I watched this full press conference yesterday on Bloomberg TV along with the questions after Bernanke wrapped up his 15 minute speech. Mr. Dimon was the last question. He wanted to know if there has been any serious analysis on the effects of the new regulations on banks post-crisis. Being he is the head of one of the largest banks on the planet, he has his own reasons for asking this question. It was a totally biased question for a man in his position. I do agree that we don’t want to take draconian measures as a over-reaction to a crisis that was created by greed and lax rules with asleep regulators (not all of them).
Here is a link to the audio of the question: http://www.youtube.com/watch?v=-Gs3X1jQxVY
Bottom-line is that we have had many rules rolled over the last 25+ years that has helped build Wall Street into the machine it is today and to Mr. Dimon, you received assistance from the government like all other major banks so you should not be asking this question unless you have concrete evidence of some harm. It feels like a slap in the face when I heard that questions. It makes one think that maybe we didn’t learn anything and we are closer than we know to the next crisis because like I have said repeatedly, we will reap the precedence we have sown.
Bloomberg - JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon asked Federal Reserve Chairman Ben S. Bernanke whether regulators have gone too far by reining in the U.S. banking system and are slowing economic growth.
Following up on my comments yesterday, it looks like inflation is going to be the route to try and bring a recovery. The Federal Reserve and Ben Bernanke will fail in this attempt because at the end of the day, income (wages) will not keep prices and real growth where it is needed to stop deflation.
The recovery is basically over when we are getting statements like this from our central bank chairman. It can become really dangerous when the Fed create uncertainty by talking about purchasing long term treasuries. The gold market has sniffed this out and the price is almost nears its nominal high of $1,253.00 per ounce.
The more these type of discussions keep coming up, the more it shows that the Fed and Treasury so not have a handle on the macro-economic situation and the market is what is really dictating our conditions. Bernanke said that deflation is not a risk to the economy but he is wrong, to him this is the biggest risk and that is why he is continuing the program of Quantitative Easing (QE aka: money printing).
Ask yourself this question, do you fight inflation with inflation or do you fight deflation with inflation?
Well you have it from the proverbial horses mouth in Ben Bernanke, our Federal Reserve Chairman. It does not bode well for the U.S. economy when the head of our central bank tells us that we should expect high unemployment for the next several years. On a political note, that is going to make this election cycle and the 2012 presidential election far from certain.
When the economy is going south, it makes it easier for a new candidate to make promises of a better economic environment even if they can not deliver. Bernanke said we will still be between 7-7.5% in 2012 for our percentage of unemployed population. We also need to take account for discouraged workers that will also come back on the rolls and possible push that statistic even higher.
This is also a best case senario, we need to take into account that a double-dip recession is not out of the cards either. I have to tip my hat to Ben for atleast giving us a realistic picture and not telling us our economy through rose colored glasses.
I applaud this choice but I want to make sure we are clear that there are major questions about giving “back-door bailouts” to Goldman Sachs and a few foreign banks by giving 100 cents on the dollar for credit-default swaps AIG held. Other counter-parties did take a discount or “haircut” on those debt insurance contracts so there is some explaining to do on those decisions.
To this point both Treasury and the Federal Reserve do not see any problem with their choices on this matter and the amount of U.S. tax payer money they used to bailout this insurance company. Honestly, the financial products division did not need to be bailout out, their normal insurance operations where is separate subsidiaries so even if that company failed they would still be able to make good on their other obligations. The reality is that major investment banks and foreign banks did not do proper due diligence on the ability of AIG to make good on this insurance in the event of a economic downturn and they should of been made to pay in a true free market system.
Bloomberg, New York - Federal Reserve Chairman Ben S. Bernanke said the central bank would welcome a “full review” of its aid to American International Group Inc. by congressional auditors and make all necessary records and personnel available to them.
Editor’s Note: After the report of the internal Fed email about disclosure of losses at Merrill Lynch being delayed, it does possibly impact the credibility of the Federal Reserve. My biggest reservation is with the Fed who dictates monetary policy, having the ability to deal with systematic risk. The Fed has a track record with financial crisis es come along, to lower interest rates to artificially low levels, bailout the bad actors and then pump money into the system to stimulate through the crisis.
Yes it does get us through the tough times but I see it as the us collective wanting to treat the symptoms and not the cause. The easy way out is usually not the best way, especially in the long run. With this track record in place, we are now talking about giving the authority who practices lose monetary policy the ability to selectively pick the winners and losers when they usually create the problem from the initial monetary policy. I hope others understand this and agree that more concentrated power is not better.
Chairman Ben S. Bernanke’s grilling by legislators over Federal Reserve conduct in Bank of America Corp.’s takeover of Merrill Lynch & Co. may reduce the odds the central bank will win new powers in a regulatory overhaul.