Tuesday, March 9, 2010

Sin of Self-Praise at the New York Fed

Calculated Risk blogged yesterday as follows: Some Praise for the Fed.

This well-respected senior financial blogger previously stirred up his readership by supporting Ben Bernanke for reappointment as Fed Chairman, not overly reluctantly either.

Now he approvingly quotes EVP of the New York Fed Brian Sack as patting the Fed on the back and them some with what I view as highly inappropriate self-praise. From Sack's remarks as quoted by CR:

With the wind-down of these short-term liquidity facilities, it is a good time to look back and assess their performance. The bottom line here is simple: These programs were an unquestionable success. . .

It is impressive that the Fed was able to remove itself from such a large amount of credit extension . . .

This design worked incredibly well . . .

Where I come from, self-praise is unseemly. Brian Sack should let the independent bloggers and of course shareholders of the New York Fed, such as JPMorgan Chase, use whatever favorable language they wish to in favor of the brilliance of these guys.

So far as this blogger is concerned, the New York Fed engaged in improper activities in favor of Big Finance in 2008, Ben Bernanke was guilty of financial malpractice though the patient survived after an unnecessary stay in intensive care, and I am unsurprised and unimpressed that with the power of the printing press, massive influence in the White House under the Bushbama Continuity and effective ownership of both houses of Congress, Big Finance survived on the backs of millions of unemployed people and tens of millions of savers who have been forced to accept record low interest rates to satisfy the greed of the owners of the New York Fed.

Hitler and Mussolini may have made the trains run on time. Without meaning to compare the Fed to those dictators, the point is that we must look at the totality of the picture, not a pretty detail. The Fed did not see, or pretended not to see, the financial crisis even when it was clearly underway, it helped cause and exacerbate what Reinhard and Rogoff call the Second Great Contraction (since the Great Depression), so that printing vast amounts of money may have been a nice technical achievement, but that's small beer to the incompetence and outrageous insider dealing that the New York Fed and Ben Bernanke demonstrated.

And of course, the tax fiddler Tim Geithner who headed the New York Fed through its fateful decisions in 2008 now heads Treasury, having been succeeded as NY Fed head by the Goldman Sachs insider Steve Friedman, who was forced to resign after the news came out that he was double dipping between Goldman and the Fed.

Unlike the Washington Fed, the New York Fed is a privately owned institution. It acts on behalf of its owners, not you and me. When its EVP goes overboard to praise its brilliance, he makes it sound similar to the head of Goldman Sachs claiming to be doing God's work.

Not an attractive picture.

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