Alan Blinder on Ben Bernanke – Phooey!

Bruce Krasting's picture
I understand that it’s a bit of a stretch for a low rent guy like me to
take on a former Fed Governor and world class academic. But I’m going
to try. Mr. Blinder wrote an Op-Ed in the Times today in support of his
“friend and colleague” Ben B.

In a weak attempt at creating balance to his praise of the ‘man of the
year' AB points to a few areas in the past where a mistake or two had
been made. Possibly. He dismisses even those with a suggestion that it
was Greenspan’s fault. On the failure of Bernanke to see the wave of
problems before it was too late AB brushes it off with the excuse, “Who did?”
Well Mr. Blinder, I did. I have been writing and talking about this for
years. I saw Sub-Prime and 100% LTV ‘enhanced’ loans for what they
were. Junk. I make investments and read prospectuses. I saw the crap
that was being sold. I’m no oracle. There were thousands of us shouting
into the wind when this was happening. I guess you did not hear us,
being so isolated down in Princeton.

I loved this line:

His job performance since October 2008 has been superlative.

AB, I know you are ‘good buds’ with this guy, but really, “superlative”?
What does that word mean in this context? Is that like a 10+? Why did
you feel it necessary to write this Op-Ed? The answer is because your
boy has not done a superlative job at all. There are Senators and
Congressmen all over Washington that think he has not been superlative.
There is a good many that have the academic status as you that think he
has done a rather poor job. If this were put to a vote of the people
your guy is finished. You think he is the guy that saved us. What you
are missing is that more than half the population thinks he is the
Prince of Darkness

AB: “He led the Fed to lower interest rates to virtually zero, and to hold them there.”

Please. What is hard about that? You make an announcement that says,
“As of tomorrow we are lending at a ¼%”, and then you call the NY Fed
desk to change the O.N. rate. Doing it is easy. Managing the
consequences is a whole other matter. AB gives credit where none is
due. I wonder if AB considered the consequences to people who are
trying to save a few dollars? Unless you gamble in the stock market
those savings have a negative future value because of the “0” stuff AB
and BB are so fond of. Lousy incentive you are creating for a nation
that needs savers.

AB: “(the Fed) breathed some life into the moribund MBS market”.

I’m sorry, what are you talking about? “Breathed some life?”
The Fed has purchased $1.1 TRILLION of MBS. That is not a breath of
life. That is a step that has no precedent in modern history. Your
‘best bud’ has just monetized $2 T bucks. Of course that is going to
work. For a while. You throw gas on a fire, it burns. No trick to that.

AB: “The plain truth is that, as bad as the recession was it
turned out less horrific than expected, and Ben Bernanke is one of the
reasons”

Mr. Blinder is far too good a historian to make that statement and mean
it honestly. Yes Ben wrote a biblical sized check. And yes that check
avoided some things that would have happened. But it is far too soon to
say that we have ‘won’. This comment reminds me of George Bush on the
aircraft carrier with the banner “Mission Accomplished”.
AB is drinking champagne a little early. Wait a few years until we see
and feel the weight of what has been done. The easiest part of this was
writing the check, paying it back could cripple us.

What prompted me (pissed me off) to post this was the last sentence of
the Op-Ed. AB was clearly addressing his comments to just 100 people.
The Senators who actually have a say in this. He reminded them that in
1983 there was a bit of a squeaker on the nomination of then Fed
chairman Paul Volker. That vote went 84-16 in favor of Volker. Mr.
Blinder concluded with:

Those 16 Senators look pretty foolish in the eyes of history. There may be a lesson there.

Mr. Blinder could have said it more bluntly, but left the same meaning:

If you don’t vote for Bernanke you’re stupid and history will prove it so”.

Well the vote is in. 70 30. Some of those 70 were no doubt influenced
by the kind words by AB. Thirty Senators stood up and voted against
this nomination. In ten years history will not judge them harshly. This
will not be a repeat of 1983. They will be looked at as the ones who
made a vote at critical time and were ignored.  They will not look
stupid as Mr. Blinder has suggested.  At some point I will remind Mr.
Blinder that it is always a mistake to judge history before history has
been made.

 

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Anonymous's picture

On the bravery of Ben leading the Fed to Zero interest rates. I just attended a school tour of a high-school that my son is considering for next year. Tuition is going up approximately 20% next year. Guess why. Being conservative with their investment policies, the schools interest income has all but disappeared. Hey Ben and Alan, how is that for an unintended consequence!

sangell's picture

Boxer is up for re-election and her vote was a freebie. Had her vote been necessary to carry the day she would have been there for Bernanke because this vote wasn't really about Bernanke. It was a 'confidence' vote in the government.

To have rejected Bernanke would have been to reject the actions of the past 2 years of which the Senate has been complicit. Bernanke's your starting QB  and he's kept you in the game. You claim he's even winning it. If you take him out you can no longer blame him if you lose. The loss will be all your fault now because you left him in too long or you took him out when only he could have brought you victory. The second half is beginning and your opponents are taking the field. You wish Bernanke did not look so old and had not used all of his trick plays in the first half but what are you gonna do?

