Ben Bernanke

Bernanke: I Support Your Efforts to Give Me More Power

bernanke nyt thumb.jpgWe mentioned the news in Ben Bernanke’s speech this morning: the Fed’s emergency lending is likely to go on past its September expiration.
Two additional morsels were included in the speech. Bernanke suggested that Congress give the Fed authority over payment and settlement to deal with counterparty risk and other problems. His “a strong case could be made” preface strikes us as the regulatory version of “I’m not saying, but I’m saying.”
Bernanke also endorsed the creation of a special resolution regime to help financial firms fail quickly and efficiently unwind their positions, although he caveated that with a demand for “a prudent manner” in doing so, implicitly later so as not to spook markets.
The mandate and tools for the special resolution regime are part of Paulson’s plan, and while Bernanke didn’t say who should command these new powers, we think he could be pointing out to the apparently Anglophile Hank that the Bank of England is taking control of Britain’s liquidation oversight.

  • 13 May 2008 at 11:55 AM
  • Banks

The Wall Street Big Wig Lunch Bear Didn’t Get Invited To

On Tuesday, March 11, Federal Reserve Chairman Ben S. Bernanke lunched with what Bloomberg is describing as a “Who’s Who of Wall Street leaders.” Attendees JPMorgan Chase ‘s Jamie Dimon, Goldman Sachs’s top dog Lloyd Blankfein, Lehman Brothers boss Richard Fuld, Morgan Stanley President James Gorman, Citigroup’s consigliore Robert Rubin, Blackstone Group’s little big man Stephen Schwarzman and Merrill Lynch’s John Thain.
Guess who wasn’t at the lunch? If you answered “anyone from Bear Stearns” you’d be absolutely right. Now some are speculating that Bear Stearns may have been purposefully excluded because its fate was one of the topics of discussion.
“It doesn’t seem credible that just about every major financial institution in the United States, except Bear Stearns, had a meeting about the most pressing issue of the day, bank liquidity, and the subject wasn’t about Bear Stearns, who had rumors swirling about them since Monday,” Eric Salzman at the Monkey Business blog says.
What was discussed at the luncheon has not been revealed. Bloomberg News obtained Bernanke’s schedule and the list of attendees in response to a request under the Freedom of Information Act. But the timing seems is jarring. Rumors of liquidity troubles at Bear had prompted the bank to issue a denial the day before for the lunch. On the preceding Friday, one bank (which has not been identified) refused to make a short term loan of $2 billion to Bear. The meeting came hours after Bernanke announced plans to lend $200 billion of Treasuries in exchange for debt including mortgage-backed securities. Hours after the meeting every bank on Wall Street reportedly began refusing to issue credit protection on the debt of Bear. Two days later Bear Stearns chief executive Alan Schwarz would be forced to call Dimon to seek $30 billion in emergency funding.
Update: Was Bear left out because its top two men were out of town? If we recall correctly, Schwarz was down at the Bear Stearns Media Conference in Palm Beach around this time, and chairman Jimmy Cayne was flying out for a bridge tournament in the midwest.
Bernanke Lunched With Dimon, Rubin Before Bear Rescue [Bloomberg]

Bernanke Ups The Bailout Ante

We’ve finally gotten around to reading the words that the Bearded One spoke at Columbia Business School on Monday night. Stitching together his various proposals, it’s clear that Ben Bernanke has become a partisan of big government. The way we read it, he pretty much calls for the federal government to bailout lenders who have provided mortgages for homes that have suffered major declines in value.
At one point in the speech, Bernanke called on Congress to expand the Federal Housing Administration, both in terms of its role in issuing mortgages and determining underwriting strategies in order to help “troubled borrowers.” How does he expect the expanded FHA to help? By bailing out lenders with mortgages where the principal is now worth more than the value of the home.
“In some cases, when the source of the problem is a decline of the value of the home well below the mortgage’s principal balance, the best solution may be a write-down of principal or other permanent modification of the loan by the servicer, perhaps combined with a refinancing by the Federal Housing Administration or another lender,” Bernanke said.
In other words, the Federal government should step in to refinance loans in danger of defaulting due to the decline in housing prices.

vikram.jpgThough conventional wisdom states that nothing or no one will ever be able to whip the diversified whorehouse that is Citi into something resembling a profitable company, at least one person willing to go on record believes Vikram Pandit “has the smarts” to do just that. We’re speaking, of course, Pandit’s finance professor from grad school, who took a cue from Bernanke’s thesis advisor yesterday and went to bat for the old boy in an interview with Portfolio. According to Rajnish Mehra, who served on the CEO’s dissertation committee at Columbia, Citi “is in safe hands” with Vik because his thesis “tackled the [now relevant] question of asset pricing with heterogeneous agents.” So don’t worry, shareholders, about that prediction that C is headed to $10– Mehra says he even went back over Pandit’s work just to make certain he was remembering the right kid from over twenty years ago and, sure enough, he was (like anyone could forget that smile).
Citi at a Crossroads [Portfolio]

