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No Hints Of QE In Latest Bernanke Word Cloud

Tyler Durden's picture


Addressing his perception of lessons learned from the financial crisis, Ben Bernanke is speaking this afternoon on poor risk management and shadow banking vulnerabilities - all of which remain obviously as we continue to draw attention to. However, more worrisome for the junkies is the total lack of QE3 chatter in his speech. While he does note the words 'collateral' and 'repo' the proximity of the words 'Shadow, Institutions, & Vulnerabilities' are awkwardly close.


Full speech here:


Some Reflections On The Crisis And The Policyt Response

I would like to thank the conference organizers for the opportunity to offer a few remarks on the causes of the 2007-09 financial crisis as well as on the Federal Reserve's policy response. The topic is a large one, and today I will be able only to lay out some basic themes. In doing so, I will draw from talks and testimonies that I gave during the crisis and its aftermath, particularly my testimony to the Financial Crisis Inquiry Commission in September 2010.1 Given the time available, I will focus narrowly on the financial crisis and the Federal Reserve's response in its capacity as liquidity provider of last resort, leaving discussions of monetary policy and the aftermath of the crisis to another occasion.

Triggers and Vulnerabilities
In its analysis of the crisis, my testimony before the Financial Crisis Inquiry Commission drew the distinction between triggers and vulnerabilities. The triggers of the crisis were the particular events or factors that touched off the events of 2007-09--the proximate causes, if you will. Developments in the market for subprime mortgages were a prominent example of a trigger of the crisis. In contrast, the vulnerabilities were the structural, and more fundamental, weaknesses in the financial system and in regulation and supervision that served to propagate and amplify the initial shocks. In the private sector, some key vulnerabilities included high levels of leverage; excessive dependence on unstable short-term funding; deficiencies in risk management in major financial firms; and the use of exotic and nontransparent financial instruments that obscured concentrations of risk. In the public sector, my list of vulnerabilities would include gaps in the regulatory structure that allowed systemically important firms and markets to escape comprehensive supervision; failures of supervisors to effectively apply some existing authorities; and insufficient attention to threats to the stability of the system as a whole (that is, the lack of a macroprudential focus in regulation and supervision).

The distinction between triggers and vulnerabilities is helpful in that it allows us to better understand why the factors that are often cited as touching off the crisis seem disproportionate to the magnitude of the financial and economic reaction. Consider subprime mortgages, on which many popular accounts of the crisis focus. Contemporaneous data indicated that the total quantity of subprime mortgages outstanding in 2007 was well less than $1 trillion; some more-recent accounts place the figure somewhat higher. In absolute terms, of course, the potential for losses on these loans was large--on the order of hundreds of billions of dollars. However, judged in relation to the size of global financial markets, aggregate exposures to subprime mortgages were quite modest. By way of comparison, it is not especially uncommon for one day's paper losses in global stock markets to exceed the losses on subprime mortgages suffered during the entire crisis, without obvious ill effect on market functioning or on the economy. Thus, losses on subprime mortgages can plausibly account for the massive reaction seen during the crisis only insofar as they interacted with other factors--more fundamental vulnerabilities--that served to amplify their effects.

On the surface, the puzzle of disproportionate cause and effect seems somewhat less stark if one takes the boom and bust in the U.S. housing market as the trigger of the crisis, as the paper gains and losses associated with the swing in house prices were many times the losses associated directly with subprime loans. Indeed, the 30 percent or so aggregate decline in house prices since their peak has by now eliminated nearly $7 trillion in paper wealth. However, on closer examination, it is not clear that even the large movements in house prices, in the absence of the underlying weaknesses in our financial system, can account for the magnitude of the crisis. First, much of the decline in house prices has occurred since the most intense phase of the crisis; the decline in prices since September 2008 is probably better viewed as largely the result of, rather than a cause of, the crisis and ensuing recession. More fundamentally, however, any theory of the crisis that ties its magnitude to the size of the housing bust must also explain why the fall of dot-com stock prices just a few years earlier, which destroyed as much or more paper wealth--more than $8 trillion--resulted in a relatively short and mild recession and no major financial instability.2 Once again, the explanation of the differences between the two episodes must be that the problems in housing and mortgage markets interacted with deeper vulnerabilities in the financial system in ways that the dot-com bust did not. So let me turn, then, to a discussion of those vulnerabilities and how they amplified the effects of triggers like the collapse of the subprime mortgage market.

A number of the vulnerabilities I listed a few moments ago were associated with the increased importance of the so-called shadow banking system. Shadow banking, as usually defined, comprises a diverse set of institutions and markets that, collectively, carry out traditional banking functions--but do so outside, or in ways only loosely linked to, the traditional system of regulated depository institutions. Examples of important components of the shadow banking system include securitization vehicles, asset-backed commercial paper (ABCP) conduits, money market mutual funds, markets for repurchase agreements (repos), investment banks, and mortgage companies. Before the crisis, the shadow banking system had come to play a major role in global finance.

Economically speaking, as I noted, shadow banking bears strong functional similarities to the traditional banking sector. Like traditional banking, the shadow banking sector facilitates maturity transformation (that is, it is used to fund longer-term, less-liquid assets with short-term, more-liquid liabilities), and it channels savings into specific investments, mostly debt-like instruments. In part, the rapid growth of shadow banking reflected various types of regulatory arbitrage--for example, the minimization of capital requirements. However, instruments that fund the shadow banking system, such as money market mutual funds and repos, also met a rapidly growing demand among investors, generally large institutions and corporations, seeking cash-like assets for use in managing their liquidity. Commercial banks were limited in their ability to meet this growing demand by prohibitions on the payment of interest on business checking accounts and by relatively low limits on the size of deposit accounts that can be insured by the Federal Deposit Insurance Corporation (FDIC).

