Bernanke Spoke With Rubin as Credit Crisis Worsened

this is great.

talk about the old boys network.

he has to speak to 30 different people in the markets including rubin and all the other cronies to find out what the fuck is going on in the market.

what are they doing at the fed.

do they not look at the prices on the screen for gods sake.

then they tip all their buddies at the select few banks and tell them going to cut 50b.p.

what a joke.

Oct. 3 (Bloomberg) -- The Federal Reserve's Aug. 7 decision to keep interest rates unchanged set off a chain of high-level discussions with Wall Street executives, money managers and cabinet officials that culminated in Chairman Ben S. Bernanke's public about-face 10 days later, according to records of his schedule.

Starting with a phone call from former Treasury Secretary Robert Rubin the day after the August rate meeting, Bernanke's appointments included Lewis Ranieri, founder of Hyperion Capital Management Inc., and Raymond Dalio, president of Bridgewater Associates.

The information on Bernanke's calls and contacts was obtained under the Freedom of Information Act by Kenneth H. Thomas, a lecturer at the University of Pennsylvania's Wharton School in Philadelphia. The records depict a chairman who ``has made a very good effort to get up to date with what is going on,'' Thomas said.

David Skidmore, a Fed spokesman in Washington, confirmed the authenticity of the document provided by Thomas to Bloomberg News. He said he couldn't provide details of discussions that Bernanke, 53, had with Rubin and others.

The conversations came against the backdrop of the worst global credit rout in almost a decade. After $38 billion in cash injections into the banking system failed to boost liquidity, the Fed on Aug. 17 cut its discount rate by half a percentage point, to 5.75 percent, and signaled a September reduction in the benchmark federal funds rate. The Fed cut the key rate a half-percentage point to 4.75 percent on Sept. 18.

Rubin's Message

Rubin, 69, now chairman of the executive committee at Citigroup Inc. in New York, told Bernanke that the Fed made the right decision on Aug. 7, even as traders complained the central bank was oblivious to weakening markets, according to a person familiar with the conversation.

On Aug. 9, Bernanke met from 11 a.m. to noon with Ranieri, a former vice chairman of Salomon Brothers Inc. and a pioneer in the mortgage-backed securities market. Fed Governor Randall Kroszner and Community Affairs Director Sandra Braunstein, who also runs an enforcement team, joined the conversation with Ranieri. Ranieri, 60, wasn't available for comment.

Dalio visited Bernanke at 2 p.m. the same day. Bridgewater is the fourth-largest U.S. hedge fund firm, with $32.10 billion in assets under management as of July 1, according to HedgeFund Intelligence's Absolute Return magazine.

Dalio's office in Westport, Connecticut, didn't return telephone calls seeking comment.

Exchange With King

According to the Fed records, Bernanke consulted throughout the month with staff experts, investors, congressional officials, community groups and Bank of England Governor Mervyn King.

Bernanke and King spoke by telephone at 1:30 p.m. on Aug. 17, following the U.S. discount-rate cut that morning. Bernanke was also in frequent contact with Treasury Secretary Henry Paulson, who said in an interview last month that he meets the chairman regularly.

Bernanke's schedule lists 35 Fed conference calls from Aug. 9 to Aug. 31, including at least two during the central bank's summer retreat at Jackson Hole, Wyoming. During the first full day of the symposium, Bernanke said in a speech that he would do what was needed to keep the six-year economic expansion going.

On the eve of the Aug. 7 rate decision, Bernanke received a briefing from Fed staff on markets. He also spoke with Timothy Geithner, president of the Fed's New York branch and the central bank's chief liaison with Wall Street.

Adding Reserves

In the days after the rate meeting, as Bernanke touched base with executives and investors, credit costs climbed. The Fed added more reserves to the banking system than any time after the terrorist attacks of Sept. 11, 2001, in an attempt to increase liquidity.

Yield differences between high-grade debt and riskier credit widened, according to a macroeconomic risk index tracked by Citigroup Global Markets. The index rose to 0.98 on Aug. 17, with a reading of one being a measure of high risk aversion, up from 0.89 on the day before the rate decision.

Wayne Passmore, a Fed expert on mortgage finance, met with Bernanke at least four times in August, including before and during Bernanke's Aug. 2 meeting with Freddie Mac Chairman Richard Syron, the schedule shows.

``He is going up and down his staff,'' gathering information on markets, Thomas said, referring to Bernanke.

The chairman continued to get reports on market conditions from investors after cutting the discount rate.

On Aug. 23, the schedule says Bernanke took a call from John Brennan, 53, chief executive officer of Vanguard Group. Senior Fed economists Brian Madigan, now in charge of the Monetary Affairs Division, and Patrick Parkinson, a financial stability expert, participated.

Vanguard managed $1.1 trillion in mutual fund assets at the end of 2006, according to the company's Web site. Officials for the Valley Forge, Pennsylvania-based firm couldn't be reached for comment.



http://www.bloomberg.com/apps/news?pid=20601087&sid=ae21h4HAD6Ag&refer=worldwide

 

Come on, THE-BEAKER, you know it - we know it. BEN has not the time to look at the screens =>

 

All of the people who met Bernanke were on their knees.

That is how much 'power' the FED has in interest rates... each 1% is more money for them.(banks) and stock market long positions.

in wall street, it's all about the money.

 

The US dollar decline is paying for the low interest rates..all imports have increased in price.

The US dollar is falling with ALL currencies.

Foreign investment dollars would be foolish to invest in US backed assets if it isn't hedged or can't be hedged.

 

Why do you think foreign investors are reluctant to invest in third world currencies..their currencies are worthless and gov't regime are untrustworthy can can get robbed by the gov't(nationalization schemes) or other ways to take your investment assets. legally. excessive tax regimes etc.

 

Now that was a good post. Wow. You know it, but to actually see it so blatantly in the press - wow.

 

I don't see anything unusual or improper in the Fed Chairman talking to a collection of bankers and money managers. Who should he confer with, the guys at the golf club? The whole crisis involved a potential seize-up in the credit markets, so it seems doubly important for him to get the viewpoint of market participants, not just Fed staffers. It also tends to insulate him from criticism. The risk is that in trying to reach a consensus position, he tips off money managers to his future course of action.

The problem arises when the Chairman is not savvy enough to discount opinions from those with an agenda. Take Rubin, for example. He is highly partisan and would be in line for an important post in a Clinton administration. Is he really the guy Bernanke should be depending on?

 

wow. Just wow. And everyone wonders who front ran the fed move.

This is bullshit. I hope the whole system goes down the drain. Bring on the depression.

I'll take it as long as these guys suffer