September 12, 2007

Open Thread: HP'ers let Ben Bernanke and the Fed know what's on your mind


And advice for Ben for Monday?

Cut 1/2?
Cut 1/4?
Hold?
Raise 1/4?
Quit?

HP's advice: Hold steady, and send this message to failed flippers, housing gamblers, reckless lenders, stupid builders, ramen eating realtors, immoral mortgage brokers and brain-dead bankers: We're done with bubbles. You made your bed, now sleep in it.

Fed Treads Moral Hazard


Wall Street has a dream: that the Federal Reserve will rescue financial markets with a sharp cut in interest rates.

Behind that dream lurks a problem, something financial people call moral hazard.

Moral hazard is an old economic concept with its roots in the insurance business. The idea goes like this: If you protect someone too well against an unwanted outcome, that person may behave recklessly. Someone who buys extensive liability insurance for his car may drive too fast because he feels financially protected.

50 comments:

Anonymous said...

Dear Ben

I want you to lower the interest rate to 1 percent. That way the dollar will become so cheap that the poor citizens from Angola can come here, invest and flip Mc Mansions just like we did.

Of course the dollar tanking wont matter much, since Europe doesn't register much in the minds of Americans. (We've become Mexico and Mexicans dont really care much about Italian cuisine (unless of course its from the Olive Garden)

So I salute you and stay the course of your predacesor, Alan Greenspan and continue to play that fiddle till it all burns down.

Thank you very much
Sincerely
Guy laughing at the Flippers

Anonymous said...

.


Paul Simon the moustache years!

Anonymous said...

“It is not the responsibility of the Federal Reserve — nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

- Ben Bernanke, August 31, 2007

Don't be a liar Ben.

Anonymous said...

Ben, please hold the fed funds rate steady. Don't get suckered into lowering rates to save you rich buddies.

Millions of boomers are beginning retirement in 2008 and a cheap dollar will put most of them in the street. This would be very painful and would cause huge medical costs for medicare, which could further bankrupt our country.

Americans will not stand for a bail out of those who can't control their spending habits and over borrowed. It's not fair!

Those of us who saved and controlled our expenses (including boomers) will lose confidence in our economy and will likely leave America for places like Medellin, Columbia where the cost of living is very reasonable, the girls are gorgeous and the people like Americans.

Let's be bold and allow the system to work so that those who screwed up take responsibility for their actions.

No Rate Cut Please!

Save America!

Save Our Dollar!

stuckinthecity said...

I watch CNBC and EVERY talking mouth has it either 20 or 50 bps. Not even considering a big fat ZERO! The Euros seem to want to raise their rates, throwing the ball into our f'ed up court. I wonder how many condos Larry Kudlow is holding on to right now.....

Anonymous said...

No cuts. The Dollar is getting reamed right now.

turdly said...

1/4 raise. something has to give. We [bankers] are raising the rates and conditions back to 1994 anyway. The rate drop is not going to do a thing for anyone but us. We'll reap the reward because we sure as hell aren't going to pass it on to the consumer. if half a point puts you out of budget and you don't qulaify, you ALREADY don't qualify.

A lot of wealthy people will take the last liquid cash overseas if he makes the cut. Not much more than 10 or so billion accumulative, but enough to make someone take notice. I have my accounts prepared to make the move....

save the clock tower, I mean dollar! said...

please hold or raise, or end the charade and just have wall st. babies tax main st. directly.

it's not a good sign when people are saying not exchanging their Canadian $ back to US $ was a good idea.

Mark in San Diego said...

HOLD THAT LINE. . . .kind of like the old football cheer. . .

CadorBolin said...

Raise the interest rate to 8 percent.

Yes, the fliptards and realwhores will scream like little stuck pigs. So be it.

But it's time to bring sanity back to the market.

sam said...

My prediction this week:
The stock market will rally on the belief that easy money is back and the fed's cut will help drive the market to new heights (it won't- a Nas buy in 2001 on that belief lost you >50% your beans!). When we are within 5% of all time highs and 10%+ up for the year, there is no "crisis", rather another impending bubble. Result: no rate cut.

