Fed Attention to Wall Street 'Dangerous,' Buiter Says

Discussion in 'Wall St. News' started by r2d2, Aug 23, 2008.

Do you share Buiter's views?

  1. Yes

    13 vote(s)
  2. No

    4 vote(s)
  1. r2d2



    "The Fed listens to Wall Street and believes what it hears," Buiter said today in a paper presented to the U.S. central bank's annual symposium in Jackson Hole, Wyoming. "This distortion into a partial and often highly distorted perception of reality is unhealthy and dangerous."
  2. r2d2



    "Cognitive regulatory capture of the Fed by Wall Street resulted in excess sensitivity of the Fed not just to asset prices (the 'Greenspan-Bernanke put') but also to the concerns and fears of Wall Street more generally," Buiter wrote.

    "Between the TAF, TSLF, the PDCF, the rescue of Bear Stearns and the opening of the discount window to [Fannie Mae and Freddie Mac], the Fed and the US taxpayer have effectively underwritten directly all of the 'household name' U.S. banking system... and probably also, indirectly, most of the other large highly leveraged institutions," he wrote.


    "Although the Bernanke Fed has but a short track record, its too often rather panicky and exaggerated reactions and actions since August 2007 suggest that it also may have a distorted and exaggerated view of the importance of the financial sector for macroeconomic stability," Buiter wrote.
  3. Money makes the mare go.
  4. mokwit


    Yep, someone has finally come out and said that Bernanke is a complete academic buffoon and a spineless Wall St poodle.

    Panick he did when the market went down on SG news for example. Did we see The ECB or BoJ cutting rates just because the banks and rich Republican donors stood to lose money?

    As for Greensenile, I saw his book on the 50% off table at a bookshop today. Expect a few attention (read: $100,000* speech booking) grabbing statements before the vile old lizard gives up and slinks of to die in disgrace.

    *Special offer while stocks last $15,000, oh allright then $5,000.
  5. nitro


    I have always wondered if the correlation has gone up. I have never studied it. But let's assume it has. I would be more interested in the reason why, and whether it was grounded in correct reasoning.

    My theory is, the Social Security fund is bankrupt, and the US government has been warning people that they need to find other means of planing for retirement. The fix in play for the last few years by the USG has been, invest your money, and we will help you by changing the tax laws to make investments more attractive.

    Well, I contend that the stock market as a result is a more important mandate than ever before for that reason alone. Add to that the theory and practice of trickle down economics being sold as the savior of the economy, and the pressure on the elderly or soon to be retired is magnified even more. Inflation is the triple whammy.

    I expect record number of people to go and vote this election. I am 85 delta Obama wins, with a very low implied vol.

  6. Wow yea!!! Never heard anybody rip Bernanke before!!! First time!! Good finally somebody came out!!!
  7. Doesn't this comment start with the (possibly false) premise that Wall St and the Fed are actually separate entities?

    If the Fed is partly private, what part does that private interest play into Fed decisions by default?
  8. r2d2


  9. Watch out for gamma as election approaches, voters can be fickle
  10. Ahhhhhhh.... that's right.

    Who needs the financial sector to make loans, allow business creation and expansion, create jobs, grow the economy, etc.

    The Economy simply grows with magic "dust" dropped by the Tooth Fairy. Everyone knows that!
    #10     Aug 24, 2008