Bob's picture

Great read, Bruce (copy editing notwithstanding.)  Glad to hear a voice able to capture the experience of the rest of us poor, half-sane souls in the asylum. 

Jay's picture

Boxer, the CA democrat, voted no. But then she said she would vote no. Feinstein voted yes.

Anonymous's picture

the fact is no one in congress would allow this guy to babysit there kid, yet, he's good to go too run the worlds money

if a babysitter let your kid play in the free-way and made a miraculous daredevil save from dying, you'd still fire the baby-sitter and hate them forever

insanity reigns

Anonymous's picture

Nicely done Bruce. Thnx.

Nikki.

Anonymous's picture

I always thought that one of the guys who would be even more of a stooge than Bernanke is Alan Blinder, and this proves it.

Anonymous's picture

Great rebuttal, Mr. Krasting. Our dollars are not a stock certificate, to be diluted like a 3rd rate biotech trying to pay off management for one more cycle of corruption. The gall of Blinder comparing Bernanke to Volcker is incredible. Volcker took the road of hard money discipline, despite the horrific pain it caused. Bernanke's just another easy money politician; "We'll pay the price down the road, right now's not a good time". And Blinder's one of the multitude of educated fools who will be surprised when the bonfires begin in their neighborhood too.

Anonymous's picture

where is the list of senators that voted for Bernanke? Don't want to support them ever again.

Steak's picture

X-( 

Both Georgia Senators voted Yea.  Both Alabama Senators voted Nay.  Growing up in Georgia we had a saying: At least we're not Alabama.  We lost the right to say that today.

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm...

Anonymous's picture

Sweet Ben is in can. I get long risk now in hopes of another trillion bailout of someone who is going to speculate that my lifestyle will improve?

Rainman's picture

What is it with these bald-headed guys...?? They always stick together. Even Lloyd's in on it. I don't mind it if they have a hard-on for the hairy.....just keep your hands off our wallets !!

No More Bubbles's picture

I had the same reaction to this part

 

Fed chairman Paul Volker. That vote went 84-16 in favor of Volker. Mr. Blinder concluded with:

Those 16 Senators look pretty foolish in the eyes of history. There may be a lesson there.

 

This time the 23 senators that actually voted correctly to NOT reconfirm this menace to society will be the ones who look smart. The 77 who let this criminal keep his "job" should, at the very least, LOSE THEIRS!  Personally, I think they will all be hung for sinking our economy. 

 

What's unrecognized by most is that it's already been sunk.  What we have going on now is a mad scramble to get on the few remaining lifeboats.......


Ripped Chunk's picture

Those 16 Senators look pretty foolish in the eyes of history. There may be a lesson there.

 Do they really????

Volker is another Trilateralist/Bilderberger.

Wake up.

 

Leo Kolivakis's picture

Bruce,

Great piece, again. Let there be no doubt that Bubble Ben was a "shoo-in" (apparently, correct term is shoo-in) before these proceedings began. The power elite, the real owners of the US and the world, do not want deflation. That's why they made sure Bubble Ben was groomed for the job and that he would follow Bubble Alan. Blinder is an excellent economist but he's blind as a bat as to the real reasons behind Bernanke's reappointment. Most people are.

Ripped Chunk's picture

Inflation will always serve those with the most assets more than anyone else and hurt those with no assets the most.  As the gap between them with the most and the rest widens rapidly......

The rest of the arguments and deflections are pure bullshit.

earnyermoney's picture

I looked into the eyes of the power elite when Senator Gregg was praising BB on the floor of the Senate this afternoon. Gregg said, "All of us would have suffered ..." meaning he and his family would be suffering like the rest of the country.

I really hope these theiving pimps and whores loose every damn penny to their name.

Bruce Krasting's picture

The shoo in, Shoe in is the fault of the copy editor.  F!$%*$$ sot.

Sincirest appologies

bk

Dirtt's picture

You have to define "job perfomance" to know whether superlative is an over-reach.

Traianus Augustus's picture

Silly man...who else can we rely on to lead us out of the darkness.  Wait a minute, there is a light up ahead.  It must be Ben's exit strategy!!!  It's the light at the end of the tunnel...I just want to know who is it that keeps blowing that damn whistle!!!!

Chopshop's picture

Great piece, Bruce. Thanks for it.

Wonder what a fellow devil's advocate(r) Lorenzo Bini Smaghi would have to say of it.

Bruce: 'at some point I will remind [you] that it is always a mistake to judge history before history has been made.'

Bruce Krasting's picture

Please do. I am wrong all the time. But I am a low rent blogger, not a world class economist. And I never suggest that people are stupid for their views

mouser98's picture

never fear, bruce, history will prove you 100% correct on this one.

if there is any question, it is who would they have got if bernanke had been tanked?  and i think that most ZH readers will agree that they would have found bernanke2.0

its not bernanke, he is just a stooge.  its his owners and handlers.

Chopshop's picture

don't sell yourself short, Bruce!

Thanks for sharing your insights with us all ... do appreciate them, sir.