As became apparent during the crisis, a key vulnerability of the system was the heavy reliance of the shadow banking sector, as well as some of the largest global banks, on various forms of short-term wholesale funding, including commercial paper, repos, securities lending transactions, and interbank loans. The ease, flexibility, and low perceived cost of short-term funding also supported a broader trend toward higher leverage and greater maturity mismatch in individual shadow banking institutions and in the sector as a whole.

While banks also rely on short-term funding and leverage, they benefit from a government-provided safety net, including deposit insurance and backstop liquidity provision by the central bank. Shadow banking activities do not have these safeguards, so they employ alternative mechanisms to gain investor confidence. Among these mechanisms are the collateralization of many shadow banking liabilities; regulatory or contractual restrictions placed on portfolio holdings, such as the liquidity and credit quality requirements applicable to money market mutual funds; and the imprimaturs of credit rating agencies. Indeed, the very foundation of shadow banking and its rapid growth before the crisis was the widely held view (among both investors and regulators) that these safeguards would protect shadow banking activities against runs and panics, similar to the protection given to commercial banking by the government safety net. Unfortunately, this view turned out to be wrong. When it became clear to investors that these alternative protections might not be adequate to protect against losses, widespread flight from the shadow banking system occurred, with pernicious dynamics reminiscent of the banking panics of an earlier era.

Although the vulnerabilities associated with short-term wholesale funding and excessive leverage can be seen as structural weaknesses of the global financial system, they can also be viewed as a consequence of poor risk management by financial institutions and investors, which I would count as another major vulnerability of the system before the crisis. Unfortunately, the crisis revealed a number of significant defects in private-sector risk management and risk controls, importantly including insufficient capacity by many large firms to track firmwide risk exposures, such as off-balance-sheet exposures.

This lack of capacity by major financial institutions to track firmwide risk exposures led in turn to inadequate risk diversification, so that losses--rather than being dispersed broadly--proved in some cases to be heavily concentrated among relatively few, highly leveraged companies. Here, I think, is the principal explanation of why the busts in dot-com stock prices and in the housing and mortgage markets had such markedly different effects. In the case of dot-com stocks, losses were spread relatively widely across many types of investors. In contrast, following the housing and mortgage bust, losses were felt disproportionately at key nodes of the financial system, notably highly leveraged banks, broker-dealers, and securitization vehicles. Some of these entities were forced to engage in rapid asset sales at fire-sale prices, which undermined confidence in counterparties exposed to these assets, led to sharp withdrawals of funding, and disrupted financial intermediation, with severe consequences for the economy.

Private-sector risk management also failed to keep up with financial innovation in many cases. An important example is the extension of the traditional originate-to-distribute business model to encompass increasingly complex securitized credit products, with wholesale market funding playing a key role. In general, the originate-to-distribute model breaks down the process of credit extension into components or stages--from origination to financing and to the postfinancing monitoring of the borrower's ability to repay--in a manner reminiscent of how manufacturers distribute the stages of production across firms and locations. This general approach has been used in various forms for many years and can produce significant benefits, including lower credit costs and increased access of consumers and small and medium-sized businesses to capital markets. However, the expanded use of this model to finance subprime mortgages through securitization was mismanaged at several points, including the initial underwriting, which deteriorated markedly, in part because of incentive schemes that effectively rewarded originators for the quantity rather than the quality of the mortgages extended. Loans were then packaged into securities that proved complex, opaque, and unwieldy; for example, when defaults became widespread, the legal agreements underlying the securitizations made reasonable modifications of troubled mortgages difficult. Rating agencies' ratings of asset-backed securities were revealed to be subject to conflicts of interest and faulty models. At the end of the chain were investors who often relied mainly on ratings and did not make distinctions among AAA-rated securities. Even if the ultimate investors wanted to do their own credit analysis, the information needed to do so was often difficult or impossible to obtain.

Dependence on short-term funding, high leverage, and inadequate risk management were critical vulnerabilities of the private sector prior to the crisis. Derivative transactions further increased risk concentrations and the vulnerability of the system, notably by shifting the location and apparent nature of exposures in ways that were not transparent to many market participants. But even as private-sector activities increased systemic risk, the public sector also failed to appreciate or sufficiently respond to the building vulnerabilities in the financial system--both because the statutory framework of financial regulation was not well suited to addressing some key vulnerabilities and because some of the authorities that did exist were not used effectively.

In retrospect, it is clear that the statutory framework of financial regulation in place before the crisis contained serious gaps. Critically, shadow banking activities were, for the most part, not subject to consistent and effective regulatory oversight. Much shadow banking lacked meaningful prudential regulation, including various special purpose vehicles, ABCP conduits, and many nonbank mortgage-origination companies. No regulatory body restricted the leverage and liquidity policies of these entities, and few if any regulatory standards were imposed on the quality of their risk management or the prudence of their risk-taking. Market discipline, imposed by creditors and counterparties, helped on some dimensions but did not effectively limit the systemic risks these entities posed.

