Ben Bernanke Looks In Mirror, Sees Barney Frank

[Crewleader]

Monday, January 04, 2010

Mike Shedlock

Ben Bernanke Looks In Mirror, Sees Barney Frank

Fed chairman Ben Bernanke is back at it again, pointing the crisis finger at everyone but himself. To be sure there are plenty of congressional clowns deserving of a Babe Ruth style "big point", but the biggest point belongs straight at himself.

Please consider Bernanke Blames Weak Regulation for Financial Crisis.

Regulatory failure, not lax monetary policy, was responsible for the housing bubble and subsequent financial crisis of the last decade, Ben S. Bernanke, the Federal Reserve chairman, said in a speech on Sunday.

“Stronger regulation and supervision aimed at problems with underwriting practices and lenders’ risk management would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates,” Mr. Bernanke, whose nomination for a second term awaits Senate confirmation, said in remarks to the American Economic Association.

Technical models based on historical trends in United States housing prices and monetary policy show that home prices rose much faster than interest rates alone would have predicted, Mr. Bernanke said.

He also argued that trends in other countries demonstrated a “quite weak” connection between housing price appreciation and monetary policy.

http://globaleconomicanalysis.blogspot.com/2010/01/ben-bernanke-looks-in-mirror-sees.html?source=patrick.net

[Crewleader]

1. Fannie and Freddie

Monday, January 4, 2010

TUCKED AWAY in the year-end news was the revelation that regulators have approved pay packages of up to $6 million each for the chief executives of Fannie Mae and Freddie Mac. The companies are undoubtedly important: They back $5.4 trillion in home mortgages and account for nine-tenths of new home loan originations. But they are essentially bankrupt and depend on tens of billions of dollars from the Treasury. Indeed, their losses since falling into government conservatorship last year have been so large -- the Treasury has pumped in a combined $112 billion so far -- that the Obama administration expanded their $400 billion lifeline before its authority to do so expired Dec. 31.

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/03/AR2010010301746.html?source=patrick.net

[pa28]

2. Ironic footnote to this.

From Bloomberg: Taylor Disputes Bernanke on Bubble, Blaming Low Rates

“The evidence is overwhelming that those low interest rates were not only unusually low but they logically were a factor in the housing boom and therefore ultimately the bust,”

Bernanke, of course, spent most of the speech in a seminar style smashup of the Taylor rule as his primary evidence the Fed acted correctly during the bubble, playing no part in it's formation. Looks like Taylor himself was sitting in the audience basically wondering what Bernanke was smoking.