Friday, December 04, 2009

"In short, you are the definition of moral hazard"

US Senator Jim Bunning tells Ben Bernanke what is on his mind. The full broadside can be found here at the West Kentucky Star. Here are some excerpts:
Chairman Greenspan's attitude toward regulating banks was much like his attitude toward consumer protection. Instead of close supervision of the biggest and most dangerous banks, he ignored the growing balance sheets and increasing risk. You did no better. In fact, under your watch every one of the major banks failed or would have failed if you did not bail them out.
You bowed to the political pressures of the Bush and Obama administrations and turned the Fed into an arm of the Treasury. Under your watch, the Bernanke Put became a bailout for all large financial institutions, including many foreign banks.

You have decided that just about every large bank, investment bank, insurance company, and even some industrial companies are too big to fail. Rather than making management, shareholders, and ebt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of moral hazard.
From monetary policy to regulation, consumer protection, transparency, and independence, your time as Fed Chairman has been a failure. You stated time and again during the housing bubble that there was no bubble. After the bubble burst, you repeatedly claimed the fallout would be small. And you clearly did not spot the systemic risks that you claim the Fed was supposed to be looking out for.
Ouch!

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