Odd praise for Bernanke


Lest we forget, this is the same Fed chief who looked at the rapidly deflating housing bubble in March 2007 and insisted that the "impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained." After the economy fell into shambles, Bernanke kept drawing happy faces on the dismal data – as early as May 2009, he stubbornly insisted that the "housing market, which has been in decline for three years, has also shown some signs of bottoming." Of course, it did not – and in too many areas, the bottom has still not been reached.
 
Is it any wonder that the movement to mandate congressional auditing of the Federal Reserve’s activity took on new power during the Bernanke years? Not surprisingly, Bernanke gasped at these efforts, dismissing this idea by haughtily declaring that the "public thinks auditing means checking the books [and] making sure you’re not doing special deals."
 

ADVERTISEMENT
But not unlike the Wizard of Oz’s order not to pay attention to the man behind the curtain, curiosity of what Bernanke’s Fed was doing out of public view has led to astonishing discoveries – albeit with an aggressive push for answers. Bloomberg News needed to file Freedom of Information Act requests and pursue litigation to uncover the never-publicized fact that Bernanke’s Fed channeled billions of dollars in U.S. taxpayer funds in 2008 to bailout foreign banks headquartered in economically prosperous countries.

Among the recipients of Bernanke’s secret funding were Royal Bank of Scotland Plc (which received $84.5 billion), Switzerland's UBS AG (the recipient of $77.2 billion), Germany's Hypo Real Estate Holding AG (the recipient of $28.7 billion). Banks headquartered in Bahrain, Canada, France, Malaysia, Japan and Taiwan also received secret Federal Reserve funds (the latter is particularly interesting, since the U.S. does not have diplomatic relations with the government in Taipei). How any of this – which was hidden from the public until July 2012 – helped the U.S. economic recovery has never been publicly explained by anyone at the Fed.
 
As for Zandi’s comment that the Bernanke-engineered economy is now receiving hints of "some sunlight breaking through" – well, maybe it is a bright day for well-heeled economists who rake in handsome salaries, but the overwhelming majority of Americans are not singing "Happy Days Are Here Again." Job generation is still puny: out of the 175.000 new jobs recorded in this month’s federal employment numbers, 122,000 were in low-wage occupations, primarily in the hospitality/leisure and retail industries. And despite grand talk of new strength in housing, more than two-thirds of all mortgage activity pegged to refinancing and one-quarter of the purchase market dominated by foreclosure-related properties.
 
Zandi is also projecting that the economy will grow at a pace of 3 percernt or more in the immediate post-Bernanke years. Well, if it does, it won’t be due to anything that Bernanke orchestrated or that his successor will formulate. And maybe Bernanke is somewhat aware of that. Last October, he glumly acknowledged, "Although monetary policy cannot cure the economy's ills, particularly in today's challenging circumstances, we do think it can provide meaningful help."
 
Well, if printing excess money to purchase government bonds and government-supported mortgage-backed securities is "meaningful help," perhaps it would be better for the Fed to let Americans fend for themselves.

Phil Hall is publisher and editor of Business-Superstar.com, an online entrepreneurial resource.