October 5, 2011
I, and many others, have said when it comes to the economy, nothing has been fixed. I thought Federal Reserve Chief Ben Bernanke underscored that fact when he spoke yesterday in Washington D.C. for the Joint Economic Committee.
Mr. Bernanke said in prepared remarks, “There have been some positive developments: The functioning of financial markets and the banking system in the United States has improved significantly.” Of course, there was not a word about the recent credit downgrades for three big U.S. banks. I also don’t see how the banks are in so much better shape with many of their stock prices tumbling. Bernanke also admitted, “Nevertheless, it is clear that, overall, the recovery from the crisis has been much less robust than we had hoped.” (Click here to read the complete text from Bernanke’s prepared remarks.) Maybe that’s why the Fed recently froze a key interest rate at near 0% for at least the next two years.
Bernanke is still saying that lethargic growth of the economy is due to “temporary factors.” And, yet, he also told the Congressional Committee the so-called economic recovery “is close to faltering.” I don’t see how these kinds of back and forth contradictions are not the sign of a Fed Chief with a clear view of the economy, let alone with a plan to fix it.
The fact is the Fed’s lax regulations, easy money policies and massive bailouts are a big part of why the economy is in the shape it is in. To be fair, it is not all Bernanke’s fault. First of all, Alan Greenspan was no “maestro.” The last Fed Chief who could call himself that was Paul Volcker. He raised interest rates to the moon to kill inflation, and Wall Street hated him for it. In the years leading up to Mr. Bernanke’s appointment, Greenspan was quick with his own bailouts and never saw a regulation he couldn’t bend or cut. It was Greenspan that pushed to get rid of Glass-Steagall, and from that point in 1999, it was all downhill.