Bernanke Finally Reveals, In One Word, Why The Financial System Crashed

Tyler Durden's picture

Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that's what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE's largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.

Bernanke confirmed as much when he said he could now speak more freely about the crisis than he could while at the Fed - "I can say whatever I want."

So what was the reason, according to the man who was easily the most powerful person in the world for nearly a decade?

Ready?

"Overconfidence." (no, not "weather")


Yup. That's it.

The United States became "overconfident", he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.

 

"This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises," Bernanke said.

Actually what is going to sound even more obvious, is that subprime was not contained.

But going back to Bernanke's explanation, brought to us by Reuters, we wonder: did he perhaps get into the reason for the overconfidence? Maybe such as the Fed's endless hubris in believing it knew what it was doing, when time after time and especially over the past 30 years, the US central bank has shown that all it now does is lead the nation from bubble to bubble, from crisis to crisis, and replaces one asset bubble, first the dot com, then the housing, with another, even bigger one, until we get to the biggest bubble of all time - the stock market as you see it currently, where the S&P 500 soars to all time highs and when news of an ICBM launch can barely cause a dent in a ridiculous upward ramp driven by, you guessed it, overconfidence.

Only this time it's different, because the Fed really know what it is doing. Or maybe this time is no different than any other market mania unwinding before our eyes, with the careful nurturing of the the Fed and its chairmanwoman, be it Greenspan, Bernanke or Yellen.

But has Bernanke at least learned something? After all he is supposedly a very smart man from Princeton? Why yes:

He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. "That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and ... I learned I can't do that because the markets do not understand hypotheticals."

 

He concluded that he should "try to simplify the message, but not simplify too much".

Oh you mean something like this, uttered literally moments ago:

  • LACKER SAYS UNEMPLOYMENT THRESHOLD CLOSE TO OBSOLETE

Thank you Fed for admitting the whole premise behind the injection of over $1 trillion in the capital markets, the Fed's "target" of 6.5% unemployment, was really a bizarro bullshit joke perpetrated on the common man, when in reality the threshold was 1900 on the S&P. Or 2000. Or 3000. Or pick some arbitrary nominal number, where people confuse paper assets inflation with real wealth.

But don't worry, it's the "overconfidence" that did us in...

And then, on to regrets - because Bernanke has a few:

"We could have done some things on the margin to mitigate somewhat the crisis."

 

"Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive."

You heard that, the $4.1 trillion balance sheet is nowhere near enough. The Fed could have blown up the final bubble even more! Because that's what you are taught on Clown Keynesian school.

But wait, because the punchline beckons:

My natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person,” Bernanke said today in his first public remarks since leaving the Fed in January, referring to the central bank’s mandate from Congress to ensure full employment and stable prices. “The complexity though arises because in order to help the average person, you have to do things -- very distasteful things -- like try to prevent some large financial companies from collapsing.”

 

“The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.”

So there it is: the system crashed because we were "overconfident" - nothing to do with system merely having gorged on the reactionary excess to the popping of the dot com bubble - but Bernanke is 100% certain he could have done more to help the average person, because the Fed's balance sheet trickle down eventually works. And let's not forget the "overconfidence" about containing inflation in 15 minutes or less. That one will be hilarious to watch unwind.

* * *

So how much does such profound brilliance cost?

Bernanke received at least $250,000 for his appearance.

Or, in other words, more than he was paid for one full year as Fed chairman.

And that, ladies and gentlemen, is a wrap.

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VD's picture

ONE WORD: SKUM

nope-1004's picture

Overconfidence?  lol.  How about under-intelligence?  Ponzi king strikes again with stupid lies.

 

My personal favorite of his self described achievements as Fed chair, as he stated, was "transparency".  LMFAO.  The Fed has bailed out foreign banks, shuffled money under the table to keep JPM and GS solvent, and he claims transparency?  This f'n guy is a total piece of shit.  Lying bankster scum.

