A Financial Roast of Roasts « The Financial Panner

A Financial Roast of Roasts

December 10, 2009

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Last Thursday, December 3, 2009, Ben Bernanke appeared before the Senate Banking Committee for his confirmation hearing. While New York Senator Chuck Schumer saw fit to question Ben Bernanke about extraneous ATM fees and many other Senators openly voiced overall support for Bernanke with limited concerns, Kentucky Senator Jim Bunning proceeded to open up a can whoop ass on the Federal Reserve Chairman.

The following is footage of Bunning’s statement during last week’s hearing:

The full text of the multi-faceted assault can be found here. The following are the key quotes from the statement with additional commentary.

Four years ago when you came before the Senate for confirmation to be Chairman of the Federal Reserve, I was the only Senator to vote against you. In fact, I was the only Senator to even raise serious concerns about you. I opposed you because I knew you would continue the legacy of Alan Greenspan, and I was right. But I did not know how right I would be and could not begin to imagine how wrong you would be in the following four years.

The Greenspan legacy on monetary policy was breaking from the Taylor Rule to provide easy money, and thus inflate bubbles. Not only did you continue that policy when you took control of the Fed, but you supported every Greenspan rate decision when you were on the Fed earlier this decade. Sometimes you even wanted to go further and provide even more easy money than Chairman Greenspan. As recently as a letter you sent me two weeks ago, you still refuse to admit Fed actions played any role in inflating the housing bubble despite overwhelming evidence and the consensus of economists to the contrary.

Bernanke had been dubbed “helicopter Ben” by some for suggesting during the 2002-03 deflation scare that the Fed could always print money and drop it from helicopters to inject liquidity into the financial system. Bernanke is not afraid to issue new money as interest rates currently at 0% demonstrate.

An excellent video on just how wrong Bernanke was can be seen here. The degree to which Bernanke was unable to forecast or sense the bubble in real estate clearly points to deception. The rationale for this perceived incompetence is simply because one of the core jobs of the Federal Reserve, which underwrites the core foundation of the US, and for that matter, global economic system, is confidence. This is also why he still will not acknowledge to Bunning that the Fed “played any role in inflating the housing bubble” – it would undermine the misplaced confidence, the magical allure, within which the Fed has existed for some time now.

The Greenspan policy on transparency was talk a lot, use plenty of numbers, but say nothing. Things were so bad one TV network even tried to guess his thoughts by looking at the briefcase he carried to work. You promised Congress more transparency when you came to the job, and you promised us more transparency when you came begging for TARP. To be fair, you have published some more information than before, but those efforts are inadequate and you still refuse to provide details on the Fed’s bailouts last year and on all the toxic waste you have bought.

This is one of the key reasons a comprehensive audit of the fed is needed. Without the facts of where things really stand, a true economic recovery will be impossible.

Now, I want to read you a quote: “I believe that the tools available to the banking agencies, including the ability to require adequate capital and an effective bank receivership process are sufficient to allow the agencies to minimize the systemic risks associated with large banks. Moreover, the agencies have made clear that no bank is too-big-too-fail, so that bank management, shareholders, and un-insured debt holders understand that they will not escape the consequences of excessive risk-taking. In short, although vigilance is necessary, I believe the systemic risk inherent in the banking system is well-managed and well-controlled.”

That should sound familiar, since it was part of your response to a question I asked about the systemic risk of large financial institutions at your last confirmation hearing. I’m going to ask that the full question and answer be included in today’s hearing record.

Now, if that statement was true and you had acted according to it, I might be supporting your nomination today. But since then, you have decided that just about every large bank, investment bank, insurance company, and even some industrial companies are too big to fail. Rather than making management, shareholders, and debt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of moral hazard.

The ironic thing is that this previous statement by Bernanke is true – the proper tools did and still do exist to manage and minimize the “systemic risks associated with large banks.” Instead what has transpired is that banks have been given huge cash injections and allowed secret loans by official sounding loan facilities. This artificial prop up, mostly held together by the equivalent of chewing gum and paper clips, has provided short term support only and is incapable of yielding a long term solution.

