Thursday, October 13, 2011

Bernie Sanders Clueless on the Fed

Patron saint of Liberal radio and websites, Socialist senator Bernie Sanders, questioned Bernanke this week, and he asked one reasonable question, namely, why not break up the top 6 banks if they are all 'too-big-to-fail'. Bernanke said he thought incentives in Dodd-Frank would better address the incentive problems. I'm not so sure. I would prefer the simplicity of having a maximum asset size than the open-ended regulatory gibberish in Dodd-Frank.

Then Sanders asked why the Fed does not provide low-interest loans to small businesses, to help kick-start the economy (see video here). He even threw out a number, $15 Trillion. Bernanke noted that the Fed has no structure to underwrite or service general loans to businesses. Sanders thought that this would be no different than offering back-stop liquidity to banks, oblivious to the insanely large amount of infrastructure needed for that to work.

That's just insanely ignorant, and highlights how the socialist mindset fails to appreciate the reasons why markets, and the firms that comprise them, are more efficient than government. It reminds me of Lenin's assumption that nationalizing industry would be trivial because business was strictly accounting, or more recently, the faith in shovel-ready projects. There are many stupid Republicans, but this really sets a new bar.


JWO said...

why not break up the top 6 banks if they are all 'too-big-to-fail'. Bernanke

I think that what needs to be broken up is the federal reserve. Break it up into 5 or 6 competing banks each with its own currency.

Aside from that many banks failed so I do not see breaking banks up would solve the problem.

Caveat B said...

Doesn't Sanders caucus with the other party?

E Hines said...

What needs to be understood in government is that "too big to fail" is a non sequitur.

Let them fail. It's the only way to clear out the detritus and let new life grow.

Eric Hines

Anonymous said...

The problem of interest rates, which are artificially low and below the rate of inflation it does force investors, including individuals, institutional investors, and state and private pension funds, into risky investments. In fact, the losses are now so large that they have threatened the entire financial system. The losses experienced by the financial sector and investors brought about by Greenspan's irresponsible monetary policies continued by Bernake will exceed several trillion US dollars if we add up the combined capital losses on homes, nongovernment bonds, and equities.