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I'm going to pass this around, people need to see it.
And Bunning's rape of him also...
Lets see if I have my fact right on AIG.
AIG had paid the collateral calls on its outstanding CDS' that were caused by the reduction of value of the underlying CDO's. This caused the credit rating agencies to down-grade AIG from its AAA status which in turn caused more collateral calls that were based on AIG's credit rating. It was only after the credit rating agencies downgraded AIG that the Fed had to step in and offer AIG a bail-out because of the new collateral calls.
Assuming the above facts are correct, I dont understand why the bail-out cost the American taxpayers more than $1.00.
The Federal Reserve, as the printing press of America should have a AAA credit rating, being based on the credit rating of the underlying entity of the United States of America. Therefore the Federal Reserve should have offered to BUY AIG's CDS contracts and the collateral already paid for $1.00. This then places those contracts back onto the balance sheet of an entity with a AAA credit rating which means the additional collateral needed based on the lowered credit rating of the issuing company is no longer needed, and thus $185 Billion of tax pay money is no longer at risk.
Am I reading this right?
Yes, the above is a serious question as finance and economics were not my major.
Good point, the government could have just backstopped AIG (as they did) instead of paying out gambling tickets that really did not even hedge risks. But they wanted to give their cronies billions of dollars instead. It really is that simple.
Ironically, they were not consistent and did not allow pay outs on SRS and other similar shorts (similar to the debt CDS but on equities) when they decided to change accounting rules and support CRE equities.
Oh no, it's not that simple. The fact is the Fed and treasury couldn't restore AIG's AAA rating (there woulld have been too much laughing out loud rolling on the floor at this transparent head fake) because..........even with the backing of the TARP and the FED, investors worldwide aren't really buying it. In other words, the rating agencies got the message right away: if these bailouts don't work, the USD/USG is insolvent, and so is the world's banking system. Nothing could be more obvious, especially now. AAA ratings of sovereign debt? That's a hope running on fumes.
That seems about right.
If the FED was going to backstop why did AIG lose its AAA?
And, as you say, if loosing the AAA caused more loss would it not have been better for the FED to say upfront that it intended bailing out Goldman & Dutch?
That is what after all they did.
The question is, did they know they were going to do it before the muppet taxpayers worked out they were getting robbed.
They knew, but there was no bloody way they were going to tell the taxpayer.
Did they have to do it?
Plain and simple. They didn’t.
Why did they do it?
For someone else. Not you, and certainly not the muppet show your citizenry is.
What irritates the shi* out of me is that Bunning, like Ron Paul, cannot utter one complete coherent sentence. He stumbles all over himself reading a prepared speech. How hard is that??? He speaks the truth but unintelligibly so.
You're right about Bunning, but lately Paul has become much much better. Have a look at him again. He is presidential material.
Bernanke claims the FED has kept inflation in check. The reason we are in our current predicament is due to the greatest inflation in home prices in the history of civilization.
Inflation is what has caused this great collapse you dumb ass.
The FED created the inflation. The market is trying to correct the inflation. The FED is using the tool of inflation to fight the markets attempt to correct the FED induced inflation.
Bernanke is clearly a dumb ass when he asserts the FED has kept inflation in check.
good point, and the fed does not monitor housing as an indication of inflation.
the last two statements he made were a lie.
he has not been open, and has been fighting it all the way
Love the last two seconds. "Chairman Bernanski...."
what effin senator is that who doesnt even know how to spell mugabee ben's last name? jesus
that's Akaka from Hawaii. I couldn't even listen to him talk.
Bloomberg runs on its crawl, Zimbabwe : 'We will take a long time to reintroduce currency' right before Demint starts askin' 'do you believe money is an instrument of government to be manipulated...
6:04 - [the Fed is] "an agency of the government."
yes, what was that??
maybe it depends on what the definition of "is" is
Then why did they refuse a FOIA request with the response that they were not subject to the FOIA because they were a private entity?
when you hire a law firm, to the extent that they are acting on your behalf, they're an agency of you.
