Evidently not. Another reason to like Texas. Richard Fisher was the ONLY Federal Reserve Governor who saw the disaster coming. Bernanke, Geithner and the rest of the moron were either too stupid or too captured by Wall Street to understand what was about to happen. And these idiots are still in charge. Can you believe these people are the ones who are supposedly saving the world now? Read this dialogue from 2007 to see what an idiot Bernanke and the rest of them truly are:
Back in late Spring of 2007 (May 9th), while many on the FOMC felt housing problems might be contained, Fisher worried allowed (much lifted from WSJ 1/18/13):
May 9, Dallas Fed President Richard Fisher: “On the housing front, I have been bearish–more bearish than anybody at this table…I am more concerned than I was before. We can go through the numbers, but I think it is best expressed by the CEO of one of the five big builders, who said that in March he was arguing internally with his board that the headlines were worse than reality and now reality is worse than the headlines.”
Apparently, Chairman Bernanke did not wish to rock the boat.
May 9, Mr. Bernanke: “I just want to make the observation that for almost a year now we have taken a very steady approach…During the period, the markets and the general view have gone up and gone down, and we have maintained a pretty even keel. That increases confidence in the institution and, unless we have a reason to change our view, we should continue to stay on a steady path.”
At the late June (27/28) meeting, as things began to worsen, they reviewed some of the implications of the problems at Bear Stearns. Secretary Geithner, then NY Fed President led:
June 27-28, Mr. Geithner on problems emerging at a Bear Stearns hedge fund (the bank would collapse in 2008): “Direct exposure of the counterparties to Bear Stearns is very, very small compared with other things.”
Mr. Fisher apparently responded:
June 27-28, Mr. Fisher: “I was once a hedge-fund manager–I know all the tricks that are played there, including, by the way, the valuation of underlying securities–in a day when the business was less sophisticated than it is now. I don’t feel I understand this issue…I don’t think the issue is contained. I do think there is enormous risk.”
By the next meeting (August 7th), Mr. Fisher’s concern and exasperation were becoming very evident as seen in this exchange. It starts with current NY Fed President (then chief of the open market desk) Dudley:
Aug. 7, Mr. Dudley: “We’ve done quite a bit of work trying to identify some of the funding questions surrounding Bear Stearns, Countrywide, and some of the commercial-paper programs. There is some strain, but so far it looks as though nothing is really imminent in those areas. Now, could that change quickly? Absolutely.”
Aug. 7, Mr. Fisher: “No amount of rewriting of history will exonerate us if we are not prepared for the more-dire scenarios that were presented by the staff. I would ask that we do some scenario preparation in terms of, should we encounter increased financial-market turbulence, what actions we might take to deal with it.”
Aug. 7, Mr. Bernanke: “I think the odds are that the market will stabilize. Most credits are pretty strong except for parts of the mortgage market.”
Dallas Fed president warned of housing crisis and Bear Stearns worries early in 2007
By SHERYL JEAN
SHERYL JEAN The Dallas Morning News
Staff Writer
Published: 21 January 2013 09:17 PM
Then-New York Fed President Timothy Geithner, now U.S. treasury secretary, and others disagreed and brushed off Fisher’s concerns. Bear Stearns collapsed in March 2008 — an early casualty of the financial crisis that led to the start of the Great Recession in December 2007.
Newly released transcripts from the Federal Reserve Bank’s policy meetings in 2007 (available at federalreserve.gov/monetarypolicy/fomchistorical2007.htm) highlight such inner workings of the central bank’s policymakers as the United States sat at the edge of a financial precipice. Although Fisher was a nonvoting member of the Federal Open Market Committee in 2012 (and this year), he attends meetings and participates in discussions.
Fisher also had expressed his growing concern about a housing credit crisis at the May 2007 Federal Open Market Committee meeting, according to the transcripts.
On Monday, Fisher talked with The News about his role at the Fed during that pivotal year.
Why were you the first FOMC member to warn about Bear Stearns in June 2007 or before?
I have a different background and take a different perspective than my FOMC colleagues. Most of my colleagues are Ph.D.s and I’m an MBA [from Stanford University with a bachelor’s degree in economics from Harvard University]. I was picking this up on the street, and you could see this in the credit default spreads. I also interview about 50 CEOS on large, medium and small companies around the world. I get to 30 to 35 in the week before each FOMC meeting. I can’t say who they are.
There were pressures developing elsewhere, too, such as at Merrill Lynch. I think others did pick it up. Eric Rosengren, president of the Boston Fed, and I talked quite a bit about this offline.
How did your background as a hedge fund manger help you spot warning signs?
I think it helps to have that background and to have a market operating background. Now there are two bankers on the FOMC board, but not then. Most theoretically trained economists work off of models, and data is history. On the housing credit side, the Dallas Fed was way ahead of others on that front because we were talking to homebuilders. You could see it building, but not showing up in the data yet. This is why we have different types of people on the Federal Open Market Committee.
In August 2007, Fed Chairman Ben Bernanke said, “Odds are that the market will stabilize.” Even as he considered interest rate cuts in December 2007, he felt “quite conflicted.” Why did it take him so much longer to see the economic downturn?
I don’t want to be critical of the Fed chairman. He has one of the greatest economic minds in the world. I think serious economists tend to downplay anecdotal evidence. Over the years, I’ve sorted out the Eeyores from the Tiggers [characters from Winnie-the-Pooh books]. There are some who are always negative and others who are always bouncing. It’s a combination of anecdotal evidence and theoretical data. Now, more members of the Federal Open Market Committee do pick up key signs from their districts.
In May 2007, you voiced growing concern about the housing market based on an interview with a CEO of one of the five big builders. What other signs did you see?
