Bernanke's Reappointment Anointment
For four more years, all hail the Lord of Money.
I didn't see Ben Bernanke's speech in Jackson Hole, Wyoming last Friday (August 21). I don't even know if it was televised, having weaned myself from the "off track-betting monitor" called CNBC several months ago. But I did read it in essentially real time, and I imagined the thunderous applause on all sides as he reflected on his great achievements of the prior 12 months. Little did I know that he'd already gotten the nod from President Obama, and would remain "Lord of Money" for four more years (following what will be a short and friendly "q&a" session with his buddies at the Senate, of course).
So what did "Lord Ben" tell us at Jackson Hole? For, although he was surrounded by all the other Lords and Masters who had flown in on company and Congressional jets with staffs and concierges that would make Louis XIV blush, he knew, of course, that his great words would be broadcast around the world, making the masses either fear or rejoice for what the money master decided about the past and his great vision into the future. Let's take a peek:
"History is full of examples in which policy responses have been slow and inadequate, often resulting ultimately in greater economic damage and increased fiscal costs."
Now, since history always happens only once, "greater economic damage" than what, we're only left to guess. Apparently 9.5% unemployment, 35% of stock market "wealth" evaporated in 24 months, a complete collapse of residential real estate prices (remember "the sub-prime problem is contained") and a commercial real estate implosion looming is the good outcome coming from Bernanke's magic buckets and broom. I shudder to think what may have transpired without his masterly control of the markets.
He continues, taking us down his glowing memory lane of the events and catastrophes of the previous 12 months. It seems, always, that he was on top of things. He was in control, like General Ike, beating back the enemy from both fronts; a master planner in his moment to show his great skills, to soar above the huddled masses and protect the world.
Well then, what were his highlights of the past year?
His first highlight is the collapse of Indymac. Huh? I had to go back and review this little tidbit in the year of incendiary destruction. Indymac! That was the thrift that NY Senator Chuck Schumer caused the run on! The little joke of a thrift that charged high rates to widows and orphans in the "reverse mortgage" structure to loot what might be left of their decaying estate. Hmm. Why Indymac? I pondered for a while, but couldn't come up with a reason why Bernanke decided to open with that one. Perhaps it was a nod to Schumer for the upcoming Senate hearings? Certainly a degree in politics is far more useful than one in economics for the job that Bernanke had prepared all his life for.
Then onto the big ones:
No mention of Bear Stearns to kick off the party. It would get a mention much later in the "technical" discussion about repo rates and margin calls. He starts with Lehman, a situation he knew would be trouble, but alas, his hands were tied. The Fed couldn't lend against deficient collateral. Evidently, that smidge from their otherwise completely mangled charter would have to be respected. Sadly, "the government lacked resolution authority or ability to inject capital" as well, so Lehman had to go.
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