It’s called Mentalis Restrictio.
It’s a method of personal mind control established by the Roman Catholic Church.
It is your duty to tell the truth to God (or whatever master you serve) and not man.
Man is corrupt. Your master is not.
As long as your are not lying to your master it matters not if you lie to your fellow man.
The method is often described as “Jesuitical”.
"A wide mental reservation is using equivocations and amphibologies to imply an untruth that is not actually stated. In the strict mental reservation, the speaker mentally adds some qualification to the words which he utters, and the words together with the mental qualification make a true assertion in accordance with fact."
:bernanke to a T
An anecdote often related, for instance by the canonist Martin de Azpilcueta to illustrate his doctrine of a mixed speech (oratoria mixta) combining verbal speech and gestual communication, concerns Francis of Assisi, who allegedly declared to people pursuing a thief that he had just seen, "He hasn't passed by here," at the same time sliding his finger in his sleeve
:watch timmy's hands
"I think that as evidenced by the fact that every major country in the world has a central bank, and uses monetary policy. I think that's the system that we have determined is the most effective at this point."
I haven't determined that Ben. Don't include me in that "we".
Lord Acton: "The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
Ben was back on his heels at that point. I would've liked to have seen another 30 minutes of Demint grilling him...BB would've started crying.
i will rout you out like the den of vipers that you are - andrew jackson
Love the headline at the bottom of the screen: "Zimbabwe Progressing..."
Decent questions, but he didn't hit hard enough.
For how much longer is he going to prop up Fannie and Freddie?
What does he think is going to happen if/when he stops buying Fannie/Freddie MBS?
Will he actually stop in March like he promises?
What plans does he actually have to sell the MBS he has accumulated?
This is never going to stop, guaranteed when March rolls around Geithner will try to resurrect Fannie/Freddie in essentially their current form, and Bernanke will keep buying their MBS.
I will keep holding on the my gold, thank you very much. The USD is toast.
If you don't shape up a little, Johnnie, I'm gonna cut off your candy supply of purchases of mortgage backed securities by March 2010, I mean your combat troop levels in AfganiPakistan by July 2011...........or something like that. So just remember I'M SERIOUS ABOUT THIS. And now, I need to go to get a pedicure before the state dinner tonight.
I think Ben and Tim really don't know what to do. They were trained to believe in systems and scenarios that aren't reflected in the current state of affairs.
When one is stuck in the confines of an outdated system, they are the last to know. We are truly in a new world--East dominating West--which is a shift this country has never endured. It's the end of a cycle and the new one will born in pain.
so be it...asian dominatrixes are hot
What if, in 1980, the Fed's mandate had been changed from (A) balancing maximum employment with inflation to (B) maintaining a constant level of total credit outstanding (government, corporate, financial, household) within a safe band and not allowing total debt to grow to 365% of GDP?
What if, because of that policy, Americans had been incentivized to save more of their earnings?
What if, because of that policy, Americans were not misled to have consumed more than they had produced, for 30 years, due to unnaturally low interest rates?
What if, because of that policy, American jobs had not been increasingly off-shored for 30 years, as Americans would have been kept honest with regards to having to produce as much as they consume?
What if, as a consequence of this policy, we weren't faced with debt/GDP of 370% today?
What if Washington was not owned by Wall Street?
What if Bernanke told the truth?
What if pigs could fly?
What if people realized that economies can't be 'managed' without destroying them?
What if the Congress disbanded the Federal Reserve System and gave the market back its gold standard?
I'm a fan of libertarian ideology. I've been reading Mises extensively. The world would certainly be a better place if every nation could adopt such policies. But I'm not convinced that libertarian policies are practical for a single nation state in the world we live, or if they would have been practical in 1980.
Thanks for your comment. I'd enjoy an intelligent discussion about the limits and inevitable impacts of government.
But I'm not convinced that libertarian policies are practical for a single nation state in the world we live, or if they would have been practical in 1980.