My advice to BB:
Hold in September but change language to indicate a bias toward easing. Indicate the need to reprice assets in an orderly manner. State that transparency in structured assets is a greater impediment to this necessary revaluation than interest rate levels. Restate that it is not the feds job to set or support asset valuations (at least that's what you say when things are going up).

If cuts are subsequently needed, another month isn't going to make much needed. There is a need to divert WS from their preferred path- more easy money drug to feed their addiction. Every addict thinks one more hit is his salvation. Never works that way.

I have to give the guy some credit for towing a pretty strong line thus far. He was left holding a bag o shite from Greenspan.

decaffeinated said...

Based on recent market action, I think Wall St. has at least a 1/4 pt rate cut baked into the cake. If Ben doesn't give them at least that much, ye olde market will tank on a scale that requires immediate market trading curbs.

Tough choice there, Ben:

a) cut rates and trash the dollar, or

b) don't cut and watch a roaring bloodbath unfold in the equity markets.

Tell us again why you wanted this job, Ben? You knew that Greenspan left a mess and yet, you walked right into a fetid cesspool.

Sucks to be you.

keith said...

The market has price in an average 3/8's easing - they may get 1/4 but they won't get 1/2

The right thing for Ben to do is no change to the rate, but change to a easing bias should future data warrant it

Meanwhile, we've entered investment asset deflation mode, same as Japan. But we'll see service and commodity price inflation, as the dollar tanks

Hold on tight.

Anonymous said...

Greenspan would have panicked and cut 2 points creating another stupid bubble

Anonymous said...

Put the blame where it belongs, Greenspan.

(Note: It does not matter what he does its a soup sandwich and he is holding it.)

Anonymous said...

He should raise it, but since we know *that* won't happen, so hold steady. Till 2008 too! Then re-evaluate.

heyMoe said...

If you guys werent aware, the forums on ml-implode.com are where ALL the unemployed mortgage brokers hang out.

So funny to hear them whinge and moan!

Make sure to stop over there to tell them what you think of thier imploding industry.

AMIGAUSER said...

I think Ben will cut by a .25% this month,
He will also indicate that he will probably cut again next month

HPs need to realize,that their is no way that the FED can afford to look like it is not NOTICING that mainstream America is in a world of hurt.
Its an Election Year, and the voters are hurting, that means they WILL be bailed out with lower interest rates

Who cares if the Dollar falls, it just makes your exports cheaper, and forces Foreign central Banks to buy more Treasury bills.

HPs should prepare themselves for the next News Event - THE Bombing
of IRAN, this should take everyones mind off the housing Problems and also put the Democrats on the Defensive

BUY OIL
BUY THE BOMB MAKERS

borkafatty said...

Dear Ben...Please don't be a fool, and follow the Socialist moment in this country..save my dollar and save our reserve currency status...raise a 1/4 and show these rich bastards that have looted this country the last 6 years that they are on their own...

thank you

the working class

bickerer said...

Raising a quarter would be the right move, but we know that he'd then be villianized and blamed for everything that is coming. And greenspan would be hailed as the hero who had guided us so well.

lauraVella said...

rates need to go up...however, I think Gentle Ben will keep them the same.

If Gentle Ben lowers rates, I'm going to buy more gold.

LauraV said...

“It is not the responsibility of the Federal Reserve — nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

- Ben Bernanke, August 31, 2007


But does he REALLY mean it?

Anonymous said...

Is that the twentieth hijacker?

Save the Greenbacks said...

Ben, please hold 'em steady. Don't bow to the pressure of Wall Street and the financally illiterate minority. Doing so will screw the majority.

Anonymous said...

Lets see, the dollar index is 79.55 as I write.

The fed will stand pat as long as it can to help out with real estate. At the end of the day, its going to have to raise rates to defend the dollar.

I think Wall Street is putting up a big ink cloud at the moment with all this interest rate talk.

Anonymous said...

