Aug 31, 2009
When President Obama nominated Ben Bernanke for a second four-year term as chairman of the Federal Reserve, Obama praised Bernanke for rescuing a “financial system on the verge of collapse.” According to White House chief of staff Rahm Emanuel, Obama credits Bernanke for no less than “pulling the economy back from the brink of depression.”
Faced with the collapse of the biggest financial bubble in history, Bernanke shoveled trillions of dollars of tax payer money into the hands of the very people who had created the crisis in the first place. He introduced a slew of lending programs, offering unheard of amounts of money practically free of charge to these big companies. The Fed also largely bankrolled JPMorgan Chase’s takeover of Bear Stearns. And the Fed had a hand in the government bailouts of Freddie Mac, Fannie Mae and American International Group. Through these huge multi-trillion dollar companies, the government provided the money to pay back hundreds of billions of dollars in bad loans and mortgages (toxic debt) held by the biggest financial companies.
The injection of all this money did allow the biggest financial companies to miraculously “recover” in record time from their death swoon. But what a “recovery”! As soon as these banks got their hands on all that money... they went back to their old ways, speculating on the stock market, various currency markets, on oil and gold and anything else they can get their hands on. Right now, they’re setting up to speculate on cap-and-trade pollution permits before the program is even legislated.
Bernanke has not rescued the economy – he only gave the banks the means to create ever more dangerous and unstable financial bubbles, crises and collapses. It was like handing super tankers filled with gasoline to psychotic pyromaniacs.