Even if all that were not true, the A.I.G. bailout alone is reason enough to send you back to Princeton. First you told us A.I.G. and its creditors had to be bailed out because they posed a systemic risk, largely because of the credit default swaps portfolio. Those credit default swaps, by the way, are over the counter derivatives that the Fed did not want regulated. Well, according to the TARP Inspector General, it turns out the Fed was not concerned about the financial condition of the credit default swaps partners when you decided to pay them off at par. In fact, the Inspector General makes it clear that no serious efforts were made to get the partners to take haircuts, and one bank’s offer to take a haircut was declined. I can only think of two possible reasons you would not make then-New York Fed President Geithner try to save the taxpayers some money by seriously negotiating or at least take up U.B.S. on their offer of a haircut. Sadly, those two reasons are incompetence or a desire to secretly funnel more money to a few select firms, most notably Goldman Sachs, Merrill Lynch, and a handful of large European banks. I also cannot understand why you did not seek European government contributions to this bailout of their banking system.

Chairman of the Senate Banking Committee and Connecticut Senator Chris Dodd further questioned Bernanke on the AIG issue, the interaction can be seen here. Suffice to say, Bernanke’s response is incredibly weak and does not defend at all against claims he intended to “secretly funnel more money to a few select firms, most notably Goldman Sachs, Merrill Lynch, and a handful of large European banks.”

Where I come from we punish failure, not reward it. That is certainly the way it was when I played baseball, and the way it is all across America. Judging by the current Treasury Secretary, some may think Washington does reward failure, but that should not be the case. I will do everything I can to stop your nomination and drag out the process as long as possible. We must put an end to your and the Fed’s failures, and there is no better time than now. Your Fed has become “The Creature from Jekyll Island.”

The last comment is truly spectacular as it puts in the public domain a clear linkage between the Federal Reserve and the famous book by G. Edward Griffin. For those unfamiliar, please see the links page which contains Parts 1 through 12 of a speech given by Griffin which covers the core subject matter.

Unfortunately, it does appear Bernanke has enough support to get reappointed. The vote is scheduled for next week.

While the typical roast is meant to be comical, this one certainly isn’t.

UPDATE: Audit the Federal Reserve

http://www.auditthefed.com

H.R. 1207: Federal Reserve Transparency Act of 2009 now has 317 co-sponsors, up from 313 last week.
S. 604: Federal Reserve Sunshine Act of 2009 now has 30 co-sponsors, flat from 30 last week.

Ron Paul: Bernanke Renomination Hearing, The Fed, Magic Money – MSNBC News (12/3/09)

http://www.youtube.com/watch?v=WjY08PbluCY

CNBC: Peter Schiff – Gold to $5K (12-02-09)

http://www.youtube.com/watch?v=miJj25bq-Ps

Treasury Secretary Timothy Geithner: Obama administration will extend bailout program to October (12/9/09)

http://www.nydailynews.com/money/2009/12/09/2009-12-09_geithner_bailout_program_extended_to_october.html

Treasury Secretary Timothy Geithner told Congress Wednesday that the administration will extend the government’s financial bailout program until next fall, saying it’s needed to protect against fresh economic shocks.
The Troubled Asset Relief Program that Congress passed during the height of the financial crisis in October 2008 was scheduled to expire at the end of the year. Geithner said it will be extended until Oct. 3, 2010. He has the authority to extend the TARP simply by notifying lawmakers.
Geithner said he doesn’t expect to use more than $550 billion of the funds.

High-stakes duel between Rep. Paul and Bernanke intensifies (12/8/09)

http://thehill.com/homenews/house/71069-high-stakes-duel-between-paul-and-bernanke-intensifies

Rep. Ron Paul and Ben Bernanke are locked in a clash of titans.
Paul, the 74-year-old House libertarian from Texas with the high-pitched voice, has fought for decades to kill off the Federal Reserve.
Bernanke, the mild-mannered ex-Princeton professor and chairman of the bank, is waging a high-stakes battle for the Fed’s reputation. And he’s doing everything possible to knock out Paul.
The fight is still in the early rounds. But with the full House expected to vote this week to give government auditors more power to scrutinize the Fed, Paul has the upper hand.