Perhaps, but it may be "more impratical" to have a system that is inherently doomed to collapse and is ripe for the looting on the way down.
I suggest you start here:
I'm familiar with the theory. Allow me to play devil's advocate. I don't know where this will go, if anywhere.
What if we had gone on the gold standard in 1980... We allow our markets to realize a natural interest rate. Our government no longer controls our monetary policy. All is well and good.
Now, if you are some high level war strategist in the former Soviet Union, how could you use this to your advantage?
You fail even faster than you did under Reganomics. Bring that scenario on. I would really like to see that.
To what extent did we (the US) help to actually create the Soviet Union via consequences of our policies? Since we're playing the alternate history game, I would suggest 1980 is a suboptimal starting point for reinstating the gold standard.
Although it does illustrate the tar pit of consequence we've sunk into.
"What if, in 1980, the Fed's mandate had been changed from (A) balancing maximum employment with inflation to (B) maintaining a constant level of total credit outstanding (government, corporate, financial, household) within a safe band and not allowing total debt to grow to 365% of GDP?"
As Denninger just said,
check out the actual wording of the mandate!
I don't know if Denninger and I are interpreting the language correctly, but it certainly seems that the "monetary and credit aggregates" language puts the stability of the debt-to-GDP ratio on exactly the same footing as the stability of the money-supply-to-GDP ratio: the Fed's first-order mandate is explicitly to achieve both, with no priority given to one over the other. And it's clearly the case that "maximum employment, stable prices, and moderate long-term interest rates" are *second-order* objectives, which the Fed must only pursue through achieving its first-order objective. So, afaics, even if we assume, contrary to all reason, that the way - and the only way - for the US to achieve full employment, low price inflation and low interest rates is through a sustained credit bubble, then nevertheless the Fed is required by law to prevent a sustained credit bubble anyway.
The act doesn't give any specific percentage target for debt-to-GDP, but equally it doesn't give any specific percentage target for growth in the money supply either. (IMO specific targets for both would be good, and they should be backed with an obligation to make a report to Congress - like the Bank of England's inflation letters - whenever either target is missed.)
I'm literally in awe. So its either outright incompetence by both Greenspan and Bernanke, or something far more sinister.
To think, all the Fed would have had to have done to avoid the disaster we are facing, was to have followed its own mandate.
DeMint sounds like he would make a hell of a president.
the best was the Jekyll Island comment from Senator Bunning
What a flippin idiot Zimbabwe Ben is. If I ever had an annual review like that one I'd be out in a flash.
I doubt that. Could you really walk away from a job where you can literally make money out of thin air and give it to yourself and you're buddies? Shit being Fed Chairman is my dream job! I can see it now...
"Hey Shameful, I bet Amzn would hit 250 and lost my shirt can I have a few billion in exchange for these worthless options?"
"Of course bro! We hitting Vegas this weekend? I got to give the economy some liquidity injections"
You couldn't get me out of that job without dragging me out the door kicking and screaming!
By being 'out' I meant that I'd be fired. If the other senators can't see the horrific job he has done as measured by the goals that Z.B. set for himself then they should all be fired. Well most of them should be anyway, but that is a different thread.
Oh I agree he should be fired at the minimum. By any yardstick Zimbabwe Ben is a complete failure. I could make random babbling statements in my sleep and be a better market forecaster. He's clearly a crook and charlatan and not even a convincing one.
I'm quite sure most of the senators or their "advisers" are well aware with the horrible beating he is giving America. The question is do they care? After all they are going to get theirs.
Hell I'm waiting for Uncle Ben to drop the line "Well you know a new Fed Chairman right now could cause instability in the dollar market..." or "Debating my reappointment makes me angry...you wouldn't like me when I'm angry!". Openly engage in a little financial terrorism. If it's good enough for Hank Paulson then it's good enough for Bernake.
"You wouldn't like me when I'm angry"
Surprised he didn't have some Queeg like little balls to crunch together in his right hand while he had his hand on a Stables like button called "I am Shiva..."
