Robert Higgs on the Federal Reserve's "Zombification of High Finance"
Economist Robert Higgs was not impressed by Federal Reserve Chairman Ben Bernanke's recent Washington Post editorial defending the Fed's recent actions:
Bernanke describes the Fed's frantic, flailing, near-panicked actions, especially from September 2008 through the early months of 2009, in calm, measured terms, as "strong and creative measures to help stabilize the financial system and the economy." This begs the question of whether the Fed's actions actually did "stabilize the financial system and the economy."
A strong argument can be made that, instead, the Fed's actions created immense uncertainty and confusion about which commercial banks, investment banks, and other big firms would be bailed out and, if they were to be bailed out, how they would be bailed out. This uncertainty deterred private parties from undertaking the necessary revaluation of assets and from devising new arrangements, including reorganized post-bankruptcy firms, that would be able proceed on a sounder basis, as a rule under new, more prudent managements. In short, many mortally wounded firms were kept on life support by the Fed, and others clung to the hope that with some creative accounting to carry them for a while, they might ultimately secure a bailout. Think of it as the zombification of High Finance.
Read the whole thing here.