Official Chinese paper calls for more gold reserves (12/8/09)

http://in.reuters.com/article/bankingfinancial-SP/idINTOE5B702F20091208?pageNumber=1

China should increase the proportion of gold in its foreign exchange reserves to ensure the safety of its overall portfolio, an official Chinese newspaper said on Tuesday.
The commentary, which was written by an academic and appeared in the overseas edition of the People’s Daily, also said that a bigger holding of gold was a crucial building block for the yuan to become an international currency.
While such a commentary might not directly reflect leadership opinion, its appearance in China’s tightly controlled official media suggests the idea of buying more gold has at least some support in elite circles.

Obama outlines bailout for Main Street (12/8/09)

http://www.msnbc.msn.com/id/34312987/ns/business-economy_at_a_crossroads

President Barack Obama called for a major new burst of federal spending Tuesday, perhaps $150 billion or more, aiming to jolt the wobbly economy into a stronger recovery and reduce painfully persistent double-digit unemployment.
Despite Republican criticism concerning record federal deficits, Obama said the U.S. has had to “spend our way out of this recession” with so many people out of work but insisted he was still mindful of a need to confront soaring deficits.

U.K., U.S. Top Aaa Ratings Tested by Debt Burdens, Moody’s Says (12/8/09)

http://www.bloomberg.com/apps/news?pid=20601087&sid=ah7iujnjVo8o

Moody’s Investors Service said the top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because public finances are worsening in the wake of the global financial crisis.
“There has been a huge increase in debt-to-gross-domestic- product ratios as a result of the crisis,” said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “It’s right that there should be a lot of attention and pressure on these numbers.”
The cost of protecting U.S. debt from default was unchanged at 32 basis points, or $32,000 a year to protect $10 million of the nation’s bonds from default for five years, according to CMA DataVision prices. That compares with a peak of 100 basis points in February and 20 basis points in October.

Bernanke Low Rates ‘Poison’ to U.S. Economy, Xie Says (12/8/09)

http://www.bloomberg.com/apps/news?pid=20601068&sid=aYVuIVpuwo4I

Federal Reserve Chairman Ben S. Bernanke is prescribing “poison” to the U.S. economy by keeping interest rates near zero and fueling a wave of speculative capital that may cause the next global crisis, former Morgan Stanley chief Asian economist Andy Xie said.
Bernanke is making decisions based on “marginal considerations” that will help short-term growth and employment, instead of focusing on the “soundness of the system,” Xie wrote in an e-mailed note today. The next worldwide crisis will probably strike in 2012, driven by inflation as the low cost of borrowing spurs increases in asset prices, he said.
“There is a Chinese saying that one could quench the thirst by drinking poison,” said Xie, who predicted in September 2006 that the U.S. economy would fall into a recession in 2008. “Bernanke seems to be prescribing exactly this to the U.S. economy. The slower Bernanke raises interest rates, the bigger the next crisis.”

Absolutely No Reason to Raise Rates – ECB (12/7/09)

http://www.nytimes.com/reuters/2009/12/07/business/business-uk-hold-ecb-quaden.html

There is “absolutely” no reason for now to raise interest rates and a further strengthening of the euro to the dollar could hit euro zone growth, European Central Bank Governing Council member Guy Quaden said on Monday.
Quaden said a further strengthening of the euro against the dollar would “not be positive” for growth in the euro zone next year.
He added that global financial imbalances leading to a relatively weak dollar concerned mainly the United States and Asian countries.
“And it is the exchange rate between the currencies of these countries which should be corrected not between the U.S. dollar and the euro,” he said.

