Bernanke's Town Hall Meeting

A town hall meeting sponsored by the Federal Reserve?? I've never heard such a thing, how about you? It actually happened on Sunday, in Kansas City, Missouri.

The Fed Chairman in a town hall meeting. What was he selling?

Bernanke: Economy to bounce back stronger
(7/26/2009 CNN Money)

"NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke said Sunday that lessons learned from the recession and the financial crisis will help make the economy stronger than it was before the crisis.

"The Fed chairman answered questions from members of the public as well as moderator Jim Lehrer of PBS at a town hall event sponsored by the Federal Reserve Bank of Kansas City, Mo.

"The silver lining in this whole thing is that people are starting to save more, since they saw what happened with 401(k) investments," Bernanke said. "People are adopting good habits, so not only will we will be back on track, but the economy will be stronger than it had been before this started."

Hmmmm, do I see a semi-visible hand of the Fed's new lobbyist from Enron?

Bernanke says the economy will be stronger. How? He doesn't say. Just fluffy and vague words to allay vague fears by the mass: Things happen, but this, too will pass.

"Facing questions from many concerned consumers, Bernanke sought to assure the audience by noting that "recessions happen." Though he said this is the worst recession since the Great Depression, he also said that, like all prior economic downturns, this one will end too.

"Bernanke said the economy is beginning to show signs of improvement, but recovery will be gradual. He said gross domestic product will likely rise by the end of the year into 2010, but job growth will lag. He conceded, "economic forecasts make weather forecasts look like physics," but said unemployment will top out above 10% before falling back in the second half of next year."

All he could offer is that the economy has recovered from recessions before, so it will recover someday from the curent one. And we are supposed to breathe a sigh of relief?

But the real purpose of this silly exercise (town hall meeting) is not to discuss the economy or the supposed recovery that's coming. The article continues:

"He declined to say outright that he opposes efforts by Congress and the Obama administration to create a separate consumer financial protection agency. But he said there were drawbacks to it, including possible "duplicative efforts" in monitoring. And he defended the Fed as being "very active" in the last three years on the consumer protection issue.

"Bernanke was even more defiant about a congressional proposal to audit Fed monetary policy and actions. He said politics need to remain separate from the Fed to ensure that inflation and financial stability remain in balance.

""It is incredibly important that the Fed maintain its independence -- it is so critical to the stability of economy," Bernanke said. "I don't think people realize that Congress' bill would allow the Government Accountability Office to be able to audit Fed decisions. That's not congruent with independence.""

This was the whole point of this town hall meeting: to sell the Federal Reserve as an independent, benevolent overseer of the U.S. financial matters; to lobby for more powers for the Fed and attack the Audit the Fed bill in the House (H.R. 1207) which now has 276 co-sponsors.

The Federal Reserve, to be sure, is indeed audited by an accounting firm (Deloitte). However, according to the Forbes article on July 21, (BTW, this Forbes article is very misleading; more later in another post)

"The law currently disallows auditing of three areas: the swap lines the Federal Reserve arranges with other central banks and international financing organizations; the actual deliberations and decisions of monetary policy (such as how much to raise and lower interest rates); and transactions made under the Federal Open Market Committee's direction."

Under the third - transactions made under the Fed Open Market Committee's direction - is where the garbage resides: TALF, TSLF, TAF, PDCF, OMO, ABCPMMMFLF (or AMLF for short), CPFF, etc, etc. Do we know who's getting these loans and how much? What are the collaterals? How are they priced? How about Maiden Lane LLC to "manage" Bear Stearns and AIG "assets"? Do we know what are those assets and how they are priced?

"Too big to fail" best describes the Federal Reserve.

Just last week, the U.S. Treasury Department auctioned off $65 billion of 70-day Cash Management Bill, which happen to carry higher interest rate than the equivalent regular Treasury bill, just so that the Federal Reserve can use the money for whatever that they've been doing. And the chairman is telling the taxpayers who foot the bill to just trust him.

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