Obama isn't a savior like the right likes to poke fun at the view they presuppose many of his supporters view him as, but he is like God or Santa Claus in at least one way, in that, if we believe what common sense tells us and again not what the likes of FOX would like us to believe, that he does very much care about individuals and individual suffering, but he has to deal in the aggregate. In the millions. So then they swing to other extreme and try and paint him as a by the numbers nerd, a socialist working with charts and graphs only interested in actuarial data. And of course they can have their cake and eat it too, because that's what they do.

Forget Bernanke for a moment, forget General Petreus and forget Geithner and McChrystal. Barack inherited all this mess, but we're apparently learning his style across the board is a lot more laizze-faire then we thought it would be. He might have some other end game in mind though.

I do agree that I think history will judge President Bush differently than the papers did, but I think it will be much harsher. So that along that line I agree with your assessment of Bernanke only I would throw in other details like the collapse of Lehman, the specific reasons why it was all his fault. Having said that, no matter who is appointed, they have a .25 rate to work with. You can either start paying banks to take our government tax dollar money, or you can raise rates.

Everybody agrees rates are going up this year, just a question of when, where and how much. Not that that can't have an enormous difference even within that scope and I don't mean to belittle it, but if you have inflationary pressure with massive unemployment, speculation in gold and a weak dollar, that's just a recipe for big bad fucking ugly cake that I sure don't want to eat. If unemployment eases off but hiring doesn't begin that with create more inflationary pressure. And fat cats with their money in commodities and stocks will probably enjoy inflation while the cost of milk and bread and gas goes up, squeezing out the working joe.

So President Obama's style is to take on a lot, try and fix health care, get the troops home from Iraq and switch the focus to Afghanistan, get the economy back on track then get some kind of jobs bill through congress, avoid a depression, save GM, root for the Beavers, make sure Malia isn't more interested in boys than homework while still keeping up with the latest gossip on Tiger, "dating" Michelle and quitting smoking all in one breath.

People will say, well Bush or other Republicans had the same responsibility, he just bit off more than he could chew and he'll get his comeuppance in the midterms and learn the lesson the hard way. But not really, President Bush really didn't give a damn about the little guy, the working stiff, the suffering of the individual, he just had to worry about a handful of friends. And that is one approach, like it or not, sometimes it works, other times we end up like the mess we're in now.

Eh, maybe I'm just justifying Barack's moves, maybe there isn't some overall strategy that makes sense from Afghanistan to jobs to Wall Street to health care. But if you know you've got to on some level please Wall Street, aside from appointing a guy like Krugman (and I'm sure there are a hundred names less familiar) which would upset the apple cart, you know you're picking from the same barrel, they're all going to raise rates this year. Which means we can't just have unemployment easing off like it has been doing (since in the aggregate at the macro scale to big employers, like GM, a government owned company, workers are a resource and thus a cost and therefore in a twist layoffs help ease inflation) but we need big job growth.

And you know that the guys like Ron Paul, God bless his heart, who wants to audit the books, also has a political agenda, and constituents who are responsible for speculation in gold and whether he likes it or not a corresponding trend with a weak dollar.

Whatever you do, don't click this link (studies show you're more likely if you shouldn't)

by tiggerporn on 12/04/2009 03:31:56 PM EST

Sorry Cenk, but you are really wrong here. Let's take it piece by piece.

"He's given credit for steering our economy to safe shores after we hit an enormous economic iceberg. First, I would argue we are nowhere near safe shores."

Firstly, Bernanke took tremendous, non-standard action in order to avert Great Depression 2.0. He didn't just perform run-of-the-mill policy, he took aggressive, intelligent action because he knew full well from his own work in the Great Depression what would happen if he didn't. A little known fact, to the public anyway, is that the Great Depression could have been substantially less bad if the Federal Reserve responded properly. There are very few economists out there that have the know-how Ben did and the audacity to try such aggressive methods. For that, he owes a great deal of credit.

Further, nobody is implying we are on "safe shores." But, he really did help us dodge a bullet and very few other economists would have had the knowledge, skill, and courage to try such an aggressive policy. However, right now, standard monetary policy has become largely ineffective. There are only two ways left to really aggressively fight this recession. There is fiscal expansion, which he has no control over, or he could use extreme quantitative easing to buy up trillions in long-term treasury bonds, but that would be political suicide for the Federal Reserve.

"Second, why are we rehiring the guy who steered the Titanic into the iceberg in the first place?"