Other shadow banking activities were potentially subject to some prudential oversight, but weaknesses in the statutory and regulatory framework meant that in practice they were inadequately regulated and supervised. For example, the Securities and Exchange Commission supervised the largest broker-dealer holding companies but only through an opt-in arrangement that lacked the force of a statutory regulatory regime. Large broker-dealer holding companies faced serious losses and funding problems during the crisis, and the instability of such firms as Bear Stearns and Lehman Brothers severely damaged the financial system. Similarly, the insurance operations of American International Group, Inc. (AIG), were supervised and regulated by various state and international insurance regulators, and the Office of Thrift Supervision had authority to supervise AIG as a thrift holding company. However, oversight of AIG Financial Products, which housed the derivatives activities that imposed major losses on the firm, was extremely limited in practice.

The gaps in statutory authority had the additional effect of limiting the information available to regulators and, consequently, may have made it more difficult to recognize the underlying vulnerabilities and complex linkages in the overall financial system. Shadow banking institutions that were unregulated or lightly regulated were typically not required to report data that would have adequately revealed their risk positions or practices. Moreover, the lack of preexisting reporting and supervisory relationships hindered systematic gathering of information that might have helped policymakers in the early days of the crisis.

A broader failing was that regulatory agencies and supervisory practices were focused on the safety and soundness of individual financial institutions or markets--what we now refer to as microprudential supervision. In the United States and most other advanced economies, no governmental entity had either a mandate or sufficient authority--now often called macroprudential authority--to take actions to limit systemic risks that could result from the collective behavior of financial institutions and markets.

Gaps in the statutory framework were an important reason for the buildup of risk in certain parts of the system and for the inadequate response of the public sector to that buildup. But even when the relevant statutory authorities did exist, they were not always used forcefully or effectively enough by regulators and supervisors, including the Federal Reserve. Notably, bank regulators did not do enough to force large financial institutions to strengthen their internal risk-management systems or to curtail risky practices. The Federal Reserve's Supervisory Capital Assessment Program, undertaken in the spring of 2009 and popularly known as the "stress tests," played a critical role in restoring confidence in the U.S. banking system, but it also demonstrated that many institutions' information systems could not provide timely, accurate information about bank exposures to counterparties or complete information about the aggregate risks posed by different positions and portfolios. Regulators had recognized these problems in some cases but did not press firms vigorously enough to fix them.

Even without a macroprudential mandate, regulators could also have done more to try to mitigate risks to the broader financial system. In retrospect, stronger bank capital standards--notably those relating to the quality of capital and the amount of capital required for banks' trading book assets--and more attention to the liquidity risks faced by the largest, most interconnected firms would have made the financial system as a whole more resilient.

The Crisis as a Classic Financial Panic
Having laid out some of the triggers and vulnerabilities that set the stage for the crisis, I can briefly sketch the evolution of the crisis itself. As I have noted, developments in housing and mortgage markets played an important role as triggers. Beginning in 2007, declining house prices and rising rates of foreclosure raised serious concerns about the values of mortgage-related assets and considerable uncertainty about where those losses would fall. The economy officially fell into recession in December 2007, following several months of financial stress. However, the most severe economic consequences followed the extreme market movements in the fall of 2008.

To a significant extent, the crisis is best understood as a classic financial panic--differing in details but fundamentally similar to the panics described by Bagehot and many others.3 The most familiar type of panic that has occurred historically, involving runs on banks by retail depositors, had been made largely obsolete by deposit insurance, central bank backstop liquidity facilities, and the associated government supervision of banks. But a panic is possible in any situation in which longer-term, illiquid assets are financed by short-term, liquid liabilities and in which providers of short-term funding either lose confidence in the borrower or become worried that other short-term lenders may lose confidence. The combination of dependence on wholesale, short-term financing; excessive leverage; generally poor risk management; and the gaps and weaknesses in regulatory oversight created an environment in which a powerful, self-reinforcing panic could begin.4 

Indeed, panic-like phenomena arose in multiple contexts and in multiple ways during the crisis. The repo market, a major source of short-term credit for many financial institutions, notably including the independent investment banks, was an important example. In repo agreements, loans are collateralized by financial assets, and the maximum amount of the loan is the current assessed value of the collateral less a safety margin, or haircut. The secured nature of repo agreements gave firms and regulators confidence that runs were unlikely. But this confidence was misplaced. Once the crisis began, repo lenders became increasingly concerned about the possibility that they would be forced to receive collateral instead of cash, collateral that would then have to be disposed of in falling and illiquid markets. In some contexts, lenders responded by imposing increasingly higher haircuts, cutting the effective amount of funding available to borrowers. In other contexts, lenders simply pulled away, as in a deposit run; in these cases, some borrowers lost access to repo entirely, and some securities became unfundable in the repo market. In either case, absent sufficient funding, borrowers were frequently left with no option but to sell assets into illiquid markets. These forced sales drove down asset prices, increased volatility, and weakened the financial positions of all holders of similar assets. Volatile asset prices and weaker borrower balance sheets in turn heightened the risks borne by repo lenders, further boosting the incentives to demand higher haircuts or withdraw funding entirely. This unstable dynamic was operating in full force around the time of the near failure of Bear Stearns in March 2008, and again during the worsening of the crisis in mid-September of that year.5 

