Understatement of the day
“One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be,” the Fed chairman said today in a speech at the central bank’s community affairs conference in Washington. “The damage from this turn in the credit cycle -- in terms of lost wealth, lost homes, and blemished credit histories -- is likely to be long-lasting.”
(HT: Mark Thoma). Obvious perhaps, yet noteworthy nonetheless because it comes directly from Ben Bernanke himself.
Well, let's not put down all financial innovation. We can all agree this one was pretty useful and made all our lives easier.
Read more at Dani Rodrik's Weblog
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Credit Default Swaps, a genuinely American institution. Let's expect to be paid if they fail. Given the fact that failure is the predictable outcome of the majority of business enterprises, who were the actuaries that decided what was a reasonable fee to underwrite this insurance?
April 17, 2009 7:25 PM | Reply | Permalink
More on credit default swaps ---
It turns out they encourage bankruptcy.
Not good.
April 18, 2009 6:09 PM | Reply | Permalink
Financial innovation as in fraud, graft, swindle, greed, scam, con job, hoax, deception, ponzi scheme ......
C
April 17, 2009 7:37 PM | Reply | Permalink
As an intentionally purposeful understatement, Bernanke's comment is -- in a Bob Newhart sort of way -- amusing.*
As analysis, it is -- Bernanke having virtually no experience of structured finance or with structured products trading -- less than deep.
* Litotes is frequently the last refuge of a critic who hasn't the courage of his convictions.
April 17, 2009 9:26 PM | Reply | Permalink
What if? It was the plan all along to destroy the homeowners?
Having eliminated an alternative financial instrument for middle class Americans. Equity in homes.
Now Americans can be a part of buying US treasuries, bonds.
Stockholders can now be victims of excessive CEO Compensation.
But wait, The Fed and treasury are not done yet.
Maybe the only financial instrument left will be bank CD'S or US Bonds. With so much demand for these products who'll benefit?
How convenient is that for those selling those products.
What Bernanke should have said was "Sorry for your loss sucker homeowner, but me and my friends are going to be just fine."
Bernanke, Paulson, Giethner, Liddy, AIG, and Goldman (Sacks) They're going to be just fine, Thank you"
April 17, 2009 9:50 PM | Reply | Permalink
I find a comparison to what Franklin and our forefathers had suffered and why they rebelled
The Federal Reserve has become the enemy of the people. Our Government and the International bankers. BANKERS, don’t want alternative financial products such as Home equity. They want to control.
http://en.wikiquote.org/wiki/Benjamin_Franklin
The colonies would gladly have borne the little tax on tea and other matters had it not been that
England took away from the colonies their money, which
created unemployment and dissatisfaction.
The inability of colonists to get power to issue their own money permanently out of the hands of George the III and the international bankers was the PRIME reason for the Revolutionary War.
"The Examination of Benjamin Franklin" in The Parliamentary History of England from the Earliest Period to the Year 1803 (1813); when questioned why Parliament had lost respect among the people of the Colonies, he answered: "To a concurrence of causes: the restraints lately laid on their trade, by which the bringing of foreign gold and silver into the Colonies was prevented; the prohibition of making paper money among themselves, and then demanding a new and heavy tax by stamps;"
$$$$$$$$$$$$
The Replacement to the British Government Finance ministers speaketh in his heart:
The Federal Reserve and his co-conspirator the Treasury.
“How dare the Middle class find alternative financial instruments? We shall destroy their paper. There equity gains will be wiped out, their deeds of trust will have no worth. We shall devalue their alternative and replace them with our proscribed 'Currency. And then we shall compel them to pay a new and heavy tax.”
Wake up America, we’ve seen this before.
April 17, 2009 10:35 PM | Reply | Permalink
http://www.youtube.com/watch?v=lRjItDLnAwc
April 18, 2009 12:28 AM | Reply | Permalink
I'm so thankful for all the innovations we have.
Iraq, Katrina, torture, dreaming of retirement to name but a few. Bless our government for giving us these wondrous things.
April 18, 2009 3:33 AM | Reply | Permalink
We can all agree this one [ATM card] was pretty useful and made all our lives easier.
Except for unemployed bank tellers.:)
I am ready for the next iteration of ATM cards. I want one that does not identify me to marketers or identity thieves. One on which I can store a limited amount of cash that is not restricted to purchases from particular places and/or subject to dwindling over time from fees. One that I can easily refill at an ATM machine. In other words, a substitute for currency.
April 18, 2009 10:23 AM | Reply | Permalink
Not a bad idea. Your comment relates to a whole area of cryptographic application research, which tries to answer the question "How might we implement a secure system that allows anonymous storage and transfer of virtual currency?" My favorite writer on such subjects is Bruce Schneier who is a well-known researcher and writer about computer security and application of crypto techniques in society.
European Smart Card technology was developed originally to enable people and businesses to transfer virtual currency without being connected in real time to the banks. This was necessary because it was difficult and expensive to establish phone lines due to the unresponsive nature of national postal and telegraph providers back then. The technology did not become popular in the U.S. because the U.S. already had sufficient phone infrastructure to enable real time connectivity with the banks.
April 18, 2009 11:28 AM | Reply | Permalink