Tuesday, February 2, 2010

Volcker and Bernanke: Of Same Mind about Fed

Contiuing on the theme of "Everything is alright now", let's go to today's Bloomberg article. It's about Paul Volcker, who many people secretly, and some openly, hoped would replace Ben Bernanke and return to the Federal Reserve as the chairman. He would clean up the Fed, the greedy banksters, he would know what to do, unlike Bernanke.

So much for that. Volcker and Bernanke are of the same mind when it comes to the Federal Reserve and the Fed's regulatory power over the nation's financial industry. Volcker probably wouldn't have done any differently than Bernanke.

Volcker Looms Larger as Ties With Bernanke Strengthen
(Rich Miller, 2/2/2010 Bloomberg)

"Feb. 2 (Bloomberg) -- Paul Volcker is enjoying increased influence with the Federal Reserve as well as the Obama administration, central bank records show.

"Volcker, who headed the Fed from 1979 to 1987, met current chairman Ben S. Bernanke six times in the year through November, the latest month that the Fed has made its records available. In the prior year, the two men only got together once.

"“Volcker has had very strong views on regulation going way back,” said Lyle Gramley, who served as a Fed governor under Volcker and is now a senior economic adviser to New York-based Potomac Research Group. “It would be logical for Bernanke to talk to him about financial reforms” as policy makers wrestled over how to prevent another crisis.

"Bernanke in the past year has advocated tighter rules for banks’ capital, leverage and liquidity, moving closer to Volcker’s view that more regulation is necessary to protect the financial system. “We cannot lose sight of the need to reorient our supervisory approach and to strengthen our regulatory and legal framework,” Bernanke said in a speech on Oct. 23. "

"...“Ben has been through the fire,” Volcker said in a telephone interview. “He’s much better qualified now than he was four years ago, before he went through that experience.” "

Just like all was forgiven for Geithner with Obama's hug, Ben's past mistakes are forgiven by Volcker. Bernanke has learned, and Volcker is satisfied. All is well.

Volcker, who had been somewhat marginalized within the Obama administration until a few months ago, clearly has no intention of rocking the boat.

"Volcker initially voiced concern about the Fed’s actions in combating the crisis, telling the Economic Club of New York in April 2008 that the central bank had acted at “the very edge” of its legal authority in helping to rescue Bear Stearns Cos.

"When he next appeared before the club, on Jan. 14, Volcker devoted much of his speech to a pitch for the Fed to retain a role as a financial supervisor. His comments came a day after Bernanke sent an 11-page paper making the same argument to members of the Senate Banking Committee. "

For Volcker, it's "the Federal Reserve above all".

"That anger -- and the threat it poses to the central bank’s independence -- may have convinced Volcker to step up his support of Bernanke and the Fed, said former Fed economist David Jones, president of Denver-based DMJ Advisors and author of four books on the central bank.

"“His dedication to the principle of central banking independence has no limits,” added Neal Soss, who served as Volcker’s assistant from 1981 to 1983 and is now chief economist for Credit Suisse Holdings USA Inc. in New York.

"Volcker endorsed giving the Fed the power to guard against risks to the financial system as a whole in an opinion article in the New York Times on Jan. 30. "

All is well. Nothing to see here. Move along.


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