 

philipat's picture

In any private Company, such as The Fed, the CEO is first and foremost responsible to the shareholders via the Board.  Which is all we need to know but, unfortunately, the vast majority of Americans are clueless about the Fed and "Debt money". Which allows them to spout all this total BS about "Concern for the common man".

idea_hamster's picture

Overconfidence?!

I thought it was that bankers cared too much about the less fortunate in society, and turned themselves inside out to help the serfs ... er ... muppets ... no, wait ... the "meek" to take part in the joy of home ownership.

The fact that those ungrateful poor jobless folks chose to fuck it up was beyond Revenend Blankfein's control.

Occident Mortal's picture

It's like somebody broke into my house, stole all my stuff and when I go to my insurance company they send my check to the fucking burglar.

That's what Bernanke did.

He didn't help anyone, he caved into the perpetrators.

He should have mailed QE to people struggling to feed their children, not piss it all over guys struggling to keep up payments on their yacht.

Bernanke pumped the wrong end of the pyramid and he knows it. He will take that knowledge to his grave.

dogbreath's picture

Overconfidence   -   thats somthing like hubris, right?

Supernova Born's picture

Overconfidence.

Bernanke is 100% sure the problem was overconfidence.

SoberOne's picture

Fuck you Bernanke and the Keynsian horse you rode in on!

clymer's picture

What a tool. Might as well have said, "well.. It turns out that we really didn't know that we don't know what the fuck we are doing."

Shit, Ben. The maestro would have spun up some convoluted bullshit to at least keep Economist magazine happy.

 

yrad's picture

Where the fuck is Jon Corzine?

SafelyGraze's picture

just got back from the bankerspeak seminar

learned a couple of things about the financial crisis

that is .. the fiscal vortex

that is .. the debt-overhang repositioning

that is .. the monetary mis-balance

wanna know the reason?

it was because America was an autoplay when it should have been on fast-forward

it was because the world's growth engines were pausing while their carburetors were being cleaned

it was because the general purchasing habits of individuals were not aligning with the output capacity of industry

it was because the expectations for growth parity were incommensurate with the exchange cycle

it was because the financial sector was playing ragtime while the retail sector was singing be-bop

ok. I'll take my 250,000 now.

 

Independent's picture

I thought it was Two Words " MONEY CHANGERS "

Nehweh Gahnin's picture

I'm over-confident this fucker has a lamppost in his future.

GetZeeGold's picture

 

 

 

Bankers are dropping like flies....but Ben Shalom is still kicking.

jeff montanye's picture

the next $quarter million may be slower in coming.

economics9698's picture

Hang the mother fuckers.

gtb's picture

Thanks for the link.

Moe Howard's picture

My kind of party! Thanks brother.

Bendromeda Strain's picture

You can have it. Only a leftist douchebag would include something this idiotic:

"The tax code shall be reviewed by a committee of academic experts to develop recommendations for an equitable policy."

I believe most "academic experts" are already on record against a flat or FAIR tax. They loves them a fat tax code of "progressive" policy. NO EFFIN THANKS PAL. How about I start an AR-15 party to meet you wanna be Robespierres at the corner?

 

Come to think of it, wasn't it "academics" who gave us the tax code in the first place?

GetZeeGold's picture

 

 

 

Looks like I owe you one dollar.

 

Double or nothing on Yellen?

halfawake's picture

I really thought it was going to be weather.

Element's picture

Something to cheer you up, Niagra Falls just froze over once again.

http://wattsupwiththat.com/2014/03/04/niagara-falls-freezes-over-again/

And predictions the Great Lakes may reach record ice cover by Friday/Saturday.

Record is ~94% and current is a bit over 91%.

detached.amusement's picture

"Which model predicted that global warming would cause vast waterfalls to freeze solid in winter?"

