Federal Reserve

Bernanke: Bankruptcy OK If You're Regular Rich, But Not If You're, Like, Super-Duper Rich

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You say Ben Bernanke is unfeeling? Just look at the man!

Federal Reserve Bank Chairman Ben Bernanke spoke to the Economic Club of NY this morning. In the speech and the followup questions, Bernanke staked more of his credibility on the green shoots recovery that is rocking the USA; offered some fun unemployment breakdowns; and reiterated the call for a resolution authority over large institutions—not limited to financial institutions—that will ensure taxpayers, rather than willing signatories of money-losing business deals, suffer private sector losses.

I watched a live feed which doesn't seem to have been archived yet, so it's worth noting that in their public statements both Bernanke (the most courageous American since Audie Murphy) and Treasury Secretary Tim Geithner project an air of haggard, panic-plagued exhaustion that contrasts with the guarded optimism of their words. Today's performance was no different. Some highlights:

Recover, dammit, recover:

My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely…

I expect moderate economic growth to continue next year. Final demand shows signs of strengthening, supported by the broad improvement in financial conditions. Additionally, the beneficial influence of the inventory cycle on production should continue for somewhat longer. Housing faces important problems, including continuing high foreclosure rates, but residential investment should become a small positive for growth next year rather than a significant drag, as has been the case for the past several years. Prospects for nonresidential construction are poor, however, given weak fundamentals and tight financing conditions.

When will somebody think of the adult males?

The best we can say about the labor market right now is that it is getting worse more slowly….

Different groups of workers have been affected differently. For example, the unemployment rate for men between the ages of 25 and 54 has risen from less than 4 percent in late 2007 to 10.3 percent in October–nearly double the rise in unemployment among adult women. This discrepancy likely reflects the high concentration of job losses in manufacturing, construction, and financial services, industries in which men make up the majority of workers. From the perspective of America's economic future, the effect of the recession on young workers is particularly worrisome: The unemployment rate among people between the ages of 16 and 24 has risen to 19 percent–and among African American youths, it is now about 30 percent.

Jobless recovery:

Productivity is defined as output per hour of work. Thus, essentially by definition, a jobless recovery–in which output is growing but hours of work are not–must be a period of productivity growth. In the jobless recoveries that followed the 1990-91 and 2001 recessions, productivity growth was quite strong. It may seem paradoxical that productivity growth–which in the longer term is the most important source of increases in real wages and living standards–can have adverse consequences for employment in the short term. But, when the demand for goods and services is growing slowly, that may be the case.

Bank lending and Cavanaugh's Parable of the Leaking Corpse:

I have discussed two of the principal factors that may constrain the pace of the recovery, namely, restrictive bank lending and the weak job market. Banks' reluctance to lend will limit the ability of some businesses to expand and hire. I expect this situation to normalize gradually, as improving economic conditions strengthen bank balance sheets and reduce uncertainty; the fallout for banks from commercial real estate could slow that progress, however. Jobs are likely to remain scarce for some time, keeping households cautious about spending.

TBTF:

We need to make sure that too big to fail is a relic of the past, that we don't do that anymore. To do that we need Better regulations, we need to strengthen institutions, we need to make sure all systemically significant firms are strong… Top of the priority list: An alternative to bankruptcy or bailout. Another way to dispose of firms, so that in the future a failing firm will be allowed to fail.

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  1. WTF is he talking about? If the firm doesn’t go bankrupt and isn’t bailed out what the hell happens to it? Failing means you fail as in are not there anymore and your stuff gets sold off to whoever wants it. If that doesn’t happen, you haven’t failed.

    1. Not only that, but the line got a round of applause. (Although the applause may just have been the signal that the audience wanted to get to lunch.)

      1. If I’m reading Miss Manners correctly, applause is the polite way of saying “Shut the hell up” to a speaker.

        1. Perhaps he would be wise to keep it shut:

          3Q GDP growth may have been just 2.8 percent, not 3.5 percent, says JPMorgan

      2. We need to make sure that too big to fail is a relic of the past, that we don’t do that anymore. To do that we need Better regulations, we need to strengthen institutions, we need to make sure all systemically significant firms are strong…

        No, they just heard the words “too big to fail” blah blah blah “relic of the past” blah blah blah…

        However, I read the whole quote. You know, all of it. Too big to fail is a relic of the past, so we need to continue to bail out and prop up anything too big to fail.

        Oh, he said strengthen systemically significant firms. Any retard with a third grade education knows that means bail them out.

  2. Different groups of workers have been effected differently.

    Right: some groups have been saved; others, created.

    And they’ve been affected differently, too.

    1. “Effected” was my error, not Chopper Ben’s.

      1. Are there less jobs or fewer jobs, Tim?

        1. There is a smaller number of more jobs.

  3. Shut the fuck up, Ben Bernanke.

  4. An alternative to bankruptcy or bailout. Another way to dispose of firms, so that in the future a failing firm will be allowed to fail.

    I got a great idea. Quit trying to prop up the profit margins over at G-S and, what’s the phrase? Oh, yeah, allow failing firms to fail. You know how much new regulation and government intervention is necessary for that, Ben? None, nada, zip, zilch, zero. We’ve got a perfectly functional bankruptcy code, despite your odd dislike of it. So, how about you STFU and allow somebody to fail?