Congressmen To Call For Break-Up Of Biggest Banks (12/7/09)

http://www.huffingtonpost.com/2009/12/07/congressmen-to-call-for-b_n_383128.html

Five House Democrats will call this week for a return to a Depression-era law that separated Wall Street investment banking from Main Street commercial banking.
If adopted, the measure would give banks one year to choose between being commercial banks or investment banks. The nation’s biggest – those now commonly referred to as “too big to fail” – would be broken up. The Obama administration opposes the measure.
The amendment’s five co-sponsors – Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts – want to restore the Glass-Steagall Act of 1933, which prohibited commercial banks from underwriting stocks and bonds. The act was repealed in 1999 at the urging of, among others, Larry Summers, now President Barack Obama’s chief economic adviser.
The five congressman all voted against the repeal then – and now they want it back.

Requiem for the Dollar (12/5/09)

http://online.wsj.com/article/SB10001424052748704342404574575761660481996.html?mod=WSJ_hpp_RIGHTTopCarousel

Ben S. Bernanke doesn’t know how lucky he is. Tongue-lashings from Bernie Sanders, the populist senator from Vermont, are one thing. The hangman’s noose is another. Section 19 of this country’s founding monetary legislation, the Coinage Act of 1792, prescribed the death penalty for any official who fraudulently debased the people’s money. Was the massive printing of dollar bills to lift Wall Street (and the rest of us, too) off the rocks last year a kind of fraud? If the U.S. Senate so determines, it may send Mr. Bernanke back home to Princeton. But not even Ron Paul, the Texas Republican sponsor of a bill to subject the Fed to periodic congressional audits, is calling for the Federal Reserve chairman’s head.
There’s no greater success story in the long history of money than the common greenback. Of no intrinsic value, collateralized by nothing, it passes from hand to trusting hand the world over. More than half of the $923 billion’s worth of currency in circulation is in the possession of foreigners.
You get the strong impression that Mr. Bernanke fails to appreciate the tenuousness of the situation – fails to understand that the pure paper dollar is a contrivance only 38 years old, brand new, really, and that the experiment may yet come to naught. Indeed, history and mathematics agree that it will certainly come to naught. Paper currencies are wasting assets. In time, they lose all their value. Persistent inflation at even seemingly trifling amounts adds up over the course of half a century. Before you know it, that bill in your wallet won’t buy a pack of gum.

U.S. already $292 bln in the red this year – CBO (12/4/09)

http://www.reuters.com/article/idUSN0418093920091204

In October and November, the government spent $292 billion more than it took in, the nonpartisan Congressional Budget Office said.
That was even worse than the same period last year, when the government was on its way to posting a record $1.4 trillion deficit for the fiscal year that ended Sept. 30.

U.S. Treasuries’ Biggest Overseas Buyer May Sell: Chart of Day (12/4/09)

http://www.bloomberg.com/apps/news?pid=20601109&sid=aBKGmT4oRCOs

Speculation that the Japanese government plans to sell $100 billion of U.S. Treasury debt to pay for domestic spending may impede the Obama administration’s borrowing plans.
Japan has been this year’s biggest buyer of Treasuries, which means it has done more to help finance the widening U.S. budget deficit than any other country. Its holdings have risen by $125.5 billion, according to data compiled by the Treasury. The comparable figure for China, which surpassed Japan last year as the largest international investor in the securities, is $71.5 billion — 43 percent lower.
Japan will inform the U.S. about the possible $100 billion sale, according to a Market News International report yesterday that cited “rumors” from unnamed sources.

Israel’s Fischer says world must accept a weaker USD (12/3/09)

http://www.reuters.com/article/usDollarRpt/idUSN0310218520091203

Bank of Israel Governor Stanley Fischer said on Thursday the world has to accept a weaker U.S. dollar in order to ensure the global economy recovers soundly.
“We also have to realize, what is hard to get across, there has to be a global rebalancing. Either the U.S. runs a very long period of recession, which is a really bad idea, or the dollar has to weaken, so that balance of payments can be straightened out,” Fischer said in response to a question during a business breakfast in New York.
The Israeli shekel ILS= has recently strengthened against the U.S. dollar, trading at around 3.7750 per greenback. In October it hit its best levels in 10 months, trading as strong as 3.67 per U.S. dollar.
Fischer acknowledged the strong economic connection with the United States and its importance for the global economy but cautioned that heavily export-oriented countries have to move away from relying on the United States to buy their goods and services.

