Summing Up Ben Bernanke's Reign In 4 Numbers

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man blog,

First of all, a very Happy New Year to our many Chinese readers.

According to the ancient Zodiac, today we are shedding the coils of the year of the Snake in favor of the Horse.

Given this symbology, it is perhaps a very small irony that today is also the final day in office for Ben Bernanke, chairman of the US Federal Reserve. Let’s review the statistics:

1) When Mr. Bernanke took office in 2006, the Fed had $834.6 billion in assets, the vast majority of which were US Treasuries.

As of Wednesday, Mr. Bernanke’s Fed now counts $4.1 trillion in assets. And the balance sheet is stuffed full of mortgage debt ‘guaranteed’ by insolvent government agencies.

2) When Mr. Bernanke took office, the Fed’s capital ratio (net equity divided by total assets) was 3.22%.

This capital ratio is a hugely important number in banking that represents a sort of ‘margin of safety’. In a severe crisis situation, banks with a higher capital ratio are able to withstand major financial shocks.

Candidly, 3.22% is not high; this means that the Fed would effectively be rendered insolvent if its assets lost more than 3.22% of their value. So the Fed that Mr. Bernanke inherited was not exceptionally healthy.

But today, Mr. Bernanke leaves office with the balance sheet in far worse condition. The Fed’s capital ratio is just 1.34%. And it’s deteriorating rapidly.

Three years ago, the Fed’s capital ratio was 2.17%. A year ago it was 1.82%. Six months ago it was 1.54%. And now today just 1.34%. It doesn’t take a rocket scientist (or a PhD in economics) to see how quickly this is unraveling.

The Fed now has a razor thin margin of safety to guarantee a bloated balance sheet crammed full of questionable assets. This is not exactly the height of responsible stewardship.

Has it helped? I suppose that depends on whom you ask.

3) When Mr. Bernanke took office, the Dow Jones Industrial Average stood at 10,954, and the US government could borrow money for ten years at 4.57%.

Today the Dow is at 15,569, and the 10-year note is 2.65%.

So this has been a pretty good run for folks who have thrown money in the stock market or have heavily indebted themselves.

Yet over 50% of Americans don’t own a single share of stocks. And as of 2010, 10% of Americans own 81% of all stocks.

Then there’s the Federal government, which has been able to pass off trillions of dollars of debt to a willing central banker, as well as generate tax revenue from all the stock investors’ capital gains.

4) Most folks, however, have seen a different side of the Fed’s expansion. The FAO food price index, for example, has increased from 122 to 207, and the labor force participation rate declined to its lowest level in decades under Mr. Bernake’s tenure.

It’s fairly clear if you look at the data objectively that Mr. Bernanke’s policies have left the Fed (and consequently the global financial system) in far more precarious condition than when he started, yet disproportionately benefited the US government and small percentage of society at the expense of everyone else.

This is not to say that Mr. Bernanke is some evil mastermind bent on nefarious ends.

When I listened to him explain his decision-making process at a dinner in Washington a few months ago, it became clear that he is very well intentioned and honestly believes that his policies help.

Unfortunately the road to ruin is almost always paved with good intentions.

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Say What Again's picture

Charles, One more time with feeling...

ArkansasAngie's picture

Choosing winners and losers ... Let's make a switch and have somebody else pick'em.

dryam's picture

I can sum up his reign in three letters....L I E.

I win.

spine001's picture

For whatever is worth imho Bernanke really believed he was doing the right thing. If you haven't read his PhD thesis, you should, he did exactly what he concluded there the Fed should have done to avert the 1920's crisis.
The problem is that his thesis was wrong. It was right for the short term, yes the depression would have been averted in 1929 but we wouldn't have had the growth we had afterwards, nor would have the USA become the bastion of wealth, freedom and liberty it became.
No pain, no gain, sorry Ben!

Your thesis didn't completely analyze the problem, only the short term aspects of it. We are now moving to the long term consequences and will see the final outcome in the next 20 years.

Imho, you were wrong. Imho, you were inmoral for experimenting with our well being without our informed consent, you were arrogant and megalomaniac for thinking that you could control the world economy. In summary you were a failure and as such you will go into the history books. And that only if we are lucky enough to still write history books after the crisis you have left us (three orders of magnitude larger than the 2008 one) subsides.

NotApplicable's picture

Simon, you don't have the slightest fucking clue what Bernanke believes. Now, I'm not saying he's an evil mastermind either (as that would be far above his pay range), but rather, he's been quite the "Useful Idiot." (aka "self-propelled tool")

Besides, any beliefs that Bernanke has are superficial, as they're based upon the fantasy of his time spent within the hallowed halls of education.

Say What Again's picture

'... he's been quite the "Useful Idiot." ...'

