I'm Beside Myself

I wake up this morning to this

Former Federal Reserve Chair Ben S. Bernanke and two US-based colleagues won the 2022 Nobel Prize in Economics for their research into banking and financial crises.

Douglas Diamond, Philip Dybvig and the one-time central banker will share the 10-million-kronor ($885,000) award, the Royal Swedish Academy of Sciences announced in Stockholm on Monday

Ben Bernanke became Chairman of the Federal Reserve in 2006, just as we were in the late innings of the housing bubble, ready to pop at any moment. Anyone who wanted to know anything about what was going on with ridiculous subprime mortgage lending, especially anyone running the Federal Reserve Board or running a Federal Reserve Bank, like Tim Geithner (he ran the New York Federal Reserve Bank) could have looked under the hood of this scam of all scams and made the heads of every financial institution involved explain how you could take $1 billion of garbage loans and create $800 million AAA rated bonds (with the remaining $200 million having a weighted average rating of investment grade) over and over again to make billions. Perhaps call S&P and Moodys in for a chat to find out how they were rating these bonds.

There’s a whole lot of things Bernanke could have asked in 2006 but instead he went to Jackson Hole (the big central banker love fest held every August) where he delivered a speech on the history of global trade. No warnings, no nothing. He was completely unaware and incurious. Then in May 2007, as losses started piling up and the plumbing of the financial markets began to seize up, Bernanke proclaimed that subprime was “largely contained”, which was a ridiculous statement, especially for someone who was supposed to be monitoring the financial markets and had access to any information he wanted to understand what was actually happening. Bernanke seems to have been completely unaware of the fact that through derivatives, subprime was not a $50 billion or even a $100 billion problem, it was at least a $1 trillion problem. He was unaware that Freddie and Fannie had been since 2000 guaranteeing crappier and crappier mortgages for lower and lower guarantor fees. He was unaware of who the central figures were writing protection on subprime deals, the biggest of course being AIG. Bernanke along with Tim Geithner and Hank Paulson were relatively clueless as to what was happening, even in 2007.

In attempt to cut Bernanke a little slack the world of finance was already a big mess when he took over in early 2006 from the other genius, Alan Greenspan. However, he could have gotten to the problem a lot sooner before it became in 2008, like trying to change the tires on a car going 80 MPH down the highway. Somehow however, Bernanke came out of this a hero. He bailed out the money-center banks, he flooded the financial system with liquidity, bringing rates down to zero and buying trillions of dollars worth of Treasuries and Mortgage Backed Securities to essentially “save” the economy and financial system from the fire HE allowed to happen.

And now, here we are 15 years later and finally all that monetary stimulus is being withdrawn as the global economy faces perhaps its biggest test ever, a calamity that Bernanke had a big hand in creating………and he’s being given the Nobel for “researching” banking and financial crises! It reminds me of when O.J. wrote, “If I Did It”, or the latest trend of Pope’s canonizing their predecessors. Crazy and maddening.

That is all.