He lowers at least 1/4. No question about it. Worried about continued dollar declines? Buy gold. They do not care about a strong dollar. They do seek to keep the decline gradual. Just like it's gradually declined 96% since 1913.

Anonymous said...

I hear the sound of an armada of Hueys and Ride of the Valkyries blaring from the lead chopper.

The Fed has made it's position clear, it's not going to bail out debtors or lenders, but then again it's not going to bail out bitter renters who missed the housing boom, and certainly not foreign debt-holders who've foolishly lent long at absurdly low interest rates. They believe their charter is to keep the economy moving, which means keeping credit markets from grinding to a halt, which means they need to cut short-term interest rates. Inflation is a secondary consideration.

Ben should cut 25bp and make it clear that another 25-50bp could be had before the end of the year. He will feel the need to get ahead of the ARM reset schedule.

The real interest rate problem isn't the short rate IMO. The real problem is that the yield curve has been very flat for a decade, meaning there is little or no incentive to lend long, and too much incentive to borrow long. With long rates below 5%, does anyone really think inflation risk has been adequately priced in? This is all due to trading partners buying all that long debt because they've nowhere else to turn to recycle dollars. The long rate has stayed stubbornly low despite efforts even under Greenspan to nudge them back up. The fed is trying to reposition a lawn sprinkler by wiggling the hose at the end connected to the tap.

michael said...

dear ben,

do not cut rates. why? because cramer told you to.

devestment said...

Dear Ben,
The piper has to be paid. Pay now or pay later. Raise 1/4, skip, raise 1/4, and skip. You know the piper wants at least 8% plus gravy for all the tomfoolery.

JimAtLaw said...

Ben, the dollar reached an ALL-TIME LOW against the Euro this morning - please save our currency and our economy in the long run, don't sacrifice the rest of us for the speculators...

Long is a double short kinda way said...

No rate cut. Cannot trash the $peso any more than it already is. there will be lotsa talk however and the markets will find an excuse to rally. It will be short lived and a great opportunity to enter SRS and SKF.

helicopters out flying! said...

They have already lowered overnight rates in the form of the TOMO operations. Today they "injected" $13.5B nice and quietly - so far. As soon as the DOW starts going down expect the happytalkers on CNBC (hee haw?) to start talking about the white knight at the fed riding in with help.

http://www.newyorkfed.org/markets/omo/dmm/temp.cfm

Anonymous said...

dear Ben,

borka's asking you not to be a fool!

Who should know better than he?




.

j-dog said...

Good= hold
Better= raise
Best= raise then quit

DO YOUR JOB!!!
PROTECT THE DOLLAR!!!

Ignore inflated asset classes and the pressure coming from the purveyors and holders of such.

Anonymous said...

Its in the bag, NO RATE CUT. Guaranteed.

Anonymous said...

quit and offer the job to that NAR hack economist Yun (whatever his name is). then NAR could hire the former iraqi press secretary.

Anonymous said...

The dollar is toast. 1/4 cut, then skip. Another 1/4 cut, another skip, and then run the presses flat out - drown all that debt in cheap paper. Let every broker and wall street firm who can lift a telephone have all the money they want. cover existing debt obligations, then fold and head for the hills. "Ctrl-Alt-Delete" the whole bloody system and reboot. (After, of course, setting up euro accounts in Paris and Munich.)

-Snowden

Anonymous said...

Here is the real issue underneath this so called real estate collapse.
And to hell with Bernanke as he cant do anything with his rate cuts one way or the other that will save the system.

LaRouche: Hysterical Hedge-Funds Stonewall the Congress--They Know that Any Disclosure will Prove them Bankrupt!
Increase DecreaseSeptember 12, 2007 (LPAC)--Lyndon LaRouche heard an authoritative report this morning, that leading Senators and Congressmen are right now under "excruciating" pressure from hedge funds to block any and all legislation affecting them whatsoever. He responded immediately: "All it requires is just any more disclosure, and people will realize the whole thing is coming down. And that would be the end of the hedge funds anyway. But, if we don't get rid of the hedge funds, we're not going to have an economy. You have to choose: hedge funds, or economy. The whole thing is coming down anyway, and delay is the worst possible thing. And the hedge funds are hysterical, because they know that they are bankrupt and finished.

