David Stockman: 'Bernanke Killed The Financial Markets'

Former Reagan Budget Director David Stockman on Squawk Box last Monday, 3 days before Bernanke unleashed $40 billion in additional monthly Qeternity.

"Ron Paul is the only one who is right about the Fed, and the Fed is the heart of the problem."

"Politicians will never make the tough decisions to solve the debt crisis as long as the Fed keeps printing free money."

"Ron Paul is the only one who is right about the Fed, and the Fed is the heart of the problem.  The Fed has destroyed the capital markets and the money markets.  Interest rates mean nothing.  Everything is trading off the Fed and Wall Street isn't even home.   It's just a bunch of computers trading word-clouds emitted by this central banker or that."

"In this environment everyone is being given the wrong signal.  The Fed and the lunatics that run it are telling the whole world untruths about the cost of money and the price of risk.  The Ryan-Romney campaign is about restoring vibrant capitalism.  How can you do that when the financial markets are dead - the lifeblood of a capitalist system."

Comments

[Cheyenne]

Interesting that Stockman says Morgan Stanley was the next domino to fall around TARP time. In his book, Barofsky says Bernanke told him the same thing.

Separately, Stockman has picked apart the fiction of the bank run in September 2008 that supposedly justified TARP. The only banks that would have been destroyed by the so-called bank run, Stockman asserts, were investment banks--not Main Street banks (as Main Street has been falsely led to believe):

"The banking system, especially the mainstream banking system, was not in peril at all. The toxic securitized mortgage assets were not in the Main Street banks and savings and loans; these institutions owned mostly prime quality whole loans and could have bled down the modest bad debt they did have over time from enhanced loan loss reserves.So the run on money was not at the retail teller window; it was in the canyons of Wall Street. The run was on wholesale money—that is, on repo and on unsecured commercial paper that had been issued in the hundreds of billions by financial institutions loaded down with securitized toxic garbage, including a lot of in-process inventory, on the asset side of their balance sheets.

"The run was on investment banks that were really hedge funds in financial drag."

http://www.fedupusa.org/2012/05/the-emperor-is-naked-david-stockman

[DailyBail]

It's a great point Stockman makes and something I sometimes scream when I've had a few beers:

"Since when do we fucking save investment banks.."

[DailyBail]

And yeah, Morgan Stanley was next and then Goldman. After Blankfein tipped him off that Goldman had maybe a week or 2 left, Paulson sprung into action and and announced TARP.

It was $9 billion from Mitsubishi that saved Morgan Stanley.

http://dailybail.com/home/check-out-the-9-billion-dollar-check-that-saved-morgan-stanl.html

[Drew Manning]

Ron Paul is a wolf in sheep's clothing. The proof?

For one, in his debate with Paul Krugman, he failed to correct the latter when, on multiple occasions, Krugman deceitfully identified the Fed as "the Government." Really Ron, you let him get away with that? Surely you know that the fed is a privately owned cartel.

For another, Ron Paul keeps pushing a return for a Gold Standard using false arguments. The Federal Reserve is corrupt because it creates money out of nothing (the province of governments)and lends it out at interest. This creates perpetual inflation and indebtedness. The endgame is ownership of all resources and serfdom for the masses.

There is, however, nothing wrong with the concept of Fiat money. Money should only exist to facilitate exchange between buyer and seller. Moreover, there is nothing magic about gold and its relationship to how much money should be in an economy despite what the goldbugs tell us.

The problem is that those who control the Federal Reserve also control the stores of gold. They would have us avoid one pitfall to fall prey to the other. It is the story of Scylla and Charybdis. We go back to a gold standard and are forced, once again, to borrow gold that may or may not exist---at interest again.

Shame on you, Ron Paul. You are either ignorant or a paid crony.

[Josie]

Wish more people listened to Stockman. The guy gets it. And M/S was going down, no question.

Did anyone see Phil Purcell on Squawk last week. He was asked if he still owned M/S stock and he said no. Why? Because they levered up and took on more risk and he got out. In other words, he saw a shit storm coming. And without mentioning John Mack, but still got his dig in by saying a CEO must be judged by the stock price on his/her watch...

[LiberatedCitizen]

He gets it too bad so many others don't. The real reason Ron Paul wants to end the fed is he realizes without it the gov. couldn't keep spending obscene amounts of your money. The fed is doing a run around Congress right now but ultimately the responsibility is still the politicians because they could end it but won't because of the bribes and the spending.

Sneaking Past Congress

http://www.nysun.com/editorials/sneaking-past-congress/87986/

Special Report: Well-to-do get mortgage help from Uncle Sam

http://www.reuters.com/article/2012/09/13/us-fanfred-lending-idUSBRE88C0CY20120913

A Huge Housing Bargain -- but Not for You

http://www.thestreet.com/story/11224917/a-huge-housing-bargain--but-not-for-you.html

Subprime Rally Building as Dealers Sop Up Supply: Credit Markets

http://www.bloomberg.com/news/2012-07-24/subprime-rally-building-as-dealers-sop-up-supply-credit-markets.html

and this

Distressed Home Prices Jump With Inventory Shrinking

http://www.businessweek.com/news/2012-08-30/distressed-home-prices-jump-with-inventory-shrinking-mortgages

Mortgage-Bond Spreads Fall to Record Low as Fed Starts Buying

http://www.businessweek.com/news/2012-09-14/mortgage-bond-spreads-fall-to-record-low-as-fed-starts-buying#r=bloomberg

Bernanke Buoys Big-Bank Stocks

http://online.wsj.com/article/SB10000872396390444433504577651902142190454.html

October surprise comes early this campaign

http://www.boston.com/news/politics/2012/2012/09/14/october-surprise-comes-early-this-campaign/6YvIcPUthLRfhboCLRVlgI/story.html

QE3: Will the Fed’s New Plan Really Help Housing?

http://www.thefiscaltimes.com/Articles/2012/09/17/QE3-Will-the-Feds-New-Plan-Really-Help-Housing.aspx#BZmfxq1XzBjAD0Jf.99

Dollar Index Headed for Rapid Collapse: Chart

http://www.cnbc.com/id/49068436

Fed Stimulus, Mideast Turmoil to Feed Oil Price Rally: Survey

http://www.cnbc.com/id/49056413

US inflation fears rise after QE3

http://www.ft.com/intl/cms/s/0/b2f99742-00cc-11e2-8197-00144feabdc0.html#axzz26llNs5KQ

Fed's Bernanke Thinks He Knows More Than 97% of Company Executives

http://www.thestreet.com/story/11700841/1/feds-bernanke-thinks-he-knows-more-than-97-of-company-executives.html

[Harry Johnson]

finance is not the heart of our system. That is the fatal flaw and stockman is as guilty as anyone for wrecking our system. He was one of the perpetrators of the reaganoid voodoo economics that pushed us over the cliff. The base of a successful economic system is productive labor, not paper shuffling by greedheads on wall street. Franklin Roosevelt recognized this and tried to establish a balance of power between working people and the money grubbers. It succeeded for 40 years till the reaganoids including stockman upset the apple cart. The focus now has been on rewarding non productive financial paper shuffling and inflating asset bubbles to pimp commissions for salestrash.

Abraham Lincoln stated it best when he said "Labor is prior to and independent of capital. All capital depends on labor...." When the reaganoids decided to trash labor that undermined our economy and started us on our downfall.