    1. If he allows the wrong corporations to fail this will mean that in the future after he leaves the FED he will no longer be invited to be on the right boards of directors, nor paid to give the speeches to the right people, nor write the big advance books nor given chairs at the right universities, nor consultant on the best government committees

    2. Exactly. I’m trying to remember what’s wrong with bankruptcy… is it the stigma? Do we just need to euphemize it?

  5. Meanwhile, General Motors, despite having repudiated vast amounts of debt, is still losing money.

    But they are going to take some government money out of one pocket and put it into another pocket; then they’ll take it out of that pocket, and use it to pay back the government loan to the first pocket. And then, the back pocket (GMAC) will ask the government if they can use it for a while.

    ????

    PROFIT!!!

    1. It repudiated lots of debt but not the right debt. It is kind of hard to make a profit when you have union contracts that cost about $1,500 per car more than your competitors and you have the govenrment telling you that you have to compete in the low margin small car business even though you only make enough money to support the union contracts making bigger, higer margin vehicles.

      Between the Unions and the environmentalists’ religious commitment to CAFE standards, the govenrment ensured that GM would never make a profit.

      1. They just need to follow the NY Times lead…

  6. Even richer that the NY Times?

    “The New York Times News Service will lay off at least 25 editorial employees next year and will move the editing of the service to a Florida newspaper owned by The New York Times Company. . . . The plan for the news service calls for The Gainesville Sun, whose newsroom is not unionized and has lower salaries, to take over editing and page design.”–news story, New York Times, Nov. 13, 2009

    1. whose newsroom is not unionized and has lower salaries

      That is a fucking rich and sugary river of tears to lap from their cheeks.

      1. Now that is some full-bodied, rich irony. You need a spoon to eat that.

    2. Why does it take 25 employees to take care of the editorial page which I would think is mostly written by the editors and the guest editorialists? Or are these editorials so badly written in the first place that it takes 25 people to fix them?

      1. Why does it take 25 UNION employees to take care of the editorial page?

        I belive that answers your question.

        But the real question is: Why does the NY Times hate unions?

    3. I take it their position on card check has changed somewhat…

  7. If the firm doesn’t go bankrupt and isn’t bailed out what the hell happens to it?

    Hint:

    “Braaaaaaaains, mnomnomnom!”

  8. Bernanke stole one of my ties! Actually, I think everyone has a tie like that.

  9. I repudiate that tie.

    1. Not in my closet.

  10. Lobster Girl wants to be lashed to the bed with that tie.

    1. Really, I heard that she likes to have the tie knotted several times, slowly inserted into her anus and then, well, you know the rest.

      1. Reminds me of a scene from River of Gods…

  11. An alternative to bankruptcy or bailout. Another way to dispose of firms, so that in the future a failing firm will be allowed to fail.

    This is too easy. The alternative? Government takeover.

  12. “An alternative to bankruptcy or bailout”

    This means the administration will flip through its buzzword thesaurus and find a term that’s not tainted like “bailout” is.

    Then, they will take your tax dollars and move it around (launder it) so they can claim it’s not coming directly out of your pocket.

    Of course, this is necessary for a safe, secure, and risk free economy. Good thing the government is around to protect me from enemies foreign and domestic. Wouldn’t want to fall and scrape my knee…

  13. I have an alternative: Pure, cleansing fire.

  14. Pure, cleansing fire.

    I’ll get you, Matthias!

    1. Nice. I finally read I Am Legend, incidentally, though my only movie exposure to the work–sort of–was The Omega Man.

      1. The Last Man On Earth is a good movie adaptation of IAL.I recommend the not-public domain transfer.

        1. I wasn’t aware of that one. With Vincent Price, too. I always liked him.

      2. The movie I Am Legend was excellent and disappointingly underrated. Also some of Will Smith’s finest acting work.

        1. It was awesome when he told that one vampire, “Yo, homes, smell ya later!”

  15. We are sOOOOo doomed. DOOOOMED I telz ya.

  16. Um, isn’t that what bankrupcy is supposed to be? a way to fail safely?

  17. “Top of the priority list: An alternative to bankruptcy or bailout. Another way to dispose of firms, so that in the future a failing firm will be allowed to fail.”

    God, how do these people live with themselves? I would become a puddle of shame behind the podium were I expected to get up and utter such nonsense.

  18. Anyone experience anything about the easy google profit kit? I discovered a lot of advertisements around it. I also found a site that is supposedly a review of the program, but the whole thing seems kind of sketchy to me. However, the cost is low so I’m going to go ahead and try it out, unless any of you have experience with this system first hand

    http://www.onlineuniversalwork.com

  19. 4. There is no doubt in my mind what so ever that Profit lance will show you how to make money online, but there are many obstacles your going to face in order to do it or to get to where I am at. What I mean is, there’s allot of information, tools and resources in this course that your going to have to get familiarized with before you can become successful. Yes you will earn money but to make a living out of it your going to really need to understand how everything works.
    http://www.onlineuniversalwork.com

  20. 4. There is no doubt in my mind what so ever that Profit lance will show you how to make money online, but there are many obstacles your going to face in order to do it or to get to where I am at. What I mean is, there’s allot of information, tools and resources in this course that your going to have to get familiarized with before you can become successful. Yes you will earn money but to make a living out of it your going to really need to understand how everything works.
    http://www.onlineuniversalwork.com

  21. I know this probably isn’t the right place to show support for Mr. Bernanke, but I’ll have a go at it anyway.
    I think what he’s trying to say is that we need a third way to get out of a “too big too fail” situation that isn’t bankruptcy (which causes a meltdown) or bailout (which cause debt, and backlash, etc, etc…)
    A third way could be similar to what the FDIC does when it “winds down” failed banks. The government doesn’t lose money on it and it doesn’t create financial panic around the country.
    Like I said, maybe many of you don’t want to hear this right now since we’re all out of a job, but I still think Ben Bernanke has bee doing a great job to help rather than hurt us.

    Ilia

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