FredrickBernanke's Blog

Obama Always Wins the Debates...Moving On

2008-10-16T03:39:09Z

1. Another in the series of three anti-climatic events.

2. McCain appears less inferior when seated.

3. The contest is over.

4. Is it true Obama is tilting toward appointing the CEO of JP Morgan Chase, John Dimon, as the next Secretary of the Treasury? (See Dimon's address at the Harvard Business School today.) If so, why are so many of us voting for him?

5. The time has come--maybe?--for federal economic policy to be primarily influenced by something other than the (random) daily movements of the Dow Jones Industrial Average.

6. The next Secretary of the Treasury should have no Wall Street/Banking affiliation, if such a economically-savvy human being exists.

One name jumps to mind: Princeton Professor and Chairman of its Economics Department, and current Chairman of the Federal Reserve Board, Ben Bernanke.

NO MORE WALL STREET DEAL-MAKERS--RUBIN INCLUDED--IN CHARGE.

Goldman Sachs & Morgan Stanley Re-Invent Themselves on a Quiet Sunday Night. Why?

2008-09-22T05:25:27Z

The Federal Reserve announced at 9:30 PM on Sunday--in the dead of night-- that--presto, chango--Morgan Stanley and Goldman Sachs are now officially "banks," in the traditional sense of the word.

What the hell is going on here?

Both these alleged "fierce "competitors petition the Fed for the same action at the same time, and both requests get approved, simultaneously....There's no doubt that they, Morgan and Goldman, are just ensuring that they're going to feed at the Public trough without any nasty semantic impediments getting in their way.

This action will submit Morgan and Goldman to regulation by the Federal Reserve System, which just a few days ago would have been the last thing in the world these guys would have wanted. Yet now, with a trillion dollars of public money up for grabs, both firms coincidentally (sic) reverse course and petition for added regulation. This change of status also will permit Morgan and Goldman to purchase Fed-regulated banks, something they could not do as independent investment banks.

These guys can smell a money-making loophole from light-years away, especially if it has 12 zeros after the first digit.

They're going to outsmart the government again, the people's pockets are going to be picked, Goldman and Morgan are going to feast...all while perhaps a million Average Schmoes have their homes foreclosed upon.

Only in America.

Paulson's Plan: The US Treasury as a Triliion Dollar Toxic Waste Dump

2008-09-20T00:47:50Z

In one fell swoop, after having already committed PUBLIC FUNDS equaling $600 billion to bailout PRIVATE businesses and their bondholders, King Henry (Paulson) and his Crown Prince, Fed Chairman Bernanke, have announced a new, far-reaching, allegedly systemic bailout of PRIVATE businesses with PUBLIC funds that could--and will-total the magic trillion dollar number.

The plan has several key but so far loosely defined components. The Federal Government (meaning us poor slobs) will become the final resting place for the essentially worthless securities--mostly mortgages--that the geniuses on Wall Street found themselves being strangled by. Before these securities became toxic, it would not be overstating the matter to say that their owners made 100's of billions of dollars in profits from trading and/or investing in these things over the past 5 or 6 years. There will be no attempt to re-claim those profits by the U.S. Treasury, of course. The price that will be paid for these pieces of toilet-paper has yet to be determined. Of course, if you don't own any of these bonds/securities, there's NO DIRECT BENEFIT TO YOU.

The Federal Government will also get into the business of guarantying Money Market Funds (MMF) for the first time, perhaps $100 billion worth of them. In postmodern Capitalism, MMFs became a de facto sort of bank to many: risk free places where excess cash could be parked with a minimal payment of interest. Of course, if you don't have any cash in a MMF, there's NO DIRECT BENEFIT TO YOU.

Finally, the Securities and Exchange Commission will henceforth prohibit short selling in the stock of any of the firms on a list of 799 names, including all of the powerhouse PRIVATE financial institutions out there. Unless you own some shares of one or more of those companies, there's NO DIRECT BENEFIT TO YOU.

So we see that there are DIRECT BENEFITS TO THREE CLASSES: (1) Holders of the toxic securities; (2) MMF depositors, and; (3) Holders of shares in the "special" list of 799, whom I'll call 799ers.

In other words, PUBLIC funds will DIRECTLY benefit three select and hardly underprivileged groups.

The PUBLIC, on the other hand, will benefit, we are solemnly told, INDIRECTLY.

The argument being advanced by CAPITAL, and those in its service, like now-King (and formally CEO of Goldman Sachs) Henry Paulson and Fed Boss Bernanke, is that the entire system was in jeopardy of collapsing, an event that would indeed have pernicious consequences for everyone, rich, poor and in the middle. That's the justificatory argument for these actions in a nutshell.