Actually he's been a puppet for a select few.

There - fixed it for you

RaceToTheBottom's picture

Simon you name dropper you... 
"When I was listening to the nice FED chair over dinner....."

Reggie has competition.....

Urban Redneck's picture

Bernanke's not a useful idiot, he's a fellow traveler.

spine001's picture

Don't underestimate the halls of education. I was a Professor for 10 years, got my tenure and then went to industry and after that started my own companies. My recollection is that it took me 1 week full time to prepare each new 1 hour class. The leverage you can get from a good professor is 40 to 1. I recently went back to get another degree and lived through that again, it's 40 times more effective to learn from a good professor than alone. That said people who have only been in academia all their lives lack the necessary perspective to understand real world behavior and situations. Never cleared than when doing case studies of companies that you've been inside and understand. But again, a good professor would quote to you Kahnemann, a nobel price sociologist/economist that demonstrated that you only think you understand complex situations, that the reality is that your brains simplifies them to make you believe you understand them to protect you. Something I call the understanding bias.

Urban Redneck's picture

One doesn't conjure an excess of annual GDP out of thin air in order to explicitly save the banks, which are only a fraction of economic activity, out of ignorance. He "could" believe that by saving the banks he "might" save the economy, or that if they succeeded that the banks "might" eventually be willing to buy their trash back from the Fed if economic conditions improved. However, even an ignoramus of Biblical proportions couldn't believe that Obozo & the Congresscritters would implement the fiscal and regulatory policy adjustments required to restore growth, despite his lip-service to their criticality.

Obozo, on the other hand, with his profit-to-earnings ratios and guaranteed returns coupled with an inflated perception of his sub-par intellect could be a "useful idiot", as opposed to a traitor. After all he was never a professor of constitutional law, despite being theoretically qualified to know what the term means and teaching a class or two about constitutional law in the US before using the term to describe himself.

kliguy38's picture

He's a god..........what's that make his bosses?

Terp's picture

Too bad folks can neither eat nor live in good intentions, Ben.

Detached fucker

NotApplicable's picture

Not much of a standard for measurement, as say, compared to "reality."

Jason T's picture


Armstrong wrote on Jan 25, Dow close below 15665 AT month end would "This would warn that a sharp drop is likely into February where we could see a retest of the 1680.00 level on the Cash SP500 15365.00 on the Dow."

looks like market is selling off now into the close.. 35 more points down and it'll hit.

Caveman93's picture

And now we can queue "Bankers falling from the sky" and committing suicide ...the quickening. 

abatis's picture

Some future tribunal will no doubt have these facts.

gwar5's picture

Paul Craig Roberts summed it up pretty good today at KWN. Said the Fed can save the banks, or the USD, but it can't save both.


Said the Fed is a banking entity so it is very questionable that they will do the right thing. Said the US could withstand the big banks to fail and reorganize, but could not withstand USD losing current role as WRC. Subsequent extreme inflation would wipe out what remains of the middle class.


(That's nutshells it pretty damn well!  The increasing police state tells me what path has already been chosen, if there was any doubt remaining.)




NotApplicable's picture

Lucky for them the plan is to destroy BOTH.

Flakmeister's picture

Why would you kill the goose that is laying your golden egg?

OC Sure's picture

"This is not to say that Mr. Bernanke is some evil mastermind bent on nefarious ends. became clear that he is very well intentioned and honestly believes that his policies help"


The bureaucrats are evil not because of what they may say and how cozy that may make one feel;

They are evil because of what they do.


dontgoforit's picture

When did anyone ever borrow their way into prosperity?  Can't be done.  Just making the end that much worse....much, much, worse.

Flakmeister's picture

All Bernanke did was try to keep the ship from capsizing after Mr. Magoo, aka Alan Greenspan, completely fucked the financial world through his interpretation of Randian claptrap... Self regulating efficienct markets??? And this guy alledgedly was a great thinker???

Combine that with the world oil production hitting its heading on the ceiling and you have the shitshow we now have...

Flakmeister's picture

   I'll put it this way... If Greenspan had come into the same situation as the Bernank we would now be looking back at the Great Depression as a more desirable outcome...

None the less, a pox on all central bankers, but some are clearly more incompetant than others...

Iam Yue2's picture

He is Tony Blair, passing on the poisoned chalice to Gordon Brown (Yellen).

jubber's picture

you forgot Gold

nightshiftsucks's picture

" This is not to say that Mr. Bernanke is some evil mastermind bent on nefarious ends."

No he just believes his own lies

QuiteRisky's picture

>>>Candidly, 3.22% is not high; this means that the Fed would effectively be rendered insolvent if its assets lost more than 3.22% of their value.

What???  The Fed was insolvent years ago....  The present "capital ratio" is meaningless because all their assets were purchased with printed money. 

