Dr. Frankenstein, Dr. Frankenstein

Right about now Ben Bernanke, chairman of the Fed, is probably asking himself why he did not become a doctor. Oh, I know that he has a doctorate in Economics. What I mean is a physician, as I am sure his mother must have said to him at one point in his young life, “Ben, you’re smart enough to be a doctor.” Half the guys in my frat house were studying to become doctors and the other half lawyers. There were a few like me that fell through the cracks. The way I see it, if Bernanke had become a physician first, and then became a specialist in proctology, and then went back and got his Ph.D. in Economics, he would be better equipped to deal with all the assholes in congress that do not understand a thing about economics or the financial markets.

For the Fed to have left Bear Stearns go under would have been malpractice in the first degree. Any member of congress that does not understand the scope of such a financial disaster on the entire financial services industry and in turn on the whole economy, demonstrates either a certain naiveté or an inexcusable ignorance at what was at stake. Bernanke went before congress yesterday and was questioned as is their job, but for congress to use this discussion as an opportunity to play to the gallery, in my opinion, only showing their stupidity. It really only shows how much behind the learning curve these members are.

All the talk about bailout is nonsense. Bear Stearns was not bailout of anything. What people need to understand is that the entire financial system is tied together by trades that have not yet settled. To stand by and let the fifth largest investment bank go down the tube without lifting a finger would have caused more than just a ripple effect throughout the financial services industry. Avoiding a massive train wreck on Wall Street most certainly avoided a massive train wreck on Main Street. Trust the man leading the Fed, he did the right thing. No one would be second guessing the Fed’s decision to act when they did, if a computer simulation of what would have been, could be put on the big screen. Perhaps that is what Bernanke should consider doing the next time he meets with members of congress, have plenty of pictures and graphs so that he can explain in detail why he did what he did. Maybe a cartoon in color with a musical soundtrack pitched at congress’ level could be crafted.

Interesting that there has not been any condemnation of the Fed’s actions as they relate to the Bear Stearns/JP Morgan action by any foreign central banks. Those that know just how bad things could have been if the Fed failed to act have enough sense to keep quiet. An economic engine the size of the United States standing idle as its fifth largest investment bank went under would cause panic around the world. Interesting that other central banks understood the consequences of inaction, but our own congress does not have the brains to process the Fed’s action. I admire the calm and patience Bernanke brings to the table as he slowly yet methodically explains what is taking place at these sessions of econ 101.

These problems of oversight and regulation must be revisited during the next administration. We can only hope that Bernanke and others that talk with congress will take the time and effort to explain why the present regs are not working. Remember, Bernanke did not cause the problem, the banking and investment industries have changed and grown, but now is the time for new measures to be put in place. Stay tuned.