this failure up rather nicely.
- Failed to understand that housing prices might actually decline in value after such a dramatic rise (seriously, even my mother knew that banks providing new mortgages on massively-inflated housing was not going to turn out well)
- Failed to negotiate with AIG counterparties; instead choosing to pay all claims at 100 cents on the dollar without asking for any compensation (preferred shares) in return.
- Failed the American people with his decision to support and reward the failed banks and the bankers for their malfeasance, excessive risk-taking and criminality.
- Failed to protect taxpayer's interests in deals with AIG, JPM, and Bear Stearns, (with Maiden Lane I, II and III) and the still un-detailed asset guarantees given to Citigroup and Bank of America.
- Ultimately Benjamin Bernanke, the Chairman of the Federal Reserve failed by choosing to reward failure in others.
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Eliot Spitzer: "The Federal Reserve is a Ponzi scheme."
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"You want a triple AAA rating? Just give me some more money."
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Nassim Taleb: "Bernanke should be removed from office."
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Nassim Taleb: "My friend Roubini has a problem...he likes Bernanke too much!"
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Cramer's complete on-air meltdown on Bernanke's failure.
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Additional reading...
What An Audit Of The Fed Might Reveal About Maiden Lane I, II and III
Dean Baker: To Get A Real Systemic Risk Regulator, Fire Bernanke
Did Bernanke Save The World From Economic Ruin?
Dr. William K. Black: The Great American Bank Robbery
Nassim Taleb On Geithner, Bernanke And Generational Theft