Tuesday, July 17, 2012

Ben Bernanke: cannot say 'in full confidence' that Libor is reliable

In his Congressional testimony, Fed Chairman Ben Bernanke said that he could not say in full confidence that Libor is reliable today.

Why?
the British Bankers' Association did not adopt most of the recommentations made by the New York Fed.
As discussed in a post yesterday, the source for these recommendations were the banks involved in manipulating Libor in the first place.

Mr. Bernanke appears to have complete trust in the banks that are or are about to become admitted liars (Barclays admitted to lying in its Libor submission to enhance its profitability and to misrepresent its financial condition).

To his credit, the Bank of England's Mervyn King recognizes that Libor must be based off of actual trades and not recommendations that protect opacity if there is to be any confidence in the accuracy of the interest rate.

2 comments:

Hartzman said...

Questions for Federal Reserve Chairman Ben Bernanke that will probably be not asked during his congressional testimony

Can bailouts perpetuate problems instead of solve them?

Did some stabilize financial markets in the short term
to defend political legacies and financial interests,
regardless of long term consequences?

If a nation prints more money,
like cutting a large pizza into 16 slices instead of 8,
is each slice worth less?

What if the pizza shrinks while the number of slices rise?

Are taxes rising or falling if workers, savers and investors
are exposed to inflationary capital confiscation?

Should economic plans designed to fix large, complex predicaments,
rely on many who created and profited from the initial problems,
who may not have wanted to identify and confront them
when they were small, relatively unknown and lucrative?

Who owns the Federal Reserve?

Why is it called the Federal Reserve,
if it’s not federal and there’re no reserves?

Should shareholder and debt investors reap profits
from money borrowed from a nation’s children,
to save companies responsible for creating the need to be bailed out?

Why did the Federal Reserve not disclose
how much some financial institutions received during the financial crisis?

At what point do bailouts do more harm than good?

Is the government penalizing well run businesses
by rewarding poorly managed firms with taxpayer and printed money?

If more money was withdrawn than invested in US equity products during 2009,
coincident with record new and secondary stock offerings,
amid the least amount of corporate stock buybacks
and the most insider selling in recent history, where did the assets needed
to recover trillions of US stock market capitalization
and borrowings by the US Treasury come from?

Why have most financial industry and government funded economists
considered warnings of financial bubbles unproven or exaggerated until afterward?

If some consider insanity to be doing the same thing repetitively,
expecting different outcomes,
and the Federal Reserve contributed to the financial crisis
by creating short term growth at the expense of long term stability
after increasing money supplies after 9/11
while reducing short term interest rates from 6.5% in 2001 to 1% in 2003,
why would who want to repeat the same strategies after 2008?

Is current economic growth dependant on increasing debt creation?

If there’s less than $45 billion in Vault Cash,
and 20 million people wanted to withdraw $10,000 each at the same time
from about $6 trillion in savings deposits, where would the $200 billion come from?

If Total Savings Deposits rose about $4 trillion since 2000
and Vault Cash increased less than $15 billion,
where’s the money?

If taxpayer intervention didn’t reduce competitive disadvantages
should taxpayers continue to subsidize failed/morally corrupt business models?

Did some economic and political leaders
bail themselves and their compatriots out of their own mistakes,
by pledging trillions of debt and newly created money,
knowing the consequences would be handed down to the unaware
of following generations?

Is a Keynesian or Austrian economic path more ethical?

If the post financial crisis recovery stalls,
should the world’s central banks and government step in again,
or should we be allowed to correct what many believe are artificial imbalances?

Could many who believe the government should pledge their children’s future income
to prevent the failure of insolvent businesses
be indirectly advocating a political system other than capitalistic democracy?

Richard Field said...

I think that what will be needed to get answers to most of your questions is not a Financial Crisis Inquiry Commission, but rather a Pecora-type Commission.

My suggestion is that that let Neil Barofsky (the former head of SigTarp) lead the commission. It needs a no nonsense, lets get the facts out type.

I will take a stab at answering one question. If bankers are involved, you can rest assured that the pizza will be smaller.