Tuesday, December 22, 2009
Bernanke misses his cue
According to the WaPo:
Bernanke, who was in charge of regulating the nation's largest banks, told the audience that these firms were not at risk. He said most were not even involved in subprime lending. And the broader economy, he concluded, would be fine.And we are supposed to believe that if we give him another chance, he will get it right next time.
"Importantly, we see no serious broad spillover to banks or thrift institutions from the problems in the subprime market," Bernanke said. "The troubled lenders, for the most part, have not been institutions with federally insured deposits."
He was wrong. Five of the 10 largest subprime lenders during the previous year were banks regulated by the Fed. Even as Bernanke spoke, the spillover from subprime lending was driving the banking industry into a historic crisis that some firms would not survive. And the upheaval would shove the economy into recession.
Just as the Fed had failed to protect borrowers from the consequences of subprime lending, so too had it failed to protect banks.
Subscribe to Posts [Atom]
Post a Comment