Tuesday, October 14, 2008

Bernanke Takes Over

Unlike the perennially cryptic Greenspan, who had an unmatched mastery of making statements no one could decipher, Bernanke has no problem making himself understood. In a Wall Street Journal column today, he said:
Our strategy will continue to evolve and be refined, and we will adapt to new developments and the inevitable setbacks.
Of that, I've no doubt. He's been winging it for over a year now. I don't expect that to end with this latest insane plan. Moving seamlessly from Fascism to open Socialism, he and Paulson plan to take a direct equity stake in several banks, to the tune of about $250 billion.

Oddly, the ones he has chosen as showpieces are those that — according to all evidence to date — need it the least: Bank of America, Wells Fargo, Goldman Sachs, and several others. B of A swallowed Merrill Lynch with no apparent problem (after buying Countrywide earlier in the year), and Wells Fargo had enough cash to enter a bidding war (which it won) with Citicorp over Wachovia.
Treasury will buy $25 billion in preferred stock in Bank of America — including Merrill Lynch — as well as J.P. Morgan and Citigroup; between $20 billion and $25 billion in Wells Fargo; $10 billion in Goldman and Morgan Stanley; $3 billion in Bank of New York Mellon; and about $2 billion in State Street.
In fact, if the report is to be believed (always a needed qualifier in these times), the banks themselves don't particularly want the money. Rather, they're being pressured by the Feds to accept the deal. What gives? Clearly, there is something we're not being told.

Still, what we are being told is pretty appalling.
The Congress and the administration acted at a time when the great majority of financial institutions, though stressed by highly volatile and difficult market conditions, remain capable of fulfilling their critical function of providing new credit for our economy.
Whoa. Haven't they been maintaining for weeks now that the 'emergency measures' were vital because credit markets were frozen? Now, he's saying the banks "remain capable of fulfilling their critical function."

Nevertheless, he intends to act.

"[T]he tools are in place to respond effectively and with force." I'm sure he didn't intend to use the word "force" in the sense of "coercion." Yet, that is what it is. Plain, naked, government coercion — against the taxpayers funding the debacle (either through explicit taxes or, worse, debasing the currency via inflation) against their express will and against the banks who don't want to participate.

Not content with forcing this plan on the American people, we are expected to take comfort owing to his confidence in the use of force.
These tools will bolster the capital of our financial institutions, restore confidence in their debt, and offer increased access to funding for businesses.
Yeah, uh huh. Pardon me if I don't hold my breath.

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