Foes of Ben, fear not: After a (very) brief flirtation with dovishness, re: the Fed’s $85 billion/month habit, Philly Fed Pres. Charlie Plosser is feeling hawkish again. Read more »
A thing that happens from time to time, and also yesterday, is that people in or around the financial services industry say furious things about Ben Bernanke:
“Ben Bernanke is running the most inappropriate monetary policy in the history” of the developed world, said Stanley Druckenmiller, the retired head of Duquesne Capital Management.
A thing that happened a lot today and yesterday is that people asked, well, why do they say such horrible things? “Because they’re true” is a possible answer and if it’s yours you might want to stop here, not much good is going to happen from here on out.
If you don’t believe that Bernanke is a war criminal or whatever, you can read some other proposed answers – by Joe Weisenthal, Neil Irwin, and Matt O’Brien – but be warned, they’re tough going if you like 2-and-20 fees and/or gold. Here, though, is a take from Matt Yglesias that I’m particularly fond of: Read more »
Tim Geithner basically spent the last four years trying and failing, numerous times, to leave Washington, i.e. his own personal torture chamber, but according to Chaz Gasparino, the former Treasury Secretary may allow himself to be pulled back in. Sayeth CG: Read more »
The panel– moderated by Morgan Stanley’s chief US economist, Vincent Reinhart, and featuring Jeff Vinik of Vinik Asset Management, Ken Ebberts of Goldman Sachs Investment Partners, Michael Novogratz of Fortress Investment Group, and Rob Citrone of Discovery Capital Management– was asked to grade Ben Bernanke. Everyone on the panel gave the Federal Reserve Chairman an “A” or a “B; Paul Singer gave a “D.” [Absolute Return]
Today the Federal Reserve released transcripts of its 2007 FOMC meetings. The Fed has a policy of releasing these transcripts with a five-year lag. This has various advantages in terms of encouraging candor and allowing the FOMC members to discuss material nonpublic information, etc., but it has the singular disadvantage of making them look like idiots, because everyone else is five years smarter than they are. “Hahaha William Dudley thinks that Bear Stearns is fine! Bear disappeared like four years ago! Has he been living under a rock? What a moron!”
Still I think the advantages of delay outweigh the disadvantages, for the Fed. Here is Dudley in August 2007 on Bear, etc.:
As far as the issue of material nonpublic information that shows worse problems than are in the newspapers, I’m not sure exactly how to characterize that because I guess I wouldn’t know how to characterize how bad the newspapers think these problems are. [Laughter] We’ve done quite a bit of work trying to identify some of the funding questions surrounding Bear Stearns, Countrywide, and some of the commercial paper programs. There is some strain, but so far it looks as though nothing is really imminent in those areas. Now, could that change quickly? Absolutely. For example, one question that we’re following with Bear Stearns is what their clients do in terms of continuing to want to do business with them. Obviously, if people start to pull back in their willingness to do business with Bear Stearns, the franchise value of the company goes down, and that exacerbates the problem. One thing that we have heard about Bear Stearns is that they have approached a number of major commercial banks about a secured line of credit. We don’t know what the outcome will be, but they are clearly trying to get even better liquidity backstops than those they have in place today. But as far as we know, they have enough liquidity—and Countrywide as well at this moment.
Laugh if you want, but that’s sort of the thing about banks and liquidity: it’s there one day, and gone the next, and its disappearance is never predictable because as soon as it becomes predictable that your liquidity will disappear, it has already disappeared. However good may be your arguments. Bear, at the time, really was drowning in liquidity.1 Dudley just looks a little wrong in hindsight; the guys at Bear who were working to bail their sinking ship had no choice but to make contemporaneous public statements about their liquidity that were true until they weren’t. And that looked, by virtue of the quick flip between “drowning in liquidity” and just “drowning,” like they weren’t true – in a liability-incurring way – even when they were.
The transcripts don’t seem particularly laughable to me2; the FOMC members seem serious and sensible and earnest and informed and reasonably on top of current events without being all that on top of the future.3 This is called the efficient markets hypothesis. Here is Ryan Avent: Read more »