I spoke to the Texas Mortgage Bankers Association. I was by far the oldest person in the room. There was no institutional memory, and these people were packaging and selling packages of mortgages.
In January 2007, you said the risk of recession had declined based on interviews with 25 CEOs including at Disney, MasterCard and Wal-Mart. But two months later, you said the risk had increased and “the financial market turbulence has a potential to become greater.” Is that proof that anecdotes are not a good economic indicator on their own?
No, it means I had rethought and refined my questions for my interlocutors, and listened more carefully. The point is that anecdotal input is a necessary complement to data. Data is history but useful for validating trends; anecdotal evidence, carefully listened to, is a helpful way to identify possible trends. Business operators are the front line of the economy. What they report back is vital to understanding what policymakers take into account in developing strategy.
In hindsight, could you have done more, done anything differently in 2007?
It’s a group process. Nineteen of us sit at the table. Back then it was 17. It doesn’t matter if you have a vote or not. Everybody puts out and it gets digested. I don’t think there was more that I could have done. I think I was just doing my part.
If President Barack Obama decides to replace Bernanke for his second term, would you consider the chairmanship?
I have no interest in going back to Washington ever. I’ve done it twice [as assistant to the treasury secretary from 1978 to 1979 and deputy U.S. trade representative from 1997 to 2001]. I love Dallas. I really have done my duty. I wouldn’t rule out Ben staying on for another term.
sangell says:
Be nice to know what Fisher REALLY thinks of the academic economists he has to work with but he has to be diplomatic in his public statement if he is to have any influence in those meetings. Still his dig at economist’s ‘models’ was spot on.
Models can be accurate and still wrong. There were working models that showed the earth was at the center of the solar system and explained the motion of sun and planets as they revolved around the earth. Men can be very clever and develop a system to explain that which they observe even if their observations are incorrect! Developing a model to explain the motion of the heavens is child’s play however as compared to trying to model a dynamic economy with billions of independent actors
influencing the system yet that is precisely what frauds like Ben Bernanke base their poor decisions on. That and what the big banks tell him he needs to do.
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23rd January 2013 at 5:55 pm
Eddie says:
If we had a President with any kind of balls, Fisher would be the go-to guy for Bernanke’s replacement. We’ll get a Janet Yellen , no doubt. Fisher is seriously talking about reform now. He’s about to retire, most likely.
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23rd January 2013 at 6:12 pm
Mary Malone says:
Fisher, “I don’t want to be critical of the Fed chairman. He has one of the greatest economic minds in the world.”
Well, I was willing to give Mr. Fisher a chance – until that pablum poured forth.
Corrupt to the core – all of them – just different degrees of corruption.
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23rd January 2013 at 6:26 pm
Davossherman says:
The M-Word, my favorite.
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23rd January 2013 at 6:29 pm
Makati1 says:
Is it me or do all of you not see what I see? This is not stupidity. Men in their position do not get there by being stupid. Do you ever back off and look at the big picture, you know, the WHOLE world? Do you notice what is happening in Europe? Japan? The entire Western world is killing the middle class.
If you want to control the world financial system, you have to reduce it to two levels. Those that own and those that produce. Lords and serfs. Masters and slaves. A powerful middle class (especially one that is armed) is not going to be controlled for very long.
This is how it started: “… the Rothschilds, a family of German Ashkenazi Jewish origin that established a European banking dynasty starting in the late 18th century…” And the plan is to control the world through a one world banking system run by the Rothschilds. If you think it could not have survived that long…think again. Wealth is passed down, and with it power and nothing else to do with your time than acquire more wealth and power. Does anyone need a billion dollars? Of course not! But power(money) corrupts and it becomes a challenge to gain more.
They know that the end is near as the world is running out of growth (oil) and it will soon all collapse. If they don’t consolidate soon, they lose. That is why so much is happening that seems obvious but is not being corrected. They are in power grab mode and want to own/control everything before the SHTF. You are just collateral damage, a pawn in the game and expendable.
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23rd January 2013 at 9:19 pm
Novista says:
Some gems here …
http://dallasfed.org/news/speeches/index.cfm
I forget to what group, but read one of Fisher’s about four years ago, that curled my hair — obviously not wearing his Fed hat that night. And various others since.
MM, I can almost hear the parenthetical words on that oneliner.
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23rd January 2013 at 10:49 pm
BUCKHED says:
I’ve read a lot of Fisher’s speeches. I get the feeling he’s a person who has ideologies that are divergent from most folks in the Fed but he isn’t powerful enough or perhaps isn’t as well connected to CONgress as Helicopter Ben.
Here’s his speech to the Common Wealth Club of California in May of 2008. He lays out the costs back then of all of our unfunded liabilities …his total…almost 100 trillion dollars. I bet if he made the same speech today his figures would be double of those put forth in 2008 .
http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm
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23rd January 2013 at 9:16 pm
TeresaE says:
While Fisher appears to make sense, I truly believe he is a plant to convince us that ANYONE is looking at ANY alternatives to policy.
Lookee’ the shiny ball.
See, we do too entertain “opposing” views, Fisher is still in Dallas, ain’t he?
Kabuki theater at its finest.
This shit ain’t stopping until the day it has too. TPTB have proven they will employ every tool in their chest to keep the facade up. You’ll know its the end game when the next major war, really major war, is declared.
History rhymes, too bad 90+% of the general public and 99% of TPTB, refuse to believe that.
And we have most definitely seen this before. This time will be different though, it is going to be spectacular and improved over previous (small potatoes, in comparison) collapses, plus we can count on this collapse with drones & hollow points! Outstanding!
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23rd January 2013 at 10:02 am