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Monday, March 16, 2009

Bernanke on 60 Minutes

The Federal Reserve Chairman appeared on network television in an infomercial on the financial crisis and how the government is dealing with it. Reserved, calm and soothing, Bernanke laid out his case for the state of the world.

Laced with shots of 64 million dollar pallets of hundred dollar bills and Bernanke sitting on "Main Street" in his home town, the interview plays like a propaganda piece intended to inspire confidence and demonstrate empathy for the plight of the American public. You think you're mad about AIG? So's Ben. He slammed his phone down a bunch of times because of those guys. Jerks! There's a Main Street in his town too, people. He knows your pain.

(PELLEY:) Does the Federal Reserve bear any responsibility for missing
what was happening to the banks, as it was happening?

(BERNANKE) Well– like other regulators– we– we probably could have
done more. We’ve already done a lot of– put a lot of effort into
reviewing our practices. And reviewing the bank’s practices. We are
trying to strengthen our regulation at every point that we can. So, I
don’t want to deny that we certainly could have done a better job, and
others could have done a better job.

This is where I decided this wasn't an interview but a puff piece. Bernanke flat out denied subprime was a bigger problem in late 2007. There was plenty they could have done along the way. 60 Minutes was chosen for its reputation as a hard hitting investigative news outlet but he might as well have been on the Today show. To not mention his role in missing the nature of the crisis would seem to have to be omission on the part of 60 Minutes.

The Chairman said we have averted a depression, that the economy's woes will moderate in 2009 and that recovery will begin in 2010. He committed to letting no big banks fail.

(PELLEY ) Your response has been to do what the Fed didn’t do in 1929,
and that is pour money into the system. But there’s an argument made
today that that’s not what the problem is. The problem isn’t that
there’s too little money in the system. The problem is there’s too
much fear in the system. That with these companies being propped up by
the government, no one on Wall Street can tell who’s solvent and who’s
not. And therefore, business does not move.

(BERNANKE) Well, I absolutely agree that confidence is key. People
don’t know what’s happening. And they’re afraid. And they’re not sure
what– you know, whether or not the– the– the system is going to
recover. So, how do you get confidence, that’s the question. And I
think the way to get confidence is to show progress.

And that is the why of it. Typically media shy save congressional testimony, the Federal Reserve Chairman needs to help confidence in any way he can. Frankly, it's resourceful. The media is an influence tool the Fed typically does not employ directly -- the prescient leak is more their style. Things are bad, my friends, for them to break rank like this. On the other hand, it's a particularly clever and probably pretty effective move and the use of unconventional tools to fight an unconventional problem is to be praised.

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