Classic panic-type phenomena occurred in other contexts as well. Early in the crisis, structured investment vehicles and many other asset-backed programs were unable to roll over their commercial paper as investors pulled back, and the programs were forced to draw on liquidity lines from banks or to sell assets.6 The resulting pressure on the bank liquidity providers, evident especially in the market for dollar-denominated loans in short-term funding markets, impeded the functioning of the financial system throughout the crisis. Following the Lehman collapse and the "breaking of the buck" by a money market mutual fund that held commercial paper issued by Lehman, both money market mutual funds and the commercial paper market were also subject to runs.7 More generally, during the crisis, runs of short-term uninsured creditors created severe funding problems for a number of financial firms, including several large broker-dealers and also some bank holding companies. In some cases, withdrawals of funds by creditors were augmented by "runs" in other guises--for example, by prime brokerage customers of investment banks concerned about the safety of cash and securities held at those firms or by derivatives counterparties demanding additional margin.8 Overall, the emergence of run-like phenomena in a variety of contexts helps explain the remarkably sharp and sudden intensification of the financial crisis, its rapid global spread, and the fact that standard market indicators largely failed to forecast the abrupt deterioration in financial conditions.

The multiple instances of run-like behavior during the crisis, together with the associated sharp increases in liquidity premiums and dysfunction in many markets, motivated much of the Federal Reserve's policy response.9 Bagehot advised central banks--the only institutions that have the power to increase the aggregate liquidity in the system--to respond to panics by lending freely against sound collateral. Following that advice, from the beginning of the crisis, the Fed, like other major central banks, provided large amounts of short-term liquidity to financial institutions, including primary dealers as well as banks, on a broad range of collateral.10 Reflecting the contemporary institutional environment, it also provided backstop liquidity support for components of the shadow banking system, including money market mutual funds, the commercial paper market, and the asset-backed securities markets. To be sure, the provision of liquidity alone can by no means solve the problems of credit risk and credit losses, but it can reduce liquidity premiums, help restore the confidence of investors, and thus promote stability. It can also reduce panic-driven credit problems in cases in which such problems result from price declines during liquidity-driven fire sales of assets.

The pricing of the liquidity facilities was an important part of the Federal Reserve's strategy. Rates could not be too high; to have a positive effect, and to minimize the stigma of borrowing, the facilities had to be attractive relative to rates available (or nominally available) in illiquid, dysfunctional markets. At the same time, pricing had to be sufficiently unattractive that borrowers would voluntarily withdraw from these facilities as market conditions normalized. This desired outcome in fact occurred: By early 2010, emergency lending had been drastically reduced, along with the demand for such lending.

The Federal Reserve's responses to the failure or near failure of a number of systemically critical firms reflected the best of bad options, given the absence of a legal framework for winding down such firms in an orderly way in the midst of a crisis--a framework that we now have. However, those actions were, again, consistent with the Bagehot approach of lending against collateral to illiquid but solvent firms. The acquisition of Bear Stearns by JPMorgan Chase was facilitated by a Federal Reserve loan against a designated set of assets, and the provision of liquidity to AIG was collateralized by the assets of the largest insurance company in the United States. In both cases the Federal Reserve determined that the loans were adequately secured, and in both cases the Federal Reserve has either been repaid with interest or holds assets whose assessed values comfortably cover remaining loans.

To say that the crisis was purely a liquidity-based panic would be to overstate the case. Certainly, an important part of the resolution of the crisis involved assuring markets and counterparties of the solvency of key financial institutions, and that assurance was provided in significant part by the injection of capital, including public capital, and the issuance of guarantees--measures not available to the Federal Reserve. In these respects, the Treasury-managed Troubled Asset Relief Program and the FDIC's Temporary Liquidity Guarantee Program played critical roles. As I have noted, the Federal Reserve did help restore confidence in the solvency of the banking system by leading the stress tests of the 19 largest U.S. bank holding companies in the spring of 2009. These stress tests, which were both rigorous and transparent, helped make it possible for the tested banks to raise $120 billion in private capital in the ensuing months.

The response to the panic also involved an extraordinary amount of international consultation and coordination. Following a key meeting of the Group of Seven finance ministers and central bank governors in Washington on October 10, 2008, the governments of other industrial countries took strong measures to stabilize key financial institutions and markets. Central banks collaborated closely throughout the crisis; in particular, the Federal Reserve undertook swap agreements with 14 other central banks to help ensure adequate dollar liquidity in global markets and thus keep credit flowing to U.S. households and businesses.

The financial crisis of 2007-09 was difficult to anticipate for two reasons: First, financial panics, being to a significant extent self-fulfilling crises of confidence, are inherently difficult to foresee. Second, although the crisis bore some resemblance at a conceptual level to the panics known to Bagehot, it occurred in a rather different institutional context and was propagated and amplified by a number of vulnerabilities that had developed outside the traditional banking sector. Once identified, however, the panic could be addressed to a significant extent using classic tools, including backstop liquidity provision by central banks, both here and abroad.

To avoid or at least mitigate future panics, the vulnerabilities that underlay the recent crisis must be fully addressed. As you know, this process is well under way at both the national and international levels. I will have to leave to another time a discussion of the extensive changes in regulatory frameworks, as well as the changes in the Federal Reserve's own organization and practices, that have been or are being put in place. Instead, I will close by noting that the events of the past few years have forcibly reminded us of the damage that severe financial crises can cause. Going forward, for the Federal Reserve as well as other central banks, the promotion of financial stability must be on an equal footing with the management of monetary policy as the most critical policy priorities.


