Ben Bernanke, by definition the most powerful central banker in the world, has looked increasingly powerless in the face of the onslaught being wrought on the US financial system.Nice to see the meejah covering this angle:
He's cut the federal funds rate from 5.25 per cent to 3 per cent in the past few months. He's slashed the discount rate penalty from 0.75 percentage points to 0.25 percentage points. He's pumped hundreds of billions of dollars into the banking system, including $US200 billion midway through last week. And still the carnage continues.
Now there is talk of another massive rate cut tonight, by a full percentage point, and perhaps even buying the dud real estate-based securities that caused the subprime crisis in the first place.
An argument has erupted as to whether Bernanke should stop right there and let the pain work its way through the market. These cowboys created the problem. Why should they be bailed out? Is it really the central bank's role to make life easy for high-flying financiers who pay themselves handsomely in the good times but rely on the public purse to cover their profligacy?The conventional wisdom is that the whole global financial network is so inter-related that it would have been irresponsible to let B.S. collapse. But in fact it was irresponsible to ever let things get to this B.S. stage. So who is going to be held accountable? Why isn't Alan Greenspan in jail yet?
Hundreds of Bear Stearns employees were paid multi-million-dollar bonuses last year for selling subprime debt, credit card debt and private equity debt. No one has asked them to repay the cash.