I understand that it’s a bit of a stretch for a low rent guy like me to take on a former Fed Governor and world class academic. But I’m going to try. Mr. Blinder wrote an Op-Ed in the Times today in support of his “friend and colleague” Ben B.
In a weak attempt at creating balance to his praise of the ‘man of the
year' AB points to a few areas in the past where a mistake or two had
been made. Possibly. He dismisses even those with a suggestion that it
was Greenspan’s fault. On the failure of Bernanke to see the wave of
problems before it was too late AB brushes it off with the excuse, “Who did?”
Well Mr. Blinder, I did. I have been writing and talking about this for
years. I saw Sub-Prime and 100% LTV ‘enhanced’ loans for what they
were. Junk. I make investments and read prospectuses. I saw the crap
that was being sold. I’m no oracle. There were thousands of us shouting
into the wind when this was happening. I guess you did not hear us,
being so isolated down in Princeton.
I loved this line:
“His job performance since October 2008 has been superlative.”
AB, I know you are ‘good buds’ with this guy, but really, “superlative”?
What does that word mean in this context? Is that like a 10+? Why did
you feel it necessary to write this Op-Ed? The answer is because your
boy has not done a superlative job at all. There are Senators and
Congressmen all over Washington that think he has not been superlative.
There is a good many that have the academic status as you that think he
has done a rather poor job. If this were put to a vote of the people
your guy is finished. You think he is the guy that saved us. What you
are missing is that more than half the population thinks he is the
Prince of Darkness
AB: “He led the Fed to lower interest rates to virtually zero, and to hold them there.”
Please. What is hard about that? You make an announcement that says,
“As of tomorrow we are lending at a ¼%”, and then you call the NY Fed
desk to change the O.N. rate. Doing it is easy. Managing the
consequences is a whole other matter. AB gives credit where none is
due. I wonder if AB considered the consequences to people who are
trying to save a few dollars? Unless you gamble in the stock market
those savings have a negative future value because of the “0” stuff AB
and BB are so fond of. Lousy incentive you are creating for a nation
that needs savers.
AB: “(the Fed) breathed some life into the moribund MBS market”.
I’m sorry, what are you talking about? “Breathed some life?”
The Fed has purchased $1.1 TRILLION of MBS. That is not a breath of
life. That is a step that has no precedent in modern history. Your
‘best bud’ has just monetized $2 T bucks. Of course that is going to
work. For a while. You throw gas on a fire, it burns. No trick to that.
AB: “The plain truth is that, as bad as the recession was it
turned out less horrific than expected, and Ben Bernanke is one of the
Mr. Blinder is far too good a historian to make that statement and mean
it honestly. Yes Ben wrote a biblical sized check. And yes that check
avoided some things that would have happened. But it is far too soon to
say that we have ‘won’. This comment reminds me of George Bush on the
aircraft carrier with the banner “Mission Accomplished”.
AB is drinking champagne a little early. Wait a few years until we see
and feel the weight of what has been done. The easiest part of this was
writing the check, paying it back could cripple us.
What prompted me (pissed me off) to post this was the last sentence of
the Op-Ed. AB was clearly addressing his comments to just 100 people.
The Senators who actually have a say in this. He reminded them that in
1983 there was a bit of a squeaker on the nomination of then Fed
chairman Paul Volker. That vote went 84-16 in favor of Volker. Mr.
Blinder concluded with:
“Those 16 Senators look pretty foolish in the eyes of history. There may be a lesson there.”
Mr. Blinder could have said it more bluntly, but left the same meaning:
“If you don’t vote for Bernanke you’re stupid and history will prove it so”.
Well the vote is in. 70 30. Some of those 70 were no doubt influenced
by the kind words by AB. Thirty Senators stood up and voted against
this nomination. In ten years history will not judge them harshly. This
will not be a repeat of 1983. They will be looked at as the ones who
made a vote at critical time and were ignored. They will not look
stupid as Mr. Blinder has suggested. At some point I will remind Mr.
Blinder that it is always a mistake to judge history before history has