"These guys are hysterical, they're running around, they're afraid that Congress is going to force the truth out. If the truth were forced out, everyone would recognize that their case was hopeless, and the hedge-fund racket would be closed down!

"The thing is on the edge of blowing out now, and the hysteria is based on the fact that the hedge funds know they're blown out and hopelessly bankrupt. They're concealing their bankruptcy! And any additional investigation would show how bankrupt they are, and everybody would immediately go for my legislation!

"They're hiding how bad the situation is; they're lying; they're hysterically lying, and they're pressuring the Congress, with hysterical lies

buyerwillepb said...

This photo looks like it's from Ben's "Bee Gees" phase.

Stayin' alive, Ben, Stayin' alive!

Anonymous said...

Anyone who thinks the Fed's mission is to protect the dollar is delusional. In what direction has the dollar moved since the creation of the Fed? It's on the escalator to the basement. That is not going to change until there is a dollar crisis, that either results in a new currency or a commodity-backed dollar.

Anonymous said...

The job market report points to a recession. The Fed should cut by 0.25%, to not be left behind the curve. The dollar will fall, but that is inevitable anyhow, because the American standard of living is too high now, when the productivity in the US is compared with other countries. A lower dollar will help to correct that problem. The biggest losers would be foreign holders of US treasuries. The Fed will be content with making the dollar fall slowly.

long termer said...

Can someone please explain why we use the Euro as a measure against the Dollar or against any currency for that matter?
1) The Euro is not backed by anything of value.
2) The outcome of this global Housing adjustment (bust / prices back to normal)
will have a much greater negative impact on the EU economy then on the USA.

Although I’m not sure that over all a weak dollar is such a bad thing, because it may help balance our trade gap, and it would be less attractive to all that insane excess oil money that has been fueling the bubble. (by buying T bills)

But if we back away for a minute and look at the big picture you may notice that
the irrational exuberance in the EU growth is based on hot air.

I know that Keith has been selling us on this whole “the grass is greener on the other side of the Atlantic” story.

BUT IS IT?

There are some basic fundamental underlying facts that must naturally come to the surface.

The peoples of Europe are elitist self centered lazy and generally miserable, on top of that they are being invaded by Arabia.

I’m Betting on the USA ……. The Greenback will without question outgrow, outperform and outlive the Euro.

Anonymous said...

Ben, Ben, BEN :

You KNOW there should be no rate cut.

We NEED a recession. We NEED to wash out this real estate bubble. We NEED to purge this bad debt. We NEED to force people to live w/i their means. We NEED to drive out carpet bagger immigrants here to ship dollars to their home countries. We NEED to support the dollar, for real this time.

Yes, Ben, yes. The medicine of no rate cuts will be bitter. But it's better than letting this inflation malignancy grow.

Please prove the Fed finally has a pair of stones again.

SHUT DOWN THE PRESSES. NO RATE CUT.

Anonymous said...

Ben can do what he wants. I've got my gold and my silver and my tar sands and my mining equities and my bicycle and huge bags of rice and beans and some good books. What is this "dollar"? Imaginary funny money. Fools! There is no choice between economy versus dollar. You are losing both. What, you thought fiat money would work this time? Tip: stay out of the Halliburton camps.

Anonymous said...

.


The 20th 9-11 hijacker!

Barron VON Rothschild said...

You do know you will always be our stooge?Right? BennyBoy?

Anonymous said...

It's just plain dumb- if he keeps lowering the rates , yeah the market might go up, but the dollar becomes more and more worthless. Foreign investors will come scoop up all our cheap to them properties as we slowly sell our country away- no war needed.

Anonymous said...

The smart thing to do is HOLD and urge other countries to lower

Anonymous said...

Market is factoring a rate cut...


World markets are preparing too. Dropping dolar.

You decide.

Anonymous said...

The heading below that photo should read: "Would you buy a treasury bill from this man?"