Thursday, May 15, 2008

Bernanke Says Banks Must Foresee the Risk the FED Ignored

I swear that I think the days are getting shorter or something. Maybe traffic is worse or I am moving slower, but it always seems I am running out of time. Reader Gawain had suggested Omaha Steaks in response to last nights inquiry. They are headquartered in Nebraska, which made me think of the film "Unforgiven" quote by little Bill Dagget: "Hell, I even thought I was dead 'til I found out it was just that I was in Nebraska." It was not clear if and how long they dry age their beef. I am ordering on Saturday, so I have to decide soon.

Loyal reader Watchtower says he has a Jon boat, and so I would like to know Watchtower if that boat is pretty stable on a river? I am of course in the market for a boat, and I plan on fishing a medium size river quite a bit. Let me know! And where is loyal reader G? I hope he is not working too hard.

Bernanke Says Banks Must Foresee the Risk the FED Ignored
Today was a good day. I love it when everyone, even the guys in the cheap seats, get an up close view of how clueless and broken the system is. Today Ben Bernanke, the FED Chief, gave a speech at a conference of reserve bankers (must be a wild crowd!) in Chicago. In the speech Mr. Boom Boom Bernanke tries to layoff the total failure of the FED to regulate banks in any way as it relates to mortgage issuance on those banks because they did not foresee the risks that the FED is tasked with regulating. Got all that? That is the translation in real terms. Bernanke's actual wording was a bit different:
AP
Bernanke: Banks must get better at foreseeing risk
Thursday May 15, 11:36 am ET By Jeannine Aversa, AP Economics Writer
Bernanke: Banks need to beef up their ability to foresee risks like credit, mortgage troubles
WASHINGTON (AP) -- Commercial banks and other financial institutions need to beef up their ability to detect and protect themselves against risks like the credit and mortgage debacles, Federal Reserve Chairman Ben Bernanke said Thursday.
The trio of crises -- housing, credit and financial -- have exposed weaknesses in financial firms' so-called risk-management practices. That is their ability to sufficiently detect and hedge against risks. Banks and other financial players have racked up multibillion-dollar losses when investments in complex mortgage-backed securities soured with the collapse of the housing market. Credit problems in housing quickly spread to other areas, intensifying the turmoil.
"Improvements in banks' risk management will provide a more-stable financial system by making firms more resilient to shocks," Bernanke said in a speech to a Federal Reserve banking conference in Chicago.
"It is clear that supervisors must redouble their efforts to help organizations improve their risk-management practices," Bernanke said. "We have focused on the institutions in most need of improvement, but we will continue to remind the stronger institutions of the need to remain vigilant, particularly in light of the ongoing fragility of market conditions," he added.

OK. Basically Mr. Bernanke is saying that the "supervisors" must get better at risk assessment? What supervisors are these? Who is responsible for the banking system through money creation, bank overnight lending, interest rate setting and other tools? Is that not the FED itself?

Bernanke is pointing the finger at the banks here, and surely the banks are fully to blame for chasing risky investment ideas and flooding the markets with cheap credit. Guilty as charged. But where in the F#ING WORLD does Mr. Bernanke think this easy money came from? The tooth fairy? A pot of gold at the end of a rainbow? A scratch ticket?

No, the easy money from an ultra accommodating FED was the flood source. With interest rates so low for so long, money was forced to chase any return and thus here we are. The FED is trying to point a finger, but when you point a finger at someone, there are 4 fingers pointing back at yourself. The tone of the speech made me think that Bernanke thinks that worse things are down the road and he is trying lay blame off early. What a tool.

Leave Friday Night Rock Blogging suggestions in the comments!

Have a good night.

10 comments:

watchtower said...

GYSC
Knowing what I know now, I would get a longer boat, maybe 12' - 14'.
Keep in mind I only fish small lakes and sloughs.

getyourselfconnected said...

"You're gonna need a bigger boat"- from the film "Jaws"

Yes, the river I love to fish can be moderately swift arly in the year, and a bit slower in summer. I may need something pretty stable to combat the current. The search goes on. Thanks for the information.

Anonymous said...

Watchtower,

I have a 10' john boat also. I haven't used it in years though as I don't fish or hunt anymore. When I quit drinking 17 years ago it kind of seemed like doing that was just an excuse to hit the bottle. I use to use it to frog a lot, they ain't stable if overloaded as I dumped one night along with 3 other drunks who with me.

I don't care for Omaha steaks personally, but Nebraska beef is about the best I have ever eaten. I buy mine from a butcher who also raises the cattle himself. Good stuff. He will ship it as I have sent some to relatives as gifts but it isn't cheap. The last time I did it it cost more to send it then I paid for the meat.

I spent the day working on the gardens got the corn and okra in the dirt today along with about 6 different kinds of squash, cucumbers, and a few sacrificial tomato plants.

Looks like the S&P is going to shot for the gap at 1450. I think I'll add to some short positions when it gets there.

Bernankie as usual is full of crap.

Kevin

Big Dawg said...

How about some classic 80s rock for Friday Night Rock Blogging?

getyourselfconnected said...

Kevin,
Wow you quit drinking 17 years ago! I do not drink anymore, of course I dont drink any less! I never drink when I fish, which seems strange to most people I know that fish. I guess I like to be in tune with the subtle line movements that mean a smallmouth bass has picked up the lure.

I need real dry aged beef, and price is not really a concern. I am leaning towards Lobels of New York for my first order.

Thanks for the input gentlemen!

getyourselfconnected said...

Wow rob, like 3 minutes difference in our posts!
You must know I am an 80's rock addict! No problem!

Anonymous said...

Hey all,

Yeah I am still here. Just finished a project involving 22 tons of river rock making its way from the driveway to the backyard. (By hand) Work sucks but it pays the bills. Funny but gas is almost half way to what I make per hour. (Not cool)
G - Stands for many things. (Gold being one of them)

This weekend is my 5 year wedding anniversary so have a great weekend as I know I will!

G

PS: Don't let the summer lull lure you into a false sense of security. We are still sinking.

Anonymous said...

G

My most valuable assert and I just celebrated our 30th on April 22nd congratulations. I might also add that this is one of the roads to wealth stay with her threw thick and thin. I know a lot of people, mostly guys that lost it all thinking the grass was greener somewhere else.

Kevin

watchtower said...

G

Kevin's line about staying married to one person is right on the money.
I can't see how the average person (which is what I am) can build any wealth by getting married and divorced over and over again.
My wife and I celebrated our 20th this past April. I can honestly say that I love her more now than when we first got married. She is definitely the better half of our team.
I hope both you and your wife have a great anniversary this weekend!

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