Forget Spitzer, fire Bernanke

[leftrightwingnut]

http://atimes.com/atimes/Global_Economy/JC15Dj02.html

Mar 15, 2008

Forget Spitzer, fire Bernanke

By Chan Akya

There must be something about men achieving power that exposes them to frequent misuses of authority. In particular, infidelity seems a particular curse for the powerful across the world. This week's events involving the governor of New York, Eliot Spitzer, may however have helped to hide a more egregious misuse of authority, namely that of Federal Reserve chief Ben Bernanke and his central banking cohorts around the world.

In another one of those nice coincidences that seem to happen whenever Wall Street is down and out, the unpopular governor of New York was found consorting with prostitutes through a Federal investigation that has all the hallmarks of a "hit job" ordered from the very top. Spitzer was deeply unpopular in the corridors of power, and especially with the current Treasury Secretary Hank Paulson, for daring to take various Wall Street firms down a few notches earlier this decade.

...

Walter Bagehot, the patron saint of central bankers, suggested the following basic principles for central banks to help the banks under their supervision to avoid liquidity runs.
A. Only lend against good collateral to avoid losses for taxpayers at a later date.
B. Lend at extremely high interest rates to avoid the facility being used willy-nilly by greedy bankers.
C. Make public the availability of such facilities, so as to prevent doubts and suspicions in the minds of depositors and other creditors.

This week's announcement by the Fed violates EVERY one of those principles. Firstly, the collateral being accepted by the Fed is tainted as the market’s complete lack of appetite (at any price) for the securities shows. By providing the ability to liquefy these securities, the Fed has effectively signaled that it would accept just about any junk.

Secondly, the cost of borrowing is not punitive; indeed it is agreeably low for anyone who cares to fill out a couple of forms. Thirdly, this facility was not used previously; therefore the market has been in some doubt about really how useful it could be.

In essence, this is a US$200 billion facility that is being misapplied to rescue a specific part of the financial system at a preferential rate, and without any disclosure required on usage. Given all this, it is impossible for anyone to expect that the ultimate cost of this facility will not be borne by US taxpayers.

...

More at http://atimes.com/atimes/Global_Economy/JC15Dj02.html

[Demeter]

1. Amen!

Obviously, we should outsource our economics policy....

[lonestarnot]

2. Did anyone really think a bushitler appointment would be any different?

[TML]

3. I'd like to, but

Bush would hire some other flunkie in his place.