How exactly did Ben Bernanke steer us into the Iceberg? Ben Bernanke took office on February 1st, 2006. At this point we were well into speculative bubble and the financial over-leveraging, and Bernanke had nothing to do with that (blame Greenspan). We know from Bernanke and Gertler's work in monetary theory that he couldn't have done anything to avert the speculative bubble. Ben Bernanke and his longtime partner Mark Gertler did profound work in which they discovered that should the Federal Reserve attempt to fight asset bubbles, the result would either be ineffective or counterproductive. What he argued is that the Federal Reserve cannot micromanage these asset bubbles. Monetary policy cannot be fine tuned enough to fight asset bubble, they just can't - without destabilizing other parts of the economy. The Fed's role should be to do what it can to prevent them from occurring (and not urging them on unnecessarily like Greenspan) and insure that when they do happen the central bank responds appropriately and has already assured the financial industry can take the shock without plunging into chaos.

Additionally, Bernanke could not implement capital requirement and transparency rules quickly enough to avert this severe recession. The recession started to occur in early 2007, if he were to take such aggressive action he would have plunged the market. This would have been a huge mistake. And he is not given enough authority to avert this anyway. The SEC played the role of freezing net capital requirements, which played a far larger role than anything Bernanke did.

Furthermore, here is what Bernanke said as a lecture in 2002:

"[T]he Fed should ensure that financial institutions and markets are well prepared for the contingency of a large shock to asset prices... banks be well capitalized and well diversified... contribute to reducing the probability of boom-and-bust cycles... more-transparent accounting and disclosure practices... financial literacy and competence... integrity of the financial infrastructure--in particular, the payments system...."

"A far better approach... supervisory action to ensure capital adequacy in the banking system, stress-testing of portfolios, increased transparency in accounting and disclosure practices, improved financial literacy, greater care in the process of financial liberalization, and a willingness to play the role of lender of last resort when needed..."

He was saying this in 2002, he clearly is a guy who has the right idea about what the Federal Reserve should be doing and the financial crisis is giving him the chance to implement those ideas.

Not only did Ben Bernanke do nothing to cause this crisis, he couldn't have done anything. It was far too late. I don't know if Bernanke would have done anything, but it's clear he couldn't have if he wanted to anyway.

"He is an expert on the Great Depression."

You dramatically underplay his credentials. You describe him as "an expert on the Great Depression," while that certainly is true, he is not just limited as an economic historian. If I were to attribute the title of "greatest living monetary scholar" to someone, that person would either be Ben Bernanke or Mark Gertler, his longtime partner. Their work on assets price bubbles, inflation targeting, debt deflation, non-monetary effects in financial crises, financial accelerators, and credit markets have changed the way we look at monetary theory; in fact, they are largely responsible for the synthesis of Keynes insights on the money supply with Friedman's monetarism. There is a reasons Ben Bernanke is the 18th most cited economist in the world (Mark Gertler being the 15th) - and that's because he is really good. I have no doubt Bernanke will win a Nobel Prize in Economics in his lifetime, likely alongside his partner Gertler and maybe Gali. I felt it was important to emphasize just how giant of an academic economist Bernanke is.

"The problem is he was at least partly responsible for creating the situation that called for his expertise."

The problem is that's just wrong, people can claim he didn't do enough on his watch - but no one has said what he could have done without actually causing financial chaos and bringing on the crisis earlier. For example, when banks are already heavily over-leveraged; what would you think would happen if the Fed raised reserve requirements ? Further, the loans and derivatives were already in play, it's not like Bernanke could magically make them disappear.

"He just said in his hearings that he would get more money by going after Social Security and Medicare."

He doesn't have the authority to go after funds in Social Security or Medicare so who cares? Further, he didn't actually suggest draining their funds. What Bernanke said was this:

"I'm not in any way advocating unfair treatment of the elderly, who have worked all their lives and certainly deserve our support and help, but if there are ways to restructure or strengthen these programs that reduce costs, I think that's extraordinarily important for us to try to achieve."

"It's only mandatory until Congress says it's not mandatory. And we have no option but to address those costs at some point or else we will have an unsustainable situation,"

"I think you can't tackle the problem in the medium term without doing something about getting entitlements under control and reducing the costs, particularly of health care."

Firstly, um, yeah Social Security and Medicare do have to be fixed or we'll have a crisis. He's talking about reduces the costs of health care; isn't that what you, Cenk, are supporting with the health care reform bill? How is his statement that we need to reduce health care costs controversial - at all. There is no debate that something has to be done about those programs; however, notice he never said what. I don't think he said eliminate Social Security, considering he wants the elderly to have support and help. He actually never said you couldn't solve them by raising taxes. What exactly is the smoking gun here?