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Fri, 04/13/2012 - 13:14 | 2342131 israhole
israhole's picture


Fri, 04/13/2012 - 13:15 | 2342139 Zero Govt
Zero Govt's picture

bullshitting crone

Fri, 04/13/2012 - 13:18 | 2342145 brewing
brewing's picture

he's so fucking smart...

Fri, 04/13/2012 - 13:32 | 2342209 flacon
flacon's picture

This is just so fucking gay.


It would be really nice if Ben Bernanke and his cohorts of PhD professors would just come up with a daily set price for each stock, bond, commodity, that way we wouldn't have to guess any more. 

Fri, 04/13/2012 - 13:58 | 2342316 narapoiddyslexia
narapoiddyslexia's picture

Here is a chart from Doug Short that says it all -

Notice on August 27, 2010, the day that Ben gave his Jackson Hole Speech, that he had allowed the S&P to drop from 1217 [peak of QE1 S&P] down to 1064. On that day the S&P started up.

At the announcement of Operation Twist on September 21, 2011, he had let it drop from 1363 [peak of QE2 S&P] down to 1130.

Now the S&P peaked at 1419 on april 2, 2012, so if he lets it drop an amount equal to the last two times he let it drop, it will go down to about 1200 before he announces anything.

He won't give a clue until then.


Fri, 04/13/2012 - 21:48 | 2342364 The Big Ching-aso
The Big Ching-aso's picture



When Bernanke has a word cloud it makes a lot of cents.

Fri, 04/13/2012 - 22:09 | 2343156 Element
Element's picture

Why is anyone surprised?  The Ben said in a speech before the QE1.1 MBS program (that slumped prices because the market could not absorb it), the fore-runner of the program that expanded into QE2, that the FOMC would use careful and detailed consistent wording within minutes and speeches, specifically to game the market and con people into thinking things were getting better, or at least not getting worse (BEA and BLS helped out as well apparently).

Ben actually detailed that the FOMC had identified carefully talking out the side of their mouth as one of its FOUR PRIMARY TOOLS that they would use to engender market stability, and to aim for achieving its mandate (I'm sure someone will have a quote handy).

Nothing has changed, he's printing, as he said he would, and he's talking pure shit out the side of his mouth, like he said he would.


You are officially winning.

Fri, 04/13/2012 - 13:15 | 2342133 GOSPLAN HERO
GOSPLAN HERO's picture

The Fed:  where beautiful girls & successful men meet.

Fri, 04/13/2012 - 13:17 | 2342141 Seize Mars
Seize Mars's picture


"The Fed. The Best financial markets jobs. The firm you really want to work for."

Fri, 04/13/2012 - 13:54 | 2342303 ABG LINE
ABG LINE's picture


Fri, 04/13/2012 - 13:15 | 2342134 idea_hamster
idea_hamster's picture


Fri, 04/13/2012 - 13:15 | 2342135 THECOMINGDEPRESSION

Total babble talk that went nowhere and meant nothing. Just another way of saying absolutely nothing but allow me to kick that can of shit just another foot.

Fri, 04/13/2012 - 22:24 | 2343171 Element
Element's picture

What Ben meant to say was;


"... you'd be safer mowing in a minefield than buying up US Bonds".

Fri, 04/13/2012 - 13:14 | 2342137 sabra1
sabra1's picture

at least we pleebs can walk the streets! bet the bernank hides in his bunker day and night!

Fri, 04/13/2012 - 16:12 | 2342138 bigdumbnugly
bigdumbnugly's picture

does it matter that this cloud eminates from his ass?

Fri, 04/13/2012 - 13:16 | 2342140 slaughterer
slaughterer's picture

Wait for Q&A.  BB is on home turf.  Time for the "hint."

Fri, 04/13/2012 - 13:27 | 2342178 bigdumbnugly
bigdumbnugly's picture

maybe the best hint that qe is actually on the table is the fact that he is avoiding mention of it.      .the thing that shall not be named.

Fri, 04/13/2012 - 13:51 | 2342290 Plymster
Plymster's picture

You're dead on.  In fact, he slightly skirted the topic, while praising his QE in the conclusion. 

The financial crisis of 2007-09 was difficult to anticipate for two reasons: First, financial panics, being to a significant extent self-fulfilling crises of confidence, are inherently difficult to foresee. Second, although the crisis bore some resemblance at a conceptual level to the panics known to Bagehot, it occurred in a rather different institutional context and was propagated and amplified by a number of vulnerabilities that had developed outside the traditional banking sector. Once identified, however, the panic could be addressed to a significant extent using classic tools, including backstop liquidity provision by central banks, both here and abroad.

Then he went further in the final paragraph by suggesting that going forward, they are going to legislate printing any time the banks appear to run low on cash.  Hell, he even threatens that failing to print will cause further financial crises.  They are institutionalizing QE and planning a global policy of currency devaluation.  As long as these fools are in power, cash is trash.

To avoid or at least mitigate future panics, the vulnerabilities that underlay the recent crisis must be fully addressed. As you know, this process is well under way at both the national and international levels. I will have to leave to another time a discussion of the extensive changes in regulatory frameworks, as well as the changes in the Federal Reserve's own organization and practices, that have been or are being put in place. Instead, I will close by noting that the events of the past few years have forcibly reminded us of the damage that severe financial crises can cause. Going forward, for the Federal Reserve as well as other central banks, the promotion of financial stability must be on an equal footing with the management of monetary policy as the most critical policy priorities.