Just 21% Favor Bernanke’s Reappointment As Fed Chairman (12/2/09)

http://www.rasmussenreports.com/public_content/business/general_business/november_2009/just_21_favor_bernanke_s_reappointment_as_fed_chairman

Ben Bernanke begins the formal process tomorrow for confirmation to a second term as chairman of the Federal Reserve Board, but 41% of Americans think President Obama should name someone new to the post.
A new Rasmussen Reports national telephone survey finds that only 21% of adults believe the president should reappoint Bernanke to another four-year term. But a sizable 39% aren’t sure what the president should do.

Fed’s Bullard – oil, gold spike not inflationary (12/2/09)

http://www.marketwatch.com/story/feds-bullard-oil-gold-spike-not-inflationary-2009-12-02

The recent run-up in gold and oil prices is not inflationary, said James Bullard, the president of St. Louis Federal Reserve Bank of St. Louis, in a CNBC television interview Wednesday.
Bullard said the Fed generally would not like to start tightening monetary policy until the unemployment rate starts down. One tightening strategy the Fed may employ would be to hold interest rates low while selling assets to lower bank reserves, Bullard said. “That would be one way to get started,” Bullard said.
If inflation expectations move up sharply, “that is going to trump everything and the Fed is going to have to come in and take care of that, he said. Bullard said the Fed should leave its asset purchase plan open in order to give the central bank flexibility next year.

Highlights from “The International Forecaster” newsletter (12/9/09)