"He says that's not his place to say if we should ever raise taxes. But apparently it is his place to encourage going after your retirement money. So, taxing the rich is never under consideration, going after the retirement money of the middle class is his first option. Sorry to be blunt, but fuck that."

The Federal Reserve chairman should never, ever say anything about raising taxes. That is a controversially position for a chairman who's goal is designed to grow the economy. Let's be honest about this. We know tax cuts (when they are targeted correctly, rather than the Bush's taxes for the wealthy) grow the economy. This economic growth has to be balanced with what we want the government to provide for us. The Federal Reserve chairman should never, ever been seen endorsing something that would actually depress growth (however minor). His comments about social security and medicare are valid because those do need to get under control for the safety of the market. If he was out endorsing a plan to cut Social Security, I'd be critical of him for overstepping his role as the Fed chairman; but saying it needs to be restructured is perfectly fine, and logical.

"But going after these programs shows you his inclination is unmistakably Republican. Screw the middle class first and protect the rich at all costs."

Did he say that? I don't think he said that ...

"But more importantly, it's a matter of perspective. From his perspective, he doesn't consider raising taxes of the wealthiest people in the country, or even more pertinent the taxes on financial transactions, as even a remote possibility. His perspective is to protect Wall Street, not you. He views you as the bank that they withdraw from."

You are talking about a variant of a Tobin Tax. Let me ask people who support these Tobin Taxes, how do you implement them properly? The argument is that because they go through just a few clearinghouses in New York and London they are easy to regulate, but why would it stay this way? Why couldn't they set up clearing houses in the Cayman Islands to get around this? Further, if we don't have a large part of the rest of the major nations on board you'll just see a flight from our markets to other nations markets.

I'm in favor of Tobin-like taxes in principle, but there are a lot of structural problems to their implementation. Furthermore, Ben Bernanke is not going to say a word about those taxes, as he should not and your linked article doesn't mention his name one bit. Again, his goal is to encourage market growth - nothing else, he shouldn't say a word about taxes (especially raising them).

"On top of all this, he refuses to disclose where the Fed distributes its money and says we shouldn't audit the Fed to find out where they send trillions of our dollars to. Is this a joke? This guy is going to have enormous power to distribute our currency and unlike Congress he doesn't even have to account for the money. And we're going to hand over the keys to the economy to a guy with this perspective? Hell no! We'd be crazy to agree to this."

You are looking at this too simply and playing a dangerous game.

Let's say Bank A is in mild trouble. Right now, Bank A will go to the Federal Reserve to get a loan because they are having short-term liquidity problems. All of the sudden, there name is known, every investor thinks they are in some crisis (even when they clearly aren't) and would then ship up to another financial institution causing that bank ever more severe problems. Maintaining investor confidence is so important to the banks, because you need that to function. So, what to do? The Bank will just slash lending to small business and individuals to make up for the liquidity loss, depressing economic growth. You want to screw the taxpayers? You want to make a financial institution go into jeopardy, possibly forcing a formal bail out? You want to depress lending? Then don't let the Federal Reserve give loans to companies on a reasonable degree of anonymity. You are looking for trouble.

Furthermore, you want to give Congress the ability to force politics into Federal Reserve decisions? Have you seen what Congress has done? You have got to be kidding me. You want investors to lose confidence in the American financial system? Hell no.

You have praised Volcker before (rightly so), so aren't you slightly curious why he is opposed to the legislation that would stop all of this?

Your populist anger is blinding you and you haven't even remotely thought about the issues at hand.

I'll let you in on something though. You aren't going to find a single giant of monetary theory that would have done anything different than Ben Bernanke. Did he make mistakes? Of course, but when you are cleaning up after a huge mess you didn't cause you are bound to make mistakes. Furthermore, there were politically limitations. On that note, Stiglitz has been critical of how he handled the bailouts (but he actually didn't say he should not be reappointed), but Stiglitz has always been incredibly hard headed and never realized political limitations and the calls of "socialism" would have been ripe should we have done his prescribed plan so I don't take his criticism seriously since he doesn't get the politics which is very real. On the flip side of that, you have other progressive economists like Paul Krugman, J. Bradford Delong, Nouriel Roubini (the only guy who really predicted this crisis) amongst a bunch of other I could list that support his reappointment.

All and all, he handled the crisis beautifully, history will see it that way, and you are overreacting out of populist anger with no justification or understanding the role or function of the Federal Reserve chairman of the Federal Reserve itself.

