The Fed

Dear Readers,

I am on vacation on the 27th. Sorry for the week-long dearth of postings and new articles.

Best wishes,
FakeBen

"I don't think we can prevent the kinds of waves of optimism and pessimism that pass over the market,'' Kohn said. "There will be future events. Our role as regulators is to try to make the system more resilient.''

FakeBen says: "What about the other side? Why make the system more resilient? Why not make it less vulnerable? Again, excessive credit created by artificially low interest rates caused this crisis. The answer is not to create more excessive credit and more resilience through more government guarantees and support. Does anyone at the Fed believe in free markets?"

FakeBen says: "An excellent article!"

Taken all together, the economic damage spells a very bad and long recession. How to fix it? No problem, say the actions of Mr. Bernanke's Fed. Let's print the missing money - and it doesn't matter if it causes inflation and tanks the dollar. Because that's not our job.

FakeBen says: "This MarketWatch article reveals the tremendous institutional bias at the Fed towards excessive credit growth. The problem was caused by excessive credit. The solution? More credit!"

WASHINGTON (MarketWatch) -- There is nothing fundamentally broken on Wall Street that a little regulation and incentives for participants to be slightly more honest couldn't fix, said Federal Reserve Chairman Ben Bernanke said Thursday.

"They [the Fed] need to speak frankly to the market and acknowledge how bad the problems are, acknowledge their own failures in letting this happen. There would never have been a subprime mortgage crisis if the Fed had been alert. This can't be blamed on global events. The Fed failed to confront something that was evident. This is something Alan Greenspan must answer for..."

The question isn't: Has capitalism failed? The question is: Has government failed? The question isn't: Can the government save capitalism? The question is: Can capitalism survive the government?

Read more:

April 9 (Bloomberg) -- Wall Street firms may be bundling high-yield, high-risk corporate loans into securities to use as collateral to borrow from the U.S. government, according to a report by Morgan Stanley analysts.

Securities firms can borrow against collateralized loan obligations at the Federal Reserve's Primary Dealer Credit Facility, the analysts said. The Fed set up the facility last month, its first extension of credit to non-banks since the Great Depression.

FakeBen says: "He's not addressing the fact that the Fed fostered massive debt growth relative to GDP and continues to do so. He's not addressing the fact that continuing to add to debt relative to GDP will destroy our currency."

"We now know the lessons from that," Bernanke told the World Affairs Council. "We are certainly going to make sure that the financial system remains in good functioning order."

http://news.yahoo.com/s/nm/20080410/ts_nm/usa_economy_bernanke_depressio...

April 8 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at "the very edge'' of its legal authority.

"The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices,'' Volcker said in a speech to the Economic Club of New York.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPDZWKWhz21c&refer=w...

The biggest financial crisis in a generation — a downturn that officials at the Federal Reserve acknowledged in minutes released Tuesday might be “prolonged and severe” — is turning the traditionally reserved and omniscient central bank into an institution that seems to be in the throes of family therapy...

Minutes released on Tuesday of the Fed’s March 18 policy meeting revealed strenuous disagreements among top central bankers, with 2 of the 10 officials present voting against the decision to lower interest rates by three-quarters of a point.

FakeBen says: "This crisis was caused by excessive lending. The Fed's answer: more lending. They really seem intent on causing inflation and destroying the currency."

NEW YORK (Reuters) - The Federal Reserve is looking at contingency plans for bolstering its lending power in case recent measures it has taken to unfreeze the credit markets fail, the Wall Street Journal reported on Wednesday.