Fri, 04/13/2012 - 16:58 | 2342737 Zero Govt
Zero Govt's picture

"..I will close by noting that the events of the past few years have forcibly reminded us of the damage that severe financial crises can cause."

I will close by noting that the predictable events of the past few years have forcibly reminded us of the damage that severe banker greed, lunatic over-leverage and corruption of the political system and Fed itself can cause... none of which we've fixed or even addressed while i sit like a complete turkey at the helm.


Fri, 04/13/2012 - 22:27 | 2343173 Element
Element's picture

"The path forward contains many difficult trade-offs and choices. But postponing those choices and failing to put the nations finances on a sustainable long-run trajectory would ultimately do great damage to our economy."

- Ben Bernanke, April 28 2010 - US Hearings on the deficit.




Fri, 04/13/2012 - 22:49 | 2343187 Element
Element's picture



" ...the promotion of financial stability ..."


Which should not be confused with having financial stability.

Fri, 04/13/2012 - 13:15 | 2342142 SheepDog-One
SheepDog-One's picture

Long winded cocksucker blah blah....hey FUCK YOU Bernank!

Fri, 04/13/2012 - 15:41 | 2342296 Village Smithy
Village Smithy's picture

I started to read it but then I heard his annoying smug voice in my head and began to feel nauseated. I quit because I don't like to show up at the pub with an upset stomach.

Fri, 04/13/2012 - 13:18 | 2342144 slaughterer
slaughterer's picture

I just saw Jan Hatzius slipping a note onto the podium.  

Fri, 04/13/2012 - 13:43 | 2342251 slewie the pi-rat
slewie the pi-rat's picture


lotta banksters on stage this week;  apparently they have all been inoculated against tetanus, too... 

...ah, to be slain by the jawbone of an ass!  (that may be from autobiographyOfaFlea)

Fri, 04/13/2012 - 13:20 | 2342147 q99x2
q99x2's picture

Hell with Bernanke.

'From CNBC

Facebook's blockbuster initial public offering could be coming at just the right time for markets — right when investors are preparing for the seemingly annual ritual to sell in May and go away.'

We've got the FB put.

Right. as if the FED, GOOG and AAPL can't do it FB will.

Fri, 04/13/2012 - 13:25 | 2342169 SheepDog-One
SheepDog-One's picture

Just think about the benefits of Farmville to the world commodity markets!

Fri, 04/13/2012 - 13:19 | 2342150 Randall Cabot
Randall Cabot's picture

The market appears to not even care anymore if he talks QE or not, only that he talks.

Fri, 04/13/2012 - 13:21 | 2342157 ekm
ekm's picture

Please, I beg you, please DO NOT use the word "market" any longer. There isn't any. Just PPT = Primary Dealers buying up everything until nothing left to buy.

I have renamed the Fed as Insanity and the Market as Madhouse.

Fri, 04/13/2012 - 13:38 | 2342237 t_kAyk
t_kAyk's picture

"The Chairsatan of Insanity has flooded the Madhouse!"



Fri, 04/13/2012 - 22:29 | 2343174 Element
Element's picture

You can not borrow and print your way to recovery of people.

Fri, 04/13/2012 - 13:19 | 2342153 Undecided
Fri, 04/13/2012 - 13:27 | 2342180 ekm
ekm's picture

Wow, wow, wow.

Thx a lot, sir. This is news - this is what I'm talking about. This is a real view of coming 3000 dow pts drop in one day.

Thx a million.

Fri, 04/13/2012 - 13:37 | 2342230 SheepDog-One
SheepDog-One's picture

My God....well we cant have traders messing up our finely tuned trade scamming operations! Get rid of all humans! Unleash the T-1 Terminators, Skynet!

Fri, 04/13/2012 - 13:48 | 2342275 ekm
ekm's picture

It looks like Ann Barnhart unleashed all dogs out of the doghouse.

Fri, 04/13/2012 - 13:19 | 2342154 Alex Kintner
Alex Kintner's picture

I don't know about 'word clouds' and such, but I just threw some Voodoo Bones and damn, it don't look good.

Fri, 04/13/2012 - 13:23 | 2342162 SheepDog-One
SheepDog-One's picture

Look at full retard markets, looks like they dont know what to do 'Duh gee whats it mean? Do we go up, or down now'?

Hell with full retard, this show is insulting even to full retards.

Fri, 04/13/2012 - 13:24 | 2342165 navy62802
navy62802's picture

He's saving up his load so he can help the IMF when they come calling, as they surely will, given the rapidly deteriorating situation in Europe.

Fri, 04/13/2012 - 13:23 | 2342166 lemonobrien
lemonobrien's picture

stocks and gold goi up before he speaks, then down afterward. just wish he'd shut up

Fri, 04/13/2012 - 13:25 | 2342173 LongSoupLine
LongSoupLine's picture

Dear Chairman Bernanke,


STFU you bank propping, middle class destroying asshole.