Huge Congrats, Ben Bernanke

bernanke nyt thumb.jpgNot only did the Beard of Understanding land some prime modeling gigs on the success of his Times spread, but he’s reached the penultimate step toward being named Most Popular girl in school (all that’s left to do is blow the editor-in-chief of the year book, who tallies up senior superlative ballots). A new CNBC survey of “Wall Street professionals” shows a waning faith in the economy at large but a waxing faith in he who would sooner say the ‘r’ word than engage in that or any other hair removal process. Thirty-nine “money managers, investment strategists, and professional economists” gave Ben a “B” for his work this month, up from January’s “B-.” It would’ve been an “A-” but Charlie Gasparino’s mechanic said he was “less than impressed” with the Chairman’s work, and failed his Harvard ass.
Fed Chairman Doing Better, But the US Economy Isn’t [CNBC]

Diary Of A Fake Goldman Trader: Monkey Business

Who remembers that Craiglist ad from the 28 year old Goldman banker looking for someone to lavish with his (pretax) $722k bonus? I’m going to go with all of you because, frankly, it/he was unforgettable. The Viking stove, the custom-made oak dresser, the amazing dinners, the shopping, the great wine, the getting each other off fabulously and, of course, the baby’s arm aren’t things one lets recede from his/her consciousness so easily. Sure, the whole thing turned out to be fake and from the mind of someone named the Cajun Boy who does not really work at Goldman Sachs or at any other financial institution, including Bear Stearns, for that matter, but did anyone give a shit? No, us included. In fact, we were so taken by the imposter– “real” name: Thad– that we asked him if we could reprint parts of his journal on DealBreaker so that you all could live vicariously through his fabulous life. He said yes, if it would help him “score ass.” So if you enjoy the following installment, show your gratitude.
On my seemingly never-ending checklist of things to do in 2008 has been to hire a personal assistant, preferably someone young, hot, eager and equipped with a vagina. Since my busy work and social schedule has made the completion of such a task exceedingly difficult, I recently decided that my buddy Gabe, heretofore jobless, thus he spends his days on splayed out on my sofa watching porn when he’s not lunching with headhunters, would be the perfect candidate for the job, at least on an interim basis. So to Gabe I’ve outsourced such peasant tasks like making restaurant and car service reservations, arranging for my laundry to be dropped off and picked up, interviewing candidates vying to be my personal chef, etc. But seeing that I hate to see Gabe so overextended, not to mention that the stress of the job really has affected his attitude and his resulting sourness has cast a pall over our friendship, I decided recently that it would be in our best interest for me to also get Gabe a personal assistant. Besides, having only one personal assistant is so 2006. Not coincidentally, I’ve also long yearned to have a monkey, ever since I saw Clint Eastwood kicking it with Clyde in Every Which Way But Loose to be precise, so I killed two birds with one stone and acquired a chimpanzee to be Gabe’s personal assistant.
His name is Bernanke.

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Bernanke Passes The Buck

Given that economic cycles are largely driven by monetary policy, it’s always a bit sick-making to hear a chairman of the Federal Reserve calling for a fiscal solution to avoid a recession. Federal Reserve Chairman Ben Bernanke just endorsed a fiscal stimulus package, just as long as it would be implemented “quickly.” He said a stimulus package would give the Fed more tools as it works to avoid an economic downturn. At certain times he seemed to be talking from another planet, noting that it was important that a stimulus package not lead to a loss of “fiscal discipline.” Has he even listened to the spending plans of our leading presidential candidates? Fiscal discipline is long gone, baby, and it’s not likely to make a comeback any time soon.
It’s hard not to look at this as Bernanke trying a little CYA in advance. Later, when the stimulus package becomes a spending boondoggle, he can say: “Look, I warned you people. This isn’t what I called for. So this isn’t my fault at all.” He’s clearly been reading Alan Greenspan’s memoirs.

There’s A Connection If You Want There To Be A Connection

Morgan Stanley is now saying that there will definitely be a recession and there’s nothing you can do to stop it so you might as well just give up. We’re all going to die eventually, it’s just a matter of when. Related/unrelated? At MS’s IED party last night, “There was a slideshow on a large screen that contained awkward photos of associates and analysts (most people were not smiling)…a lot of Sean Paul…a MD walking around with a blinged out Santa hat giving his business card to anyone that would compliment his style…and one very sad analyst talking to the bartender about how even the low hanging fruit he hoping to score with wouldn’t give him the time of day.”
Morgan Stanley issues full US recession alert [Telegraph]
Recession Watch: Morgan Stanley Finally Sees Weakness [Alley Insider]