Treasury Secretary Henry Paulson (left) and Federal Reserve Chairman Ben Bernanke. (AP Photo/Susan Walsh)
I was able to catch parts of the hearing yesterday (September 24) when U.S. Federal Reserve Chairman Ben Bernanke testified before the Joint Economic Committee. It was painful. It is obvious Bernanke knows what he is talking about. I hear Paulson was just as impressive.
It was painfully obvious that many members of the committee don’t know what they are talking about. Some of them didn’t look too bad as they read prepared statements that were designed to please their constituents back home (probably written by some staffer. But when they got into questions and answers with Bernanke, their ignorance became obvious.
One committee member said his constituents don’t care what happens on Wall Street, they just care what happens on Main Street. Idiot. I hope his constituents aren’t as ignorant as he portrays them to be. If you have money anywhere other than stuffed in your mattress, one way or another, your money is on Wall Street. Banks invest in Wall Street, insurance companies invest in Wall Street, retirement and pension funds invest in Wall Street. Just about any financial institution invests in stocks and bonds from Wall Street and/or other markets around the world. Saying you don’t care about Wall Street is like sitting at the stern of the Titanic and saying, “Thank goodness the iceberg hit the bow of this ship.”
No wonder Congress can’t balance the budget. No wonder they didn’t give proper oversight to the SEC (Securities and Exchange Commission). No wonder Wall Street ran a muck as brokers made millions in fess while repackaging and reselling shaky mortgages. No wonder that we are in this mess in the first place.
There used to be a law on the books that limited large investment backs to a 12/1 ratio of leveraged securities to assets. In other words, they could borrow $12 in leveraged securities for every $1 they have in assets. Congress, in its great wisdom, changed the rules which allowed the big investment backs to have a 37/1 ratio, $37 in leveraged securities for each $1 in assets. At that rate a 3-4% drop in the value of leveraged securities (like home mortgages) would wipe out a company. Three out of the big five Wall Street Investment banks are now gone. Warren Buffet stepped in and bought $5 billion worth of Goldman Sachs, and Goldman’s stock soared.
If every American watched the hearings yesterday, some would be justly proud of their elected representatives, but many would not. One financial analyst on CNBC called several of the committee members “idiots”. It is time that some of these economic incompetents are voted out of office.