Fuck off,

ZH followers


Fri, 04/13/2012 - 13:58 | 2342312 Silveramada
Silveramada's picture

ok, so, no Qe (for now)... really? between oil, inflation, unemployement, reduced industrial capacity, no production...exc exc  HOW we gonna have any GDP grow? NONE, right, then the next step is LESS MONEY IN FISCAL REVENUE, so finally, HOW  ARE  WE GOING TO PAY FOR OUR MONSTER DEFICIT? u got it... the motherfuckers will have to print, is a debt society: if you don't print and get in more debt you cannot keep the show going!!! BEN u bastard print print print more $, Mugabe is your economy teacher u retard...

Fri, 04/13/2012 - 15:42 | 2342190 Silverhog
Silverhog's picture

I see these words didn't make it into the word cloud either, boned, sheeple, fucked, pillage, lady Gaga.

Fri, 04/13/2012 - 22:34 | 2343177 Element
Element's picture

Oh, I can see you need more of the same young man!


“There are some signs that the private sector is picking up the baton and moving the economy forward.” ... “The recession is too deep, the loss of tax revenue is too great, the spending to try and support the economy and the financial system too large.” ... “We are going to have to make a judgment about when is the appropriate time to begin moving and begin moving towards a more normal policy,” … “but doing that in a way that anticipates where the economy is going to be a year or a year and a half down the road.”

- Ben Bernankster, June 07 2010

Fri, 04/13/2012 - 13:31 | 2342194 gookempucky
gookempucky's picture

A broader failing was that regulatory agencies and supervisory practices were focused on the safety and soundness of individual financial institutions or markets--what we now refer to as microprudential supervision. In the United States and most other advanced economies, no governmental entity had either a mandate or sufficient authority--now often called macroprudential authority--to take actions to limit systemic risks that could result from the collective behavior of financial institutions and markets.


didnt know he could speak in past and present terms at the same time---- this was a thousand word lie.

Fri, 04/13/2012 - 13:31 | 2342198 Stares straight...
Stares straight ahead's picture

Can someone give me the number to a good, local shadowbank?  I need a shadow loan.

Fri, 04/13/2012 - 13:32 | 2342200 NotApplicable
NotApplicable's picture

No hints?

The largest two words in the bubble "financial crisis" are code-words for more QE (once they've finished the current round in Europe, that is).

Nothing like having to endure more pain, so that even more can be added later. A true win-win!

Fri, 04/13/2012 - 13:34 | 2342211 SheepDog-One
SheepDog-One's picture

WHAAAAA I want some hints of QE so I can get back to 'feeling better' as Becky Quick says every other sentence....booo hoooo.

Fri, 04/13/2012 - 13:36 | 2342223 TheFischerKing
TheFischerKing's picture

"leaving discussions of monetary policy and the aftermath of the crisis to another occasion." Hmmm and when will that one be?

Fri, 04/13/2012 - 14:51 | 2342454 SheepDog-One
SheepDog-One's picture

Thats what none of us knows....Monday, the following week or following month or end of the year the next 'crisis' is coming....but it is coming. And it very well may be stock markets and 'QE's' will be the last thing on anyones mind when the next 'crisis' hits.

Fri, 04/13/2012 - 15:17 | 2342521 worbsid
worbsid's picture

Pridicting is very difficult, especially about the future.

The future just ain't what it used to be.

The Yogi made more sence than The Bernak

Fri, 04/13/2012 - 13:36 | 2342225 Scalaris
Scalaris's picture

Is Bernanke trying to say that shadow institutions vulnerabilities caused the financial crisis and are causing short-term banking liquidity?  Because it doesn't make sense. Or is he onto something?


Nonetheless - I fucking love world-clouds.

Fri, 04/13/2012 - 13:39 | 2342235 JustObserving
JustObserving's picture

The Fed has complete control of the bond markets (bond vigilantes died years ago), the stock markets and the precious metals markets.  These are markets in name only. They are just extensions of the Fed.

The corruption of US markets is complete.

Fri, 04/13/2012 - 13:43 | 2342253 ekm
ekm's picture

I you meant 'trying' to have complete control, it's correct.

I you meant that they actually can have complete control 'forever', it's incorrect. They can have control, until......they can't.

Fri, 04/13/2012 - 13:58 | 2342319 Everybodys All ...
Everybodys All American's picture

That's right. Everything is fine until it's not and there will be no warning. Other than your own common sense which is screaming 'hey dumbass' right now.

Fri, 04/13/2012 - 14:53 | 2342462 SheepDog-One
SheepDog-One's picture

Thats right, thats my argument with everyone who believes they 'print to infinity' they dont, no one has ever had complete control even though many megalomaniacs have believed they did. All megalomaniacs regimes end in sudden disaster, and we're no different.

Fri, 04/13/2012 - 13:43 | 2342256 JenkinsLane
JenkinsLane's picture

Don't be fooled by the ink that he's got, he's still Benny from the block.


Sincerely, crowbars r us

Fri, 04/13/2012 - 13:47 | 2342271 Dingleberry
Dingleberry's picture

Same shit. Different QE.  Who cares what he says anyways.....remember when "subprime was contained"?  BTW, he'll print. Or he'll watch his fiat-induced edifices come crashing back to earth. Print or die....bitchez!! That's all you need to know. 

Fri, 04/13/2012 - 13:48 | 2342272 ultimate warrior
ultimate warrior's picture

Ben flat out lying on tv right now. What a prick.

Fri, 04/13/2012 - 13:49 | 2342280 goforgin
goforgin's picture

This is news? At the end of the rainbow, there ain't QEs into infinity. The pigmen will bring in austerity. That's the B Plan.

