Economists from Bear Stearns are unloading on Ben Bernanke:
But in their most recent economics report released Wednesday — titled “Apart From That, Mrs. Lincoln, How Was the Play?” — Bear Stearns economists detail their sometimes sarcastic critiques of Mr. Bernanke, and lay their firm’s inescapable demise squarely on his shoulders.In their introduction, John Ryding, Conrad DeQuadros and Meghna Mittal admit that it is difficult for them to objectively assess the events of the past week. But if it isn’t clear from the title of their report, the three economists maintain some of their sense of humor in a trying time for Bear: “We were concerned about a run on the bank (although we never imagined that we would be the bank!).”
The Bear team recap the Fed’s efforts to stabilize the still-tottering financial system, including by introducing a new loan facility for investment banks “announced with ironic timing at 7:13 p.m. on Sunday.” Those efforts should help alleviate the pressure on securities firms feeling squeezed by the mortgage assets they cannot sell, the three write. But banks will still probably require more capital.
It is then that the Bear team unload on Mr. Bernanke, going back to 2003 and 2004, when he was still a Fed governor. At the time, they argue, Mr. Bernanke and the rest of the Fed were far too concerned about deflation and kept interest rates at what they considered to be a far-too-low rate of 1 percent before only gradually raising them.
Mr. Ryding argues that he warned back then that various signs pointed to reflation, and that the Fed should have boosted short-term interest rates.
It's such a pity they didn't warn the other people at Bear Stearns.
Since when to Wall Street executives listen to advice from their economists? You think that back when Larry Kudlow worked at Bear Ace Greenberg but any weight in his opinions?
"... put too much emphasis on deflation." Sheesh,
deflation is the John Dillinger to the Fed's Melvin Purvis. Preventing deflation is the raison d'être *of* the Fed. When Greenspan used the d-word in '03, there was fear, real fear.
But yeah - in a way, it feels like "we" threw Bear into a volcano to appease the monetary-gods. I do get deja vu from the old Savings and Loan debacle in the '80s. The money pump works pretty well, but .... the incentives on the end working the money down to the "retail" level seem off. Apparently quite off. We've been here before.
I would also imagine that anybody who was overly critical and not formally invited to be formally critial at Bear at the time would have been considered a Jeremiah/wet blanket and shunned - up to and including dismissal.
We know what this is. It's groupthink. Once the cognitive dissonance starts, it defends itself through denial, and anyone who tries to "fix" the denial is a heretic.
"... put too much emphasis on deflation." Sheesh,
deflation is the John Dillinger to the Fed's Melvin Purvis. Preventing deflation is the raison d'être *of* the Fed. When Greenspan used the d-word in '03, there was fear, real fear.
But yeah - in a way, it feels like "we" threw Bear into a volcano to appease the monetary-gods. I do get deja vu from the old Savings and Loan debacle in the '80s. The money pump works pretty well, but .... the incentives on the end working the money down to the "retail" level seem off. Apparently quite off. We've been here before.
I would also imagine that anybody who was overly critical and not formally invited to be formally critial at Bear at the time would have been considered a Jeremiah/wet blanket and shunned - up to and including dismissal.
We know what this is. It's groupthink. Once the cognitive dissonance starts, it defends itself through denial, and anyone who tries to "fix" the denial is a heretic.