I'm normally such a fan, Cenk, so I'm disappointed to see your populist anger overcoming any rational discussion on this matter since many of your points are just wrong or unthoughtful. If you really want a Democrat or something, you could look at Mark Gertler. He's Bernanke's longtime colleague, an equally competent scholar of monetary theory, and tends to be much more progressive. I'd be open to that discussion, but your analysis of Bernanke is unfair. Summers and Geithner have screwed it, but Bernanke should be given far more credit that you have given him.

by caelum on 12/05/2009 12:46:08 PM EST

Ok,yea i got that the fed were rubbing us while we are staring,watching them take the money out our hands.All-the-same, I think the FED has a right not to answer that question.We all know the FED's role - to lower or raise interest rates,to loose or tighten money supply,to change FED FUND RATES,and to issue,or buy government bonds and T-Bills to tight or loose money supply.All that function of the fed previously mentioned is to *BAIL OUT THE BANKS PERIOD* - I mean that was what they were made for.Taxation processes are to be dealt with by the Government,and the fed can easily refuse to comment on that.I am a bit sad that the FED targets are still the poor and middle class(come on they have been attacking us for years),But this is because congress and the government won't take blame for their wrongs.Look, the FED didn't started this mess;it was the banks and the stupid borrowers that caused this.The banks gave out bad loans,then the middle class and poor took them with adjustable rates(which are high). Then when everything crashed,they ran to the fed for bailout money.Now the congress ran up the deficit,with the help of the government(bush and party),and started pointing to the FED to bail them out ,or supply some ideas.So, the FED points at the middle class and the poor whom they have been getting their riches from for YEARS. listen the FED,congress and government are fucked up;plain and simple.

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Listen man that's prof  that congress doesn't have any idea what ben bernanke said about how the capital they are planing to give the banks are capital in forms of preferred stocks that will be use when the banks are going to fail.What he is saying is,the government,PRIVATE INVESTORS(BANKS) and the FED themselves will own the preferred shares;with the exception that the bank will own them only if they need to take down the capital(which is when the economy is in a crisis).With that said,say that the economy crashed again.The preferred will be converted into higher common stock price.We all know that when more shares are issued it dilutes the exitsing share holders position,but preferred stocks has a feature that is called *ANTI-Dilutive Covenant*.This feature allows the the preferred to adjust their convertible price by the same amount (percentage wise )the common stocks loses value..FOR eg,the common stock is at $15 and the convertible price for the preferred is $20 and you have about 100 shares of preferred.You would convert and get 5 shares of common for 5x15,which is $75 if you exercise the convertible feature(which is a lost).Since this is a lost to you-- you would wait until the stock price moves higher due to suckers buying the stock.So say the stock price moved to $40,you would exercise the feature to buy 5 common shares for 40 dollars.Now say their were 20 common shares outstanding.Now that you have converted you create more common shares,which is 25%(1.25) more common shares on the previous 20.now without the *anti-dilutive* you would lose some money. Since your stock price is now $40  it would now be 40/1.25=32. Now times that 32 by 5 shares and you get $160(32x5) dollars a nice 25% lost,since 40x5=200.If you had the *anti-dilutive*,the preferred would lose nothing and the common share holders(middle class investors) would lose 25% of their value.

YEA :/, they are all fucked up.But like BEN said man,when you have a community full of board houses and one catch fire because of some stupid smoker,no matter what--you need to put out the fire.NOW i disagree with cenk on the  analogy's meaning.Listen, the house are the banks and the man in the house represents the bank owners.the fire is the financial crisis and the water is the solution to put out those crisis.Ben Bernanke said that allowing the banks to raise capital of 75BILLION will put the banks in a position to start leading again.THE WATER IS THE MONEY that's how you save the banks,and large and small businesses.More importantly, that's how you stop the crisis(the fire).I expected more from cenk.

So, cenk, i'm saying just let him in back.THERE is nothing you can do but talk;It won't change a thing.We have been waiting on the reform and we see no results.I'm kinda sad to say this,but if it was Bush saying he want health care i would rather believe him.Look, he said he is going to war and what happened?EVERY thing he wanted he did NO PROBLEM.Now,Obama is in the same position(even a better one) and he is pussy-footing around. MAN FUCK them all,we are done for.Just try making some money so that your kids won't born in this fucking mess.EDUCATE them(the kids) with all you can because it's the key now;they are the future. One of them can be in seat and change everything.HAHAH,I only wish I had the vocabulary like you guys has a 19 year old.

by sesshoumaru2st on 12/05/2009 04:02:10 PM EST