Is it a valid argument? The collapse of the financial system would have unimaginably malign consequences for all inhabitants of modern or near-modern societies. That proposition is beyond debate.

The three questions that are open to debate are: (1) Would the financial system have collapsed without these specific actions? (2) Will these specifics actions prevent the system's collapse? (3) Has there been adequate input into the decision-making process so as to ensure that other approaches were presented and evaluated before the Paulson Plan was adopted?

The Postmodern Great Depression, Act II

2008-09-17T21:36:14Z

Russia, two days ago, closed their stock market in the face of a two-day decline of of approximately 27%. That market has not yet re-opened for trading.

What can be expected next in the United States?

Today's trading on the New York Stock Exchange saw the Dow Jones Index lose 450 points.

Shares of the venerable and sole-surviving independent investment banks, Morgan Stanley and Goldman Sachs fell as much as 44%(!!!) and 27%, respectively. Morgan is doomed for sure, Goldman, most likely too.

As the logo's in the post below this one indicate, these two firms have plenty of company.

Does the USG dare halt trading? Do they dare call a "bank holiday," as was done during the other Great Depression in the 1930s? Will such actions only exacerbate the problems?

As of now, there have been no indication of a 1930s-style run on the banks taking place. The public, either because of ignorance or blind faith, has yet to line up at their local bank branch and demand their money. Right now, the first priority of the USG is to prevent such a scenario from developing.

One can surmise that the USG in concert with the Federal reserve System has realized that they cannot be the "lender of last resort" to EVERYONE.

The question now is: Who shall be allowed to fail and how can the consequences of these failures be mitigated, if at all?

Prediction: McCain is Forced to Publicly Apologize to Britney and Paris for His Callous Mockery of the Two

2008-08-01T02:37:35Z

During his defeat of the Clinton Machine in the primary, Barack Obama proved he could take a punch. The Britney/Paris ad doesn't even count as a solid left jab in this bout. If anything it looks like one of those wild left hooks opponents like Sonny Liston, Joe Frazier and George Foreman threw at Muhammad Ali in desperate attempts to knock the Champ out with one vicious blow. The problem was Ali merely moved his head back an inch or two, the blow missed by that much and his opponents were often left wide open to counter punches. Barack doesn't even have to move his head for this powder-puff of an attack ad. The aspect that most troubles me about the ad is the fact that McCain has shown that he is willing to drench two innocent bystanders (Britney and Paris) in his filthy political vomit. Barack's in the ring, he's fair game. The two women whom McCain essentially humiliated are not. Regardless of what one may think of the twosome, neither of whom has made any political comments that I am aware of, they are human beings, American citizens, apolitical civilians. The callous vulgarity McCain has displayed by airing this ad, the complete indifference regarding how Paris and Britney--real people!-may feel being used as exemplars of Nothingness, that disregard for these two innocent bystanders (in the political realm) exposes what McCain, his campaign organization leadership and Republicans, in general are. I loathe frivolous lawsuits, but it sure would be sweet if Brit and Paris could launch a defamation suit against the holier-than-thou McCain campaign. {Late News: It turns out both Paris' father, Rick, and her grandfather, Barron Hilton, are McCain contributors. Reports are that Barron Hilton personally has contacted the McCain campaign to express his outrage at their use and mockery of his grand-daughter in the ad. This one ain't over.]

We Have No More a Coherent Policy Regarding Afghanistan Than We Did/Do Iraq

2008-07-30T04:06:47Z

No Text Required.

Rush & Co. vs. the President-Elect

2008-07-30T03:53:37Z

A new part time job that keeps me on the road for most of the day has allowed me to listen to talk radio more than I have ever done so in the past.

Limbaugh, Hannity, Savage...they're my new over-the-road companions.

Limbaugh is certainly glib, and churlishly humorous at times. Savage dwarfs the other two in terms of education and knowledge on apolitical subjects, but is the most histrionic and crude of the threesome. Hannity is merely a bore, neither glib nor intelligent, humorless and uncreative in his monologues.

Of course, they all support McCain.

But none of them talks much about old John. Rather, 95% of their political words are focused on Barack.

They reach and reach, search and search, to find some flaw, some stutter in his speech, some miscue in an otherwise brilliant speech or interview---anything, regardless of its obvious triviality, to slam the President-Elect.

There's no need to chronicle the litany of snide remarks, half-truths and poignantly innocuous comments these guys utter.

What interests me is the fact that they literally cannot put together a coherent positive commentary on their nominee, John McCain. He remains, even in this coven of right-wing supporters, invisible, just as he is in the general media.

For the talk radio hosts, it's spring training. They are sharpening their skills in anticipation of Obama's election. They no more believe the polls showing a close race than do most of the public.

