Dean Baker: Bernanke optimistic about subprime market collapse.

from The American Prospect:



Bernanke: "The problems in the subprime market seems likely to be contained."

I have nothing against Ben Bernanke. By all accounts he is a very decent person. His predecessor, Alan Greenspan left him with a time bomb just waiting to explode in the form of the housing bubble. The loss of $8 trillion in housing wealth was guaranteed to lead to a recession and the sort of financial meltdown that we are now seeing.

But, Bernanke did not help a very bad situation by denying its existence as long as possible. It is appropriate for reporters to ask him about his earlier comments (this statement was made in Congressional testimony less than a year ago).

At this point, the financial markets need credible analysis from the Fed, not happy talk. An important first step would be a move toward greater transparency. Why is the Fed letting banks borrow hundreds of billions of dollars in secret? What guarantees were given to J.P. Morgan as part of its takeover of Bear Stearns?

Bernanke has to start being open and honest in addressing the country's financial problems. Otherwise his words will have no weight. Reporters should demand a fuller accounting from Bernanke and the Fed.

--Dean Baker


Posted by Dean Baker on March 16, 2008 11:02 PM


http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=03&year=2008&base_name=bernanke_the_problems_in_the_s

His job is to keep people from panicking- our whole economy depends on people spending, and scared people don't spend.

OTOH, this crisis was avoidable and for that fact alone, the Fed should be hanged by their toenails in Guantanamo.

Bernanke did not help a very bad situation by denying its existence as long as possible.

Given his position, he probably worked to prop up the markets for awhile by denying the crisis... The very same reason people are running around now talking about a "small correction" when it looks like its going to be a pretty big one. Sitting around being a sourpuss in a high position can make things worse.