Bernanke says he can't figure out why he did not do his job to prevent the AIG problem.

[dixiegrrrrl]

From Denninger yesterday:

"Benanke already had regulatory power over the banks that were buying these CDS instruments from AIG.
He did nothing to stop them from purchasing "credit default insurance" (which is what it was, no matter what AIG and others claimed) from a company that did not have any money to pay, even though he had the unquestioned authority to do so.

The Fed, OTS and OCC (the latter two of which are Treasury both in name and in fact) willfully ignored what AIG was doing despite having the ability to stop it."

So right this minute in the hearing, when asked what caused the problem, Bernanke just blathered and said he could not say, he had no idea of what happened.

He is the fucking Gonzales of the Fed.

[dipsydoodle]

1. Broadly speaking

turds don't have brains so its hardly surprising that this one had no idea of what was occuring.

[Warpy]

2. Well, to be completely fair to him, we have to admit that

this disaster was many years in the making and some of it dates back to the 1970s. If anyone is to blame for stuffing his head up his ass and waddling around oblivious to the approaching debacle, it's Greenspan.

Bernanke had this mess dumped into his lap. He's not the problem. I doubt he can be part of the solution, but he's not the problem.

[LeftHandPath]

3. Credit Default Swaps == FRAUD

If you dont have the money to back up a contractual obligation it is fraud.

AIG wrote these CDS's with full knowledge they could not pay in the event the bonds failed. The government was complicit in the fraud because everyone believed home prices would go up forever and ever.

The real question for Bernanke is this:

"If the insolvent banks were 'insuring' their assets (and capital ratios) with CDS's that were not backed by the appropriate capital, is that not fraud?"

And who has been prosecuted for this fraud? Noone. In fact, it is still continuing even today.

[dixiegrrrrl]

4. In fact, the NEW Geithner/Bernanke plan is the same fraud cover up..

Their definition of "unwinding" these "assets" is that the banks still have billions of debt left on their books, so now they want Congress to approve the *selling* these bad debts to....


are you ready for this???


your pension plans.
and mutual funds.
which can use YOUR retirement money ( what's left of it ) to
"buy and hold" the bad debts for a few years until they find there is NO value in them.
Geithner and Bernanke will be long gone, the Big Banks and AIG CEOs will be long gone,
and YOUR retirement fund will be empty.

That is essentially what Geithner said at hearing today.
He is scheduled to return to a Congressional hearing Thursday to lay more details.

At today's hearing he was not very cooperative with Congressmen, and both he and Bernanke had shaky voices. Their bluff is being called and the congress critters were actually asking pretty pointed questions....not at all like during the *turdface* era.

[JohnWxy]

5. Trade in Credit Default Swaps was by law unregulated. the Commodity Futures Modernization Act 2000

slipped in as a rider to the Omnibus Spending Bill 2000, by PHil Gramm made trading in Credit Default Swaps legal and unregulated.

THe Fed has regulatory authority over banks which are part of the Federal REserve System. Wall Street investment banks were not in the Fed Reserve System until just the last few months as they got into troubble and had to be saved.

Nobody even knew how much of these Credit Default Swaps anybody was holding until the banks started to open their books when they got bailed out. Government is only now finding out just how much is hanging out there committed to CDSs (e.g. AIG).

Now, the SEC had a meeting in 2004 and was told by the WSBs that they didn't need to be held to the 12:1 Debt to Equity RAtios anymore (why did they think that? because they bought CDSs and they thought they were protected from default risk) and that they wanted to have reserve requirements relaxed to 33:1 Debt to Equity ratios (instead of the previous 12:1 ratio). After a meeting that lasted about 55 minutes, the SEC changed the reserve requirements on WSBs.

As a result of this deal however, the SEC gained the power to look at the WSBs books and even set up an office to do that, the Risk Management Office. But Cristopher Cox, SEC chairman (appointed after this 2004 meeting) basically shut down the office and did not monitor what the banks were up to.

They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
~~
The 2004 decision for the first time gave the S.E.C. a window on the banks’ increasingly risky investments in mortgage-related securities.

~~
The commission assigned seven people to examine the parent companies — which last year controlled financial empires with combined assets of more than $4 trillion. Since March 2007, the office has not had a director. And as of last month, the office had not completed a single inspection since it was reshuffled by Mr. Cox more than a year and a half ago.

~~
But the agency never took true advantage of that part of the bargain. The supervisory program under Mr. Cox, who arrived at the agency a year later, was a low priority.

~~
Mr. Cox dismantled a risk management office created by Mr. Donaldson that was assigned to watch for future problems.

You see, Christopher Cox, like fellow Republican Phil Gramm (sponsor of the CFMA which legalized trading in Credit Default Swaps) was sure that the market would police itself.

Phil Gramm's Deregulation Disaster: The American Dream Going Down

[notesdev]

6. That would be my answer

if I were totally and completely complicit in the serial gang raping of the US taxpayer and wasn't quite stupid enough to actually admit to it under oath