Fri, 04/13/2012 - 14:14 | 2342359 Elmer Fudd
Elmer Fudd's picture

There is QE, its for the banks and its called ZIRP.  There is no QE for the sheeple and their portfolios.  So far at least.

Fri, 04/13/2012 - 13:50 | 2342281 Elmer Fudd
Elmer Fudd's picture

Thanks for the cheap physs!!!

Fri, 04/13/2012 - 14:05 | 2342335 orangegeek
orangegeek's picture

When Austerity is failing in government spending is failing - both in Europe, how will the outcome be any different in the US?


The next 10 years will be the decade of paying back or more likely defaulting on the mess of the last 50 years.



Fri, 04/13/2012 - 14:18 | 2342371 kevinearick
kevinearick's picture

New Empire Same as the Old Empire

So, housewives don’t work, don’t understand economics, and have nothing to contribute, according to the make-work crisis managers. Mrs. Romney is much more important to the solution than Mr. Romney.

The insiders print money with the Facebook derivative, all insiders require free money, and hope to print it again with the Facebook purchase of Instagram, on the promise of drawing intelligent kids into the black hole of the fixed lottery ponzi economy, which has no demographic currency remaining. QE simply moves the liability pointers, 0 on the number line, to avoid recognition, increasing penalties and interest on the back end, which is quickly becoming the front end, because intelligent kids will not bite.

AGS is correct in the requirement for global markets, but he is incorrect in assuming that their current structure may be severed from IT, which itself is dependent upon its root in the Family Law Information System, legacy control over new family formation, upon which all empires are dependent, placing the current empire iteration in a catch-22 situation. Careful who you try to place in a catch-22; you never know who holds the key to the empire’s future.

During the investment half-cycle, union/corporate labor superintendents are the lowest superintendants on the labor demand curve. They evacuate and are replaced by corporate superintendents to begin the consumption half-cycle. All labor superintendents above that level must be developed before swapping the polarity back.

Intelligent kids will not work for corporate, because corporate superintendents must twist all developments to suit the existing status quo. They will only work for small business, beyond the empire’s reach, where their ideas may be fully developed, instead of short-circuited. Because females are now interested in participating, these kids require 20hr/wk jobs that pay more than their basic living expenses when combined in marriage, with kids, to prime the demographic currency pump.

From the perspective of labor, the economy is a system of unique participants delivering a distribution, so labor superintendents take whoever comes to the door first, to assess their skills and enable their mobility in the network, to get them where they need to go as quickly as possible. Corporate superintendents do the opposite. They place kids in a waiting pool, to churn them into the efficient droids required for corporate existence, certifying them in credit event horizons accordingly.

Your objective is not survival; that’s the empire’s game. You want your community back up and running, to prosper, as quickly as possible, to take advantage of currency migration. Take a look at Renaissance and WWII business development in the US. The problem with the WWIII scenario is that the perspective participants have been issuing war bonds all along, to build bridges and cities to nowhere, swapping investment with government economic activity consumption. The point of Syria is Turkey, Iran, and Israel, the re-pricing of government currency as reflected in the relative price of oil, with PM as the transition.

The slaves and the masters all have the same teenager mentality, where their development was arrested in school. The only difference between them is birth. The empire must dismantle Family Law, but it cannot, which is why it is in suspended animation, running on automatic. The President is a figure-head.

Bernanke is an order of magnitude smarter than Greenspan, but not as smart as the intelligent kids, and he has the empire on his back. Always set aside surplus for the unexpected, which is always the difference, between time and money. Income is misdirection.

Once you have two points on a line at your position, expect the third. The empire cannot help itself.

Fri, 04/13/2012 - 14:20 | 2342374 FranSix
FranSix's picture

Consider the following.  That in order for massive leverage to continue and that dynamic hedging strategies to remain in place, bankers will have to seriously consider standard weights in gold as the underlying asset.

Fri, 04/13/2012 - 14:27 | 2342392 sbenard
sbenard's picture

How DARE he! I'm sure that if we parse his words closely enough, even reading between the lines between the lines, we'll find some asssurance that Wall St's eternal entitlement is there. It just HAS to be!

Fri, 04/13/2012 - 15:18 | 2342523 The Continental
The Continental's picture

Bernanke used many words to say absolutely nothing. This is by design. He is the unholy fusion of Professor Erwin Corey and Charles Ponzi with a dash of Houdini. After these speechs, he has a good laugh with his minions watching the socalled financial gurus analyze and divine his verbal dribble.

QE never stopped. Beb Shalom Bernanke is buying 80% of treasury debt issuance. And he's giving it to the bankers for nothing. The bankers are gorged with cash and free interest income while Main Street chokes and the real economy disintegrates. These bastards won't be happy until every American family is homelss and living in a tent and having barbecued squirrel for dinner. The the banksters will buy up the country for pennies on the dollar. Jefferson is rolling in his grave.

Fri, 04/13/2012 - 15:24 | 2342538 ejmoosa
ejmoosa's picture

I always am dismayed to find the most important word there is missing: profit.

Fri, 04/13/2012 - 15:30 | 2342552 VonManstein
VonManstein's picture

this was pretty obvious.

Sun, 04/15/2012 - 10:38 | 2346451 Grand Supercycle
Grand Supercycle's picture

The Big Picture Wile E. Coyote Equity Top.

Prepare for a substantial USD rally.

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