The Republicans are about to nominate The Invisible Man as their candidate, while the Dems are about to nominate Superman.

Limbaugh & Co. know that.

Obama as Univ. of Chicago Law School Lecturer

2008-07-30T02:47:36Z

Below is link to an article in today's NYTimes on the titled subject.

I found it interesting, so most of you probably won't, of course.

http://www.nytimes.com/2008/07/30/us/politics/30law.html?_r=1&partner=rssuserland&emc=rss&pagewanted=all&oref=slogin

Obama as Univ. of Chicago Law School Lecturer

2008-07-30T02:47:11Z

Below is link to an article in today's NYTimes on the titled subject.

I found it interesting, so most of you probably won't, of course.

Gore's Energy Proposal: The Apotheosis of Political Arrogance

2008-07-18T02:16:48Z

[Note: I publish this with fear and trepidation. I am not now nor have I ever been a troll or a Republican. If you look at my Blogs here at TPM you will see that. I do not use a thesaurus, so please don't condemn me for using that A-word in the title---I just thought it fit. I would write a similar post if some self-important, pompous right winger proposed a similarly expensive right wing project. Finally, I am fully aware that Bush was born with the same silver spoon as Gore.]

Albert Gore, the Nobel Prize winning climatologist---oh wait! he's got zero training in climatology.

Albert Gore, the Nobel Prize winning meteorologist---oh wait, he's got zero training in meteorology.

Albert Gore, the Nobel Prize winning astrophysicist---oh wait, he's got no training in astrophysics either.

Albert Gore, the born-with-a-silver-spoon-in-his-mouth son of a US Senator has raised the upper limits of audacity and hubris to hitherto unseen heights by calling for a mandated program that would cost the American taxpayers and private investors the tidy sum--even by today's standards--of $1.5 trillion based on a hypothesis he, Mr. Science, believes to be true: Global Warming.

The program would convert the US from a carbon-based fuel economy to a non-carbon-based one, by employing solar, windmill and other non-carbon energy technologies.

The sheer arrogance of a single individual, any individual, proposing a program, any program, that requires the commitment of $1.5 trillion is exceeded only by the financial (and scientific) ignorance that such a proposal evinces.

For instance, what if the price of a barrel of oil were to fall to $80 or $60 or $40 during the life of this program? What then?

For instance, since the prediction even of the next day's weather is such an enormous and complicated mathematical task that the National Weather Service (NWS)_ has the largest collection of Super Computers in the world, more the Pentagon, more than NASA, and the NWS still cannot guarantee with absolute certainty that tomorrow's weather will be so and so; how can a coherent persuasive argument be mustered for such an expenditure based on data whose interpretation may prove erroneous?

And finally, how can a person--Albert Gore, not Albert Einstein--possibly understand any of the physics and mathematics that underlie the prediction of weather and climate changes? I can answer that one for you: He can't. If he were shown the equations, his eyes would glaze over. Without understanding those equations, his guess on the future of climate is no better than yours or mine.

But he relies on "experts," you may say. Yes, that's true. But there is not unanimity on the part of experts, though there may or may not be a general consensus that supports Gore's position.

"A General Consensus" is insufficient grounds to suggest, let alone adopt, a project of this magnitude with taxpayer funds. If the private sector--of which Gore is a part--likes the idea, they are more than welcome to raise the funds and go for it. Otherwise, both Presidential candidates should immediately announce that they have no intention of seizing roughly 12.5% of the nation's GDP based on Senor Gore's beliefs.

The USGovt should never undertake any project of this magnitude, period!

Capitalism Gets Re-Capitalized Again, Like the 1930s

2008-07-15T00:31:39Z

It's been quite a week for Capitalism.

On Friday, federal regulators seized the assets of Indybanc, making it the second largest bank failure in American history. On Monday morning depositors were reported lining up at Indymac branches in California at 4:30 AM in an effort to get their deposits out.

The federal government insures deposits up to $100,000; beyond that, there is no formal federal insurance. There are people whose deposits at Indybanc exceed $100,000. It's too early to know what will become of their money.

On Sunday, at 6 PM, the Treasury Dept. announces a plan to "bailout" the troubled mortgage institutions, Fannie Mae and Freddie Mac. Part of the plan includes the federal government buying stock in these private companies as well as the Federal Reserve System (Fed) making loans available to them at the same rates that member banks pay for this privilege. The Treasury explained that a collapse of Fannie Mae and/or Freddie Mac would be intolerable for the world financial system.

The USGovt and the Fed have been engaged in a series of putting out brush-fires regarding the world financial system since at least March 2008, when they put together a bailout of the Wall Street investment bank Bear Stearns. That bailout set precedents, as does the current bailout of the two mortgage giants.

