"The incompetence that Bernanke has displayed over the past few years makes the Cincinnati Bengals look like a model of excellence," the alwaysexcitable Michael Snyder writes at DailyMarkets.com. "Bernanke kept insisting that the housing market was stable even while it was falling apart, he had absolutely no idea the financial crisis was coming, he declared that Fannie Mae and Freddie Mac were in no danger of failing just before they failed, his policies have created asset bubble after asset bubble and the world financial system is now inherently unstable. But even with such horrific job performance, Barack Obama and leaders of both political parties continue to publicly praise Bernanke at every opportunity. What in the world is going on here?"
Snyder puts together a list of Ben's best. You've probably seen a few before, but lucky for America's enemies, Bernanke keeps talking, as he did Sunday with the appropriately credulous Scott Pelley of CBS's Sesenta Minutos.
Some choice bits:
#4 (January 10, 2008) "The Federal Reserve is not currently forecasting a recession."
#7 "The money supply is not changing in any significant way. What we're doing is lowering interest rates by buying Treasury securities."
#11 "Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling."
My favorite from the 60 Minutes sitdown wasn't a particular gotcha, but a comment that reveals how captive the Federal Reserve Bank chairman is to the meritocratic fallacy:
"This fear of inflation, I think, is way overstated. We've looked at it very, very carefully. We've analyzed it every which way."
More Fed fun: Ford Motor Company goes from hero to zero. The only one of the Big 1.9 U.S. auto makers that did not receive Treasury Department funding in the Obushma bailout turns out to have borrowed $15.9 billion from the Federal Reserve Bank, more than any other U.S. car company. From Jalopnik:
Ford spokeswoman Christin Baker said the two programs "addressed systemic failure in the credit markets, and that neither program was designed for a particular company, or even a particular industry." Ford Credit has disclosed through SEC filings and conference calls with media and investors that it was taking part in both programs.
BMW told Bloomberg that the Fed lending "supported our financial profile and offered us an additional funding source, especially at times when the money markets and capital markets did not function properly and efficiently."
According to the Fed, the commercial paper loans have been paid in full, while some $2 billion remains outstanding on loans for bond investors.
Related: Is the world's greatest central banker (it's like being the tallest munchkin at MGM) holed up in … Lebanon? At RealClearMarkets, C.J. Maloney pays a more-spirited-than-documented tribute to Bank of Lebanon chief Riad Salameh:
Dr. Salameh has been Lebanon's central bank governor since 1993, steering her through multiple foreign invasions, civil war, political assassinations, and the greatest credit bubble the world has ever seen. Unique among all central bankers, he pulled his banking system from in front of the onrushing train of the Great Moderation so it went roaring by Lebanon's banking system and broadsided America's, sitting idle, dumb, and fat on the tracks just up ahead.
With admirable foresight, Dr. Salameh paid attention to the Lebanese banks' off-balance sheet items, forbade (in 2004) sub-prime investments, and required a minimum 30% cash reserve at each institution. The result? (In Dr. Salameh's own words), "Lebanon will not feel the effects of the financial crisis, because we took the necessary measures preemptively" and as they say in Texas, it ain't braggin' if it's true.
In the time since the burst of our bubble, Lebanon's banking system has been doing super, thanks for asking! The first seven months of 2010 saw "unprecedented growth in lending activity" from a Lebanese system made up of "highly liquid deposit rich banks with low leverage".
Is Maloney full of baloney? No and yes. Salameh gets props for maintaining the local currency's dollar peg: It was 1,500-to-a-greenback when Salameh took over the central bank in 1993 (coincidentally the same year I began making occasional journeys to Lebanon), and it's 1,501.4 to the dollar now. And interest rates have dropped substantially in recent years. However, inflation (of real estate in particular) is rampant, unemployment is estimated to be well above the officially claimed (and historically very suspicious-looking) rate of 9.2 percent, and economic opportunity is limited.
I'm also not sure how seriously to take those prohibitions against leverage. In a country where two-thirds of the population is theoretically not allowed to charge or collect interest, all agreements on interest and leverage are going to be to some degree self-declared.
Lebanon's federal budget is of course a total mess—but a central banker's job is only to allow that kind of stupidity, not to execute it.
And a bonus just for staying to the end: Some interesting comments from a great Deirdre McCloskey interview at National Review. Here the Reason contributor and author of Bourgeois Dignity dismisses hairshirts like me who issue spartan condemnations of our debt-ridden culture:
Conservative romantic nonsense, similar to the cries in the 18th century that commerce would corrupt the Spartan virtues. Dr. Johnson, who was a conservative but no sort of romantic, said in 1778, "Depend upon it, sir, every state of society is as luxurious as it can be. Men always take the best they can get." And the blessed David Hume had said in 1742, "Nor is a porter less greedy of money, which he spends on bacon and brandy, than a courtier, who purchases champagne and ortolans [little songbirds rated a delicacy]. Riches are valuable at all times, and to all men." Of course.
There's a progressive version of the nonsense, the complaining about "consumerism."
A more up-to-date reply is that so long as various Oriental protectionists (in the 1970s it was the Japanese, not the Chinese) are so foolish as to send Americans TV sets and hammers and so forth in exchange for IOUs and green pieces of paper engraved with American heroes, wonderful. Would you personally turn down such a deal? If your personal checks circulated as currency, and the grocer was willing to give you tons of groceries in exchange for eventually depreciated Matt-dollars, wouldn't you go for it? I would, and drink champagne.