Published and Edited by: Bob Chapman

Check out or Subscribe to The International Forecaster

Our government continues to do its best to suppress gold and silver and commodity prices. Their ham-fisted presence was quite evident this past week and it was only marginally successful. All they accomplished was to make an unnatural correction in a market that could have needed a natural correction. The underlying fundamental factors are still very bullish. The technicals and the long-term charts as well as pro-gold and silver psychology are still in place. The reality is that gold, silver and commodities are still in bull markets and intervention by the President’s “Working Group on Financial Markets” cannot and are not capable of stopping what are going to be the biggest bull markets in history. In both gold and silver bullion and shares the shorts eventually have to cover and that could prove to be one of the biggest bloodbaths of all time and the American taxpayer will get to pay for the losses. What else can one expect with the world financial system collapsing and hyperinflation on the way. Today’s strength in gold and silver have nothing to do with inflation and everything to do with a flight to quality. It has nothing to do with a falling dollar and a great deal to do with a loss of confidence and trust in the G-10. The other factors will add to the fire a bit later. The sophisticated of world finance are starting to realize the US financial system has been run by criminals for a long time. The ringleader of this gang of thieves is the Federal Reserve. That is why S604, HR1207, now attached to HR3996 is so important. It will lead to exposure of what the Fed has been up too for 96 years. These are the people who own the Fed, who have had a revolving door between Wall Street and Washington, particularly our Treasury Department, for many years. They created Fannie Mae, Freddie Mac, Ginnie Mae and FHA. Socialist-Fascist programs initiated by Wall Street to bring great profits to the wealthy lenders and great debt to the American people. Worse yet, there are no longer rules, regulations and laws, because the government regulators at the SEC and CFTC are always looking the other way under government guidance. These agencies absolutely refuse to protect the public against crooks in the fields of banking, ratings, investments and insurance. They are an integral part of the problem. Who in their right mind would take over these agencies instead of letting them fail, as they should have along with AIG, GM and Chrysler? The bottom line is the dollar and every other currency in the world has been falling against gold for six years and almost all general stock market indices have fallen 50% to 80% versus gold for the past nine years. Why don’t CNBC, CNN and the major media tell you that? It is because they are all bought and paid for – that is why. What market couldn’t go up in value with $12.7 trillion at its disposal? This has nothing to do with a healthy economy and everything to do with the Fed creating money out of thin air for its owners and throwing it at the stock market creating the second such bubble in the last 13 years. Do not be fooled readers. This is all just another scam that every American will get to pay for.
Our new President promised change. In the financial sphere we got none. JPMorgan Chase runs the Fed and Goldman Sachs runs the Treasury. The looting of the financial system goes on unabated. The dollar remains under pressure as credit derivatives are used to keep the system running. In gold and silver, not as easily controllable, massive short positions attempt to control the market. The dollar is being deliberately destroyed in order to replace it with an international trading unit made up of G-20 countries. In order to make this acceptable a 10% to 15% gold banking will be part of the package. The Western governments will continue to not only destroy the dollar as a world reserve currency, but also their own currencies in order to transfer strength to currencies of the second and third world, as a method of transferring wealth. This political, social, economic and financial destruction is calculated to bring the economies of the first world down to the level of the second and third world, forcing America and Europe in particular to accept world government. This will eventually bring about a military coup controlled by the Pentagon in which the Illuminists believe they will solidify power by force. That we believe will be unsuccessful and will finally begin the fall of the elitists. It will fail because our military knows what these people are up too and they won’t allow it to happen. As this attempt is made the financial system will unravel, as a mercenary force of a few hundred thousand attempts to protect the power of the elitists
Does the Fed really believe that buying more than $3 billion a day in toxic mortgage securities daily will solve banks’ balance sheet problems? These are the securities that the Fed refuses to tell us what they are paying for them. This is in addition to many other programs, plus zero interest rates designed to support an economy in a depression. We are told such programs will be extended indefinitely, although we have been told unofficially, that the Fed wants to withdraw $1.5 trillion from the economy. That in part is to be accomplished by closing down TARP and collecting $500 billion. You saw Bank of America’s securities offering this past week, which will allow it to pay back TARP funds. We also brought to your attention, as we predicted from secret inside banking sources, that the FDIC was broke, in debt $8.2 billion and secretly another $80 billion it received from the Treasury. We also said the FDIC would no longer exist after late next year. That said BofA announced last week that they would no longer insure interest-bearing deposits and were exiting the FDIC. We have been telling you over and over again get all your money out of CDs and banks, except for 3-months operating expenses or 6-months for businesses, and put those funds in gold and silver related assets and or sovereign Treasuries in Canada and Switzerland. In addition, part of the Fed’s lending has gone to foreign financial institutions and governments by secret direct lending and swap programs. The most recent in March was for $500 billion with Canada, England, Switzerland, Japan and the ECB. The dollars traded to these central banks are used to buy US Treasuries and the foreign currencies given in return are used to manipulate the dollar upward. You saw the result of that last Friday as the dollar rose violently, gold and silver were pounded and the Dow was kept from falling. This is a good example why the Fed has to be audited and investigated. We have to find out what they and the Treasury have been doing via the “Working Group on Financial Markets.”
Many nations are very serious about purchasing more gold. China intends to buy 10 tons in eight years. We can promise you they’ll buy much more than that, plus all domestic production. This gold accumulation is the antithesis of what the world’s elitists desire and is sure to cause great consternation in their ranks, as they fall into the great hole they have created in the scam known as ‘global warning’. Our sources say the FSB, formerly the KGB, was responsible for the over thousand hacked emails. The European, US and British banks are insolvent and the phase of making the public fund them is almost over. The next phase is bankruptcy, which will proceed over the next few years. Wait until the oil producing industry worldwide switches out of the dollar, which is now underway, led by Saudi Arabia. The problem for these producers of real wealth is that all currencies are falling versus gold, so by getting paid in any currency is a loser. What they should be doing is getting paid in gold. Getting paid in a euro with 7% backing certainly isn’t good enough. It is not just the dollar, the whole monetary system worldwide is coming down and only those with gold will escape it. The net that has supported the world monetary system is about to enter its second phase of deterioration and that will create further dislocation. The system in this next phase will contract further and as phase 3 emerges total collapse will result. In these final 2 phases gold will begin to finally trade freely. The manipulations will be over and we will finally have a free market.

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