Demint's Lead in--all the republican talking points, refusing to take any responsibility. Claims failures in system based on Fed. Really? How did the Fed force Mozillo to ramp up a phony loan program? Or force Lehman, Bear Stearns and AIG to make really stupid bets?
This is the Republican blame the others and hide the truth strategy. Like Ben or not, this mistelling of reality is bad for the country.
Look at Demint's question #1-- Federal reserve does not regulate. Actually, that is the Senate\Congress's job. Not the Feds and not Bernanke.
Demint knows that.
As B points at the end, Fed raised the questions for year. Regulators did not act. 1998, they repealed rules which would have limited the damage we've seen in the last 2 years.
Hate Ben and the other policy wogs for truthful reasons if at all.
From Wikipedia on Demint:
"DeMint was ranked by National Journal as the most conservative United States Senator in their March, 2007 conservative/liberal rankings, and again in 2008.
DeMint's main work has been opposing the increase of Federal government spending, both under the Bush and Obama Administrations. He was opposed to federal bailouts for banks and other corporations. For his stances on budgetary issues, DeMint has been strongly supported by the fiscally conservative political group Club for Growth.
He has been a consistent supporter of school sponsored prayer and has introduced legislation that would allow schools to display banners reading "God Bless America".
DeMint favors banning all forms of abortion even in cases of rape and incest.
DeMint endorsed Republican Presidential Candidate Mitt Romney.
In the Senate, DeMint introduced an amendment aimed at weakening the Sarbanes-Oxley corporate accountability legislation; this amendment failed to become law.
On the issue of immigration, DeMint favors requiring all illegal immigrants currently in the United States to return to their home countries to apply for legal reinstatement. He is also against the Guest Worker program and is in favor of establishing English as the country's official language.
On February 6, 2008 Jim DeMint was joined by Saxby Chambliss, Tom Coburn, John Cornyn, James Inhofe, and David Vitter in the Senate to introduce the Semper Fi Act of 2008 which would strip federal funding from Berkeley, California in response to the Berkeley Marine Corps Recruiting Center controversy. The bill would have stripped $2.1 million in earmarks for the city and the University of California, Berkeley and would have instead directed the funds to the Marine Corps Recruiting Fund. His actions were reprimanded by both the House and Senate leadership as divisive and unnecessary. His bill was defeated by a 74-25 vote.
In 2009, DeMint introduced an amendment to a multi-billion dollar economic stimulus bill that would have prohibited lawmakers from using any percentage of transportation funds on bicycle, walking, or wilderness trails.  Additionally, DeMint opposed the whole bill.
DeMint was one of two Senators, along with David Vitter, to vote against Hillary Clinton's confirmation to become the United States Secretary of State.
DeMint went to Honduras in 2009, and met with de facto president Roberto Micheletti, who was installed after the coup. The White House has explicitly banned meetings with the current leaders. The United States (along with every other country) officially views ousted president Manuel Zelaya as the legitimately elected president.
In 2009, DeMint authored a book entitled Saving Freedom: We Can Stop America's Slide into Socialism (Fidelis, Nashville, 2009)."
Opposing spending--I'm on board. But I find it really weird that Demint is against bycycles. That is bizarre. They may not work everywhere but those who've seen Holland see how well they can work, at least in some places.
"Look at Demint's question #1-- Federal reserve does not regulate. Actually, that is the Senate\Congress's job."
Really, Congress is supposed to act as a bank regulator?
That is news to me, or just about anyone else in the country.
What's bizarre is you saying he's "against bycycles" when he's actually against federal funding of bicycles. That's bizarre.
Listen up Lex, this is not about party affiliation anymore here at ZH. We are a mixed bag of Dems, Repubs, Libs, Nothings, and even a socialist or two. DeMint asked excellent questions and Ben was stuck with one sentence answers.
And there is not a congressman or senator that you could not pull up lots of dirt on. They are all bought and sold--except maybe perhaps and hopefully, Ron Paul.
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