Bernanke Admits Fed Is Clueless and Banks are Zombified

[girl gone mad]

Bernanke Admits Fed Is Clueless and Banks are Zombified
http://globaleconomicanalysis.blogspot.com/2009/02/bernanke-admits-fed-is-clueless-and.html">MISH'S Global Economic Trend Analysis


Inquiring minds are asking "To what extent is the Fed is in the dark?"

Amazingly Bernanke answered that question today in Congress with complete candor. All you need to know is how to translate his statements. Please consider Bernanke tells Congress Fed knows what it is doing.

Federal Reserve Board chairman Ben Bernanke tried to assure Congress and investors that federal regulators are not grasping at straws in the response to the financial crisis.

"We're not making it up," Bernanke told the House Financial Services panel.
"We're working along a program that has been applied in various contexts."
"We're not completely in the dark."

My Translation:

"We're making it up as we go along"
"We have no idea what we are doing so the program changes every day"
"We are completely in the dark"

Bernanke is trying to reinforce his message to Congress that the Fed and the Obama administration now have at least the outlines of a bank rescue plan in place that will show results over time and that banks are not on an out-of-control course to nationalization.

My Comment: The only reason banks are not on an "out-of-control course to nationalization" is Bernanke is on an "out-of-control" mission to rescue banks regardless of what it costs taxpayers.

http://globaleconomicanalysis.blogspot.com/2009/02/bernanke-admits-fed-is-clueless-and.html">More...

[wuvuj]

1. My interpretation?

They state the intention of saving the banks with help from private funding (or investors)...so to avoid panicking them...they need to be a bit fuzzy on the details...at least until they've done the stress testing.

Nationalization means the stock owners lose it all....of course at this point they don't have that much more to lose.

If a few banks can't make the grade...then private capital moves in to buy up the good parts? What happens to the toxic stuff...I don't wanna know...taxpayers can use it to paper their walls?

I think it's a matter of keeping them glued together until things pick up (housing and economy)...then the derivatives...etc....can be safely valued...because there is a bottom. Bridge over troubled waters?

* I'm not a registered adviser...but my car is registered if that's any help....

[pissedoffhippie]

2. nationalizing the Fed is really the way to go

Forget about nationalizing the banks. This is only going to force the government to go deeper into debt. Nationalize the Federal Reserve Bank!

From what I have read on http://monetary.org/ currently, the government funds it projects by borrowing money from the Fed. This involves issuing bonds to banks who are members of the Fed, the banks then taking those bonds in exchange for cash. Interestingly, with the TARP money, this cash is then "lent" back to the banks. Meanwhile, the government is paying interest on the bonds, and the national debt is mounting.

The proposal to nationalize the Fed means the Fed would become part of the Department of the Treasury, and if the government needs money, it simply prints it, thereby controlling all currency as it should without the banks involvement. This theoretically would save trillions of dollars a year.
http://www.monetary.org/ need_for_monetary_reform.html

Today, 60% of IRS taxes pay interest on the national debt much of which is paid to the FED banking system. By abolishing the FED we can cut personal income tax by 75% and balance the budget with no spending cuts if we keep business taxes the same. If not, within four years, IRS taxes will only pay the interest on the national debt.

The U.S. Government can buy back the FED at any time for $450 million (per Congressional Record). If we bought it, we would pocket over $450 million dollars in bonds the FED and the government own. So the real cost is nothing!

Generally speaking, when the Government runs a deficit of $400 billion the bank tells the U.S. Treasury to print $400 billion of Federal Reserve Notes (cash). The bank pays for printing (3 for $100 bill). The bank uses these $100 bills to buy $400 billion in newly issued Government bonds paying the bank 8-12% interest. The bank receives cash interest free and exchanges the cash for interest bearing bonds. Sixty percent of all taxes goes to pay this interest and the bank pays no income tax.