 

LOL zing!  None that overestimate co2 warming, that's for damned sure

BorisTheBlade's picture

That would be Al Gore, oh wait, that guy is in charge of climate. But then going to Abu Dhabi and complaining about weather is one of those things that make you go hmm. Telling arrogant Sheikhs about overconfidence is something they can certainly relate to, US$250,000 isn't such a bad deal for former Fed Chairman working at stand-up comedian either. Meanwhile, Abu Dhabi bank will expand its network of Gold dispensing ATMs and add couple of gold souks in newly-built malls. Any indication on whether Bernanke feels uncomfortable around those barbarous relics? -> http://en.wikipedia.org/wiki/Gold_to_Go

Johnny Cocknballs's picture

Interested in your opinion.

I say The Economist is mostly, but not entirely, full of shit.

Are you a 'it's full of shit' kind of guy?

SmackDaddy's picture

The publication belongs to The Economist Group, half of which is owned by Pearson PLC via the Financial Times. A group of independent shareholders, including many members of the staff and the Rothschild banking family of England,[7] owns the rest.

SmackDaddy's picture

haha, i used to read tbe economist

Max Hunter's picture

If he were being honest, the obvious answer is "greed"

Nexus789's picture

I don't think he was riding the horse in the way you suggest. 

jimmytorpedo's picture

It would have been much funnier if he had pulled a "Francis Sawyer"

In one word,...it was the,..."J$W's!"

They would have eaten that shit up in Abu Dhabi!

Hell, I would have paid 250k to hear him say that.

N.B. Tylers, my wife is half Jewish/Swiss I'm not hatin' on anybody, I just like irony.

TheReplacement's picture

Wouldn't that really be a mea culpa if he did that?

Georgia_Boy's picture

copout answer. People have been way overconfident before and threw all kinds of money into risky investments (tech boom) and it didn't crash the whole financial system. People don't ask you "why" because they want to know about touchy feely emo stuff like confidence, they want to know what the systemic flaws were that allowed this to happen. He must know that, so this is his idea of speaking freely?

Johnny Cocknballs's picture

The world is sorely lacking in such subtlety, friend.

Raging Debate's picture

Perspective of cause:

1) 1999 deregulation removal of Glass-Steagall. Clinton Admin puts lots of cops on the street. Rising lawlessness.
2) Greenspan "Put"
3) Overleverage - big national party. Lot's of bankers and government politicians getting real rich from front-running, fraud and insider trading. Dough for energy conquest such as Iraq, WOT
4) 2008 - Bankers and government keep partying - citizens get bill for the entire party start paying through high interest rates on debt servicing and inflation. Bankers and politicians getting richer. Capitalism "compromised to save it". Outright looting from bankers and politicians. Fascism and complete lawlessness. Continuation of trade imbalance at both American and Chinese citizen longer-term expense.
5) Just lawlessness and empirical projection, thrashing around.
6) 2014 - Nothin to invest in outside of small time real-estate and gold. Marxism. Criminals still in charge acting from sociopaths becoming pyschopaths. Geopolitical turmoil...

BurningFuld's picture

Arrogant, self entitled, greedy criminality.  Was that more than one word?

jbvtme's picture

i am reminded of the scene in the movie fargo when peter stormare is standing by the wood chipper and buscemi's ankle is sticking out...i'm so long wood chippers

gmrpeabody's picture

OK.., let's see, one word...

Fuukubernanke...

sixsigma cygnusatratus's picture

I see, it's not a confidence game, it's an overconfidence game.  Got it!

SDShack's picture

"Arrogant, self entitled, greedy criminality.  Was that more than one word?"

= sociopath

Lore's picture

PSYCHOPATHS: natural destroyers, attempting to remake the world in their own broken image. Things are not going to improve until the power is taken away from PSYCHOPATHS.

Au_Ag_CuPbCu's picture


"
I came from the academic background and I was used to making hypothetical examples and ... I learned I can't do that because the markets do not understand hypotheticals." 

 

WTF?  Everything he did was based on only his academic background and hypotheticals.  No understanding of the real world or unintended consequences because he never worked a fucking day of his life in the real world.  Any study that has to use the "all other things being equal and unchanged...XYZ will happen is not science.  Well guess what dickhead, all other things do not remain equal and unchanged...fucking unbelievable.