Last week, Austrian economist Ernst Fehr proved, with science, what weve known all along: Bankers are crooks. I thought Id heard and seen it all in the 30-plus years Ive been around the financial game. But this week even I was surprised when New York Fed President William Dudley shocked everyone by actually speaking the truth. He said that the Fed only puts out financial fires - but does nothing to prevent them. Talk about putting your foot in your mouth. How the Fed Sees Itself Is Not Pretty Nov 24th, 2014 | By Shah Gilani Talk about putting your foot in your mouth. This would be funny if it wasn’t sickening. During congressional questioning on Friday, Sen. Elizabeth Warren (D. Mass.) commented that the U.S. Federal Reserve‘s job is like that of “a cop on the beat.” And that’s when New York Fed President William Dudley inserted a foot in his big mouth. He responded, “I don’t think our primary purpose as supervisors is a cop on the beat, it’s more like a fire warden; make sure that the institution is well run so that, you know, it’s not going to catch on fire and burn down. And managed in a way that if the institution is stressed that it doesn’t collapse and threaten the rest of the financial system.” In other words, there’s no “policing” going on. Dudley said it – not me. But today I’ll share with you what I do have to say – and I’ll show how the close relations between Wall Street and Washington could lead to yet another financial conflagration… Too Close for Comfort According to Dudley, then, the Fed’s job – its reason for existence – is to protect banks from burning themselves down when their greedy schemes ignite depositors’ ample piles of kindling. The New York Fed president was testifying before the Senate Banking Committee’s Subcommittee on Financial Institutions and Consumer Protection on the subject of the Fed being too close to the banks it’s supposed to police. Now we know why banks and the Fed are so close. When the banks’ crack pipes break from excessive heat, the Fed is there with liquidity beer bongs to dampen their highs so they don’t OD and send the whole economy on a bad trip. And here’s even more evidence that lawmakers failed to jam the revolving door between the big banks and their so-called regulatory agencies following the 2007-’08 financial crisis: Dudley is the former chief economist of Goldman Sachs Group Inc. (NYSE: GS). And after that statement, he wasn’t done. Dudley stuck another foot in his mouth by explaining why the Fed is not the cops. “Our main goal is to ensure the safety and soundness of the institutions that we supervise,” he told Sen. Warren. “If in the process of doing that we see behavior that we think is illegal, then our job is to refer it to the enforcement agencies.” A stunned and angry Sen. Warren replied, “But you don’t think you should be doing any investigation? You should wait to see if it jumps in front of you?” Yep, that’s what the Fed’s job is. It’s not an arson investigator or fire inspector, just a fire department putting out pesky conflagrations by pumping more flammable liquids into their basements. - Shah Gilani wallstreetinsightsandindictments/2014/11/fed-sees-pretty/
Posted on: Sun, 30 Nov 2014 05:28:23 +0000
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