The precedents being set all have at there core the intervention of the federal government into sectors that had previously been considered, at least de facto, realms of the private sector.

This dynamic is reminiscent to this writer of the revamping of Capitalism that took place during the period of the Great Depression and WW II during the mid-20th Century. Only this time the folks in charge are trying to conduct a revamp/rescue in the stealth mode, careful not to say things that might worsen the situation, but also offering very little in the way of explaining what is going on and why the System has reached this stage of disrepair.

There are legitimate concerns about fueling bank-runs by uttering the wrong words; for example, Wall St. has been cautioned by the SEC to avoid rumour-mongering, whispers between traders that today could bring down a firm. But is complete silence from the president on these matters the only alternative? Up until today, it has been Treasury Secretary Paulson who has been the lone voice of the administration and certainly the Treasury Dept. sits at the nexus of the private and public financial system. But the time for the president to address this critical situation has arrived.

The heavy lifting in this current re-capitalizing of Capitalism is going to be left to the next president, probably Obama. And, ideology aside, it appears that an expansion of the role of the federal government in our Capitalistic economy is inevitable; in fact, it has already started with the actions taken thus-far by the laissez faire Bush Administration. Only they don't bother to state that fact for public consumption.

They're Still The New York Times

2008-07-13T11:05:06Z

It has nothing to do with your idol, Barack, and nobody will comment or recommend this little post, but try reading the article linked to below.

http://www.nytimes.com/2008/07/13/world/middleeast/13dissident.html?pagewanted=1&hp

"I am learning to get online myself, and I will have that down fairly soon, getting on myself."-Guess Who?

2008-07-12T22:52:12Z

Below are selected passages and quotes from an interview by Adam Nagourney and Michael Cooper with John McCain in today's New York Times.
_____________________________________________

"He [McCain] said, ruefully, that he had not mastered how to use the Internet and relied on his wife and aides like Mark Salter, a senior adviser, and Brooke Buchanan, his press secretary, to get him online to read newspapers (though he prefers reading those the old-fashioned way) and political Web sites and blogs.

“They go on for me,” he said. “I am learning to get online myself, and I will have that down fairly soon, getting on myself. I don’t expect to be a great communicator, I don’t expect to set up my own blog, but I am becoming computer literate to the point where I can get the information that I need.”

"Asked which blogs he read, he said: “Brooke and Mark show me Drudge, obviously. Everybody watches, for better or for worse, Drudge. Sometimes I look at Politico. Sometimes RealPolitics.”

“I don’t e-mail, I’ve never felt the particular need to e-mail,” Mr. McCain said.

_______________________________________________

Where does one start when commenting on this?

Can one be a functional Senator without knowing how "to get online?"

Would one think that someone desiring, for many years, to be elected President of the US might have heard of the Internet and been curious enough to perhaps check it out once or twice during the past two decades?

Aren't fighter pilots kind of by nature "technical guys?" Don't they have to be ultra-comfortable with technology and the human interface therewith to fly those super-tech machines?

And, once logged on, why does he need others to "show" him Drudge & Co.?

How many other members of Congress don't know how to log onto the Internet; how many don't use e-mail?

What the hell is going on here!?!

Something Important, For a Change

2008-07-12T03:33:44Z

[I am going to be vilified for posting this on TPM, Maybe Banned!] Man for man, position for position, the San Diego Chargers have had the best team in the NFL for at least two years...with one glaring exception: The Quarterback.

Now that it appears Brett Favre may un-retire and become essentially a free agent, the Chargers have their chance to win the Super Bowl.

Barring injury, and based on his fabulous play last season, Favre may have a couple of very productive seasons still in him. The Charger offensive line can virtually put him in a vault as far as pass protection is concerned. And having LT and his powerhouse lead-blocker, O'Neal, means no opponent can ignore the run and merely chase Brett around the backfield at will.

How much will it cost the team? That's not my concern. This city already went through a deal where the TAXPAYERS!!! bought any unsold tickets for billionaire Spanos that the team could not sell.

Spanos can buy a Super Bowl or two. The current QB is a gamer, buit short on skill.

San Diego Charger fans speak up.

Phil Graham Follows Wesley Clark and Jesse Jackson Into Political Oblivion

2008-07-11T03:21:54Z

Another example of a surrogate uttering impolitic remarks.

Clark's remarks were at least true, but nonetheless were suicidal.

Jesse Jackson's remark oozed jealousy and hypocricy, coming from a purported religious figure.

Graham's remarks were untrue, arrogant to the extreme, contemptuous of the vast majority of the voting public, ignorant in the extreme regarding the state of the economy, and politically suicidal.

O's best surrogate: Joe Biden (altho I am not sure Joe's accepted that role quite yet.)

McCain's best surrogate: To be determined.

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