...and the balance sheet?  Meaningless.... it's just a number entered into a spreadsheet, and the Fed has permission to use that number on the fed wire to purchase paper....


Papasmurf's picture

Good intentions?  This was just an experiment to satisfy his curiosity about the crash of 29. 

sudzee's picture

The Bernank has done so well for the FED and friends while Gov has to send Obegger in chief on the air to beg for nickles and dimes to save the country. Progress for sure.

TrustWho's picture

I was so happy at 9:45am this morning. I actually thought the stock market would say good-bye to Daddy Bernanke with a plus 1000 point drop in the DOW. This would have been so appropriate. One last time with Bernanke as head of Fed......



Yardfarmer's picture

thanks for the quaint, sentimental reassurance that BS is a well meaning guy. having presided over the arguably greatest transfer of wealth that any of us will ever witness. resolutely defending the flagging fortunes of the plutocracy and buttressing their astounding and misappropriated losses on the the backs of the middle class. no, Mr. Black, you intellectual bankrupt, you  ignore a century of concerted, engineered mega grand theft from the money masters at the Fed. this latest wax dummy much like his predecessors is a pathetic, cowardly pawn, moved at will by his masters and who like his counterpart at 1600 Pennsylvania Avenue was installed like a figurehead on a ship whose voyage was mapped out ages ago in an undeviating itinerary of criminality and subterfuge. 

Waterfallsparkles's picture

I wonder how well Yellen will do day trading the Stock Market?  Bernanke had his finger on the buy button every time the Market dipped 50 points.

Everybodys All American's picture

Simon I would ask you to wake up to the fact that Bernanke is a psychopath.

Danno Anderson's picture

When a country consumes more than it produces it becomes poorer.  So what happens in the markets when a country becomes poorer ?  Look at Japan which now has record trade deficits, and has been battling deflation for twenty years.    This isn't Wiemar by a long long shot.

It's all political. The public now realizes, and is outraged, that the banksters milked the US government by borrowing over 4 Trillion dollars at 1/4% and loaning it back to the government for 3 1/4 %. So QE must end before the elections to calm the public.   So what's next ?    They're crafting the next plan now which will just instill even less confidence in the government until the debt bomb explodes.   Fear is much more powerful than greed, thus hyperinflation will never happen as the masses will sell their bonds and the government will be powerless.    Such has happened many times in the past

We'll see. 

Music101's picture

Bernanke's reign = WORLD OF DEBT!!!   See Video Below "WORLD OF DEBT":

kchrisc's picture

I can sum up his "reign" in one phase: "Must keep the ponzi going."


"With the right attachments, a guillotine can be used to cut wood."

Rainmaker's picture

"When I listened to him explain his decision-making process at a dinner in Washington a few months ago, it became clear that he is very well intentioned and honestly believes that his policies help."


Of course he sounds honest and credible.  He was hired because of that sole reason.  He has led us to the abyss with his "well intentioned and honestly" BS.

Moron!  Still asleep at the wheel!

I won't be stopping by Sovereign Man blog anytime soon.  All it takes is a dinner to get you kissing up to this monster!


kchrisc's picture

Good comment.

"...honestly believe that his policies help."

These kinds of people believe nothing, they are self-serving sociopaths. They do as they are told and relish the false-glow of fame and accolades that other self-serving sociopaths heap upon them.

They only believe in money and power for themselves.


"If a guillotine works in the woods, does anyone here the bankster's pleas?!"

RaceToTheBottom's picture

Ben, you should have let the economy bounce.  We would be through the bad stuff by now and we would be a lot healthier because of it.

Now we have a bunch of WS Fucks who own us and think they are gods

nathan1234's picture

Ben- You put Madoff to shame.

You are the Best Ever Ponzi.

Cult of Criminality's picture

"Summing Up Ben Bernanke's Reign In 4 Numbers"

How about 4 letters...........Dung

Cult of Criminality's picture

His avatar picture, is missing the bird he shot to the planet and people on it.

damicol's picture

If you want to see some real benwanker cock sucking, go to this and read this fucking half witted fan boys rantings

AEP in the telgraph, enough to make you vomit


dragoneyes74's picture

My animation is done.  This is the 30-minute pilot of a 12-episode first season I wrote about three best friends crossing the threshold of thirty with crushed ideals of the way their life was supposed to be as they struggle to find happiness in a deteriorating economy with evaporating opportunities as the rich get richer and our jobs move overseas.  

I'm about to shop it around to the industry, but I'm also open to the idea of raising the money to produce the series independently, so if you know anyone who invests in things like this, send me a message via youtube.  There's a 10% finder's fee and I'd need 3.5 million dollars, so there's some incentive for ya.  Peace.