Bernanke Gets Desperate (Fed Letter)

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Bernanke gets desperate, pens letter to Dodd & Shelby acknowledging 'shortcomings in oversight', while begging for a continued seat at the regulatory table.

This gem slipped under the radar yesterday, but that shouldn't diminish its significance to Fed watchers.  Bernanke is definitely getting nervous.  The WSJ called the letter a 'rare move' by a sitting Fed Chairman.

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Complete Fed Letter (pdf)  >>

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Delivered today to the Economic Club of New York:

Paul Volcker's Very Supportive Speech (transcript)  >>

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(Awesome video BELOW)

The report from the WSJ

WASHINGTON—A defensive Federal Reserve Thursday took the rare step of laying out its case for continuing supervising the U.S. banking system.

In a letter to lawmakers, the Fed acknowledged regulatory "shortcomings," cited improvements it has made to its practices and worked to illustrate how its supervisory and monetary policy roles complement one another.

"Elimination of the Federal Reserve's role in supervision would severely undermine the Federal Reserve's ability to obtain in a timely way and to evaluate the information it needs to conduct its central banking functions effectively," the Fed said.

The Fed conceded that it cannot and shouldn't be responsible for overseeing the entire financial system, but explained in 12 pages why it thinks it should keep its current role in banking supervision.

"Both effective consolidated supervision and addressing macroprudential risks require a deep expertise in the areas of macroeconomic forecasting, financial markets, and payments systems. As a result of its central banking responsibilities, the Federal Reserve possesses expertise in those areas that is unmatched in government and that would be difficult and costly for another agency to replicate," the Fed said.

The letter comes as the nation's central bank is facing increasing criticism on Capitol Hill, which is considering stripping away some of its regulatory powers, and as Ben Bernanke still hasn't seen his continued role as Fed chairman reconfirmed.

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Video: Nassim Taleb with Nouriel Roubini on Squawk Box -- August 2009

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I think Taleb said it best:

• Debt must be converted to equity.

• Bernanke is an extremely poor bus driver.

• The markets are clueless.  They mean nothing in the short term.

• We're not pessimists, we just see risks and try to warn about them.

• All the risks are still there.  Our leadership was blind.  We're worse off than before.

• The problems still have not been recognized.

• The problem with the Obama administration is they are rewarding all the bad actors.

• The problem is Bernanke belongs to a school of economics (Keynes) that's never been in sync with anything, especially complex financial instruments.

• Bernanke's mistakes are worse than those of Greenspan.

• Bernanke presided over this build-up of risk in the system, and didn't understand, acknowledge or even recognize it.

• The Obama administration won't stop rewarding failure.

• Cash for clunkers rewards failure.

• Instead of being penalized, the bankers have more power now than before.

• No one is working on a cure.

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Featured comments:

The Fed chairman is supposed to be a cop. Imagine what a mess the world would be if we replaced all the cops with law professors. That is the very core of the Bernanke issue; he's the wrong man for the job. In my life, I have never seen anyone so blatantly ignore their responsibilities. And this notion that he's done a good job is beyond insane to me.

Mark McHugh

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I believe the U.S. Postal Service returned that letter, stamped "RETURN TO SENDER, NO 'HONORABLES' FOUND AT LISTED ADDRESS."

RLR

Comments

[DailyBail]

Fed Lays Out Case for Continued Role in Banking Supervision

http://online.wsj.com/article/SB10001424052748704281204575003163846202790.html?mod=WSJ_article_MoreIn

[DailyBail]

Volcker: Fed Must Retain Bank Supervisor Role

http://blogs.wsj.com/economics/2010/01/14/volcker-fed-must-retain-bank-supervisor-role/

[mark mchugh]

To add to Taleb's comments:

The Fed chairman is supposed to be a cop. Imagine what a mess the world would be if we replaced all the cops with law professors. That is the very core of the Bernanke issue; he's the wrong man for the job. In my life, I have never seen anyone so blatantly ignore their responsibilities. And this notion that he's done a good job is beyond insane to me.

[Sonic Ninja Kitty]

DB, I cut and fixed up the Fed thing a little, now it's a 'review': http://sonicninjakitty.wordpress.com/2010/01/15/its-review-time-kids/

[DailyBail]

mark...adding your comment to the bottom of the post...

snk...thanks for the update...we're going to be covering the bernanke confirmation next week and your post will be in there...

[RecoverylessRecovery]

I believe the U.S. Postal Service returned that letter, stamped "RETURN TO SENDER, NO 'HONORABLES' FOUND AT LISTED ADDRESS"