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Ben Bernanke
While many former homeowners will be spending the holidays in the streets, it is good to know the bailed out banks are making some nice profits… off the American taxpayer. Fed Chairman Bernanke’s continual leveraging of the national credit card via buying mortgage-backed securities to stimulate the mortgage market has done little for the mortgage market and a lot for Wall Street’s bottom line.
From the Wall Street Journal:
The Federal Reserve’s intensified campaign to push mortgage rates lower has hit a wall, in part because a shift in the lending landscape has made some banks unable, or unwilling, to pass along cheaper credit.
While current rates are the lowest in generations, some economists argue that they should be even lower—perhaps 2.8% based on the historical relationship between mortgage rates and yields on mortgage-backed securities. The economists posit that banks are keeping the rates artificially high, boosting profits and depriving the economy of the full benefit of the Federal Reserve’s efforts.
Whether you agree or disagree with the Federal Reserve’s MBS buying program – in what world does Wall Street need further subsidy from the Fed?
Commercial banks reported a record $9.4 billion in income from mortgage-banking during the third quarter of 2012, according to an analysis of data by Inside Mortgage Finance, which says it is the highest since it began tracking such data in 2002. The third-quarter figure was up 18.7% from the second quarter and 72.3% from one year ago, and it was more than what the industry earned in 2007 and 2008 combined.
Will former Goldman Sachs Chief Economist/current Federal Reserve of New York President William Dudley crackdown on these practices? Will Bernanke? Will anyone?
Image by SS&SS under Creative Commons license.
20 Comments
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Well, Mr. or Ms. Wright, I take it you’re DDay’s replacement, and I just want to THANK YOU for being here and if this article is any indication, you’re going to do just fine here.
I will say though that I miss DDay already, as I thought him the very best I had ever read, and in a perfect world FDL would have both of you. But we live in an imperfect world, and as such, I just would like to say one last time, on the off chance he may drop by, that I wish all of the VERY BEST for you, your family, and your future David Dayen. May the best days of your past be the worst days of your future. Best wishes and good luck.
It’s been obvious that the only kind of stimulus that will improve the economy is FISCAL stimulus. However, we have the Republican deficit hawks to obstruct any meaningful economic progress with job creation, for example.
This is not a surprise at all to DDay readers. It was obvious and it’s only surprising if anyone believed otherwise.
Could never “replace” just helping out for awhile.
I have no doubt DDay will be doing something worth reading soon. Unstoppable talent.
Best,
Dan
I take it you are the new guy?
Please accept our heartfelt “welcome to the club”. Lots o’ good folks here. But, I can see, you already know you have big shoes to fill.
But yo seem to have a very similar style to DDay. You’ll do fine here. I’ll warn you of the ones you need to watch out for. OFG and donbacon are some of the good ones. BUt, we’ll talk more later……..if you catch my drift???
Just because they CLAIM to be the job creators apparently doesn’t mean they are necessarily motivated to DO that. Ya’ know, how they call really big, fat guys “tiny”?????
LOVE the picture of Bernanke.
He looks so pensive.
Oh, darn, after reading your stuff today I was hoping you were the replacement.
Well, thank you for helping out, and know you’ve already got 1 fan here. At least. I suspect I’m not alone. I thought the piece on the FBI targeting and labelling as terrorists the Occupy protesters was awesome, but didn’t comment there since I had already commented here.
Great work Dan, and don’t let anyone tell you that you’re in any way whatsoever shortchanged on talent. You’re quite the talent as well. And thanks again for being here for awhile.
And I assume those questions at the end are rhetorical? Just in case, no, no, no, no. never.
What OldFatGuy said!
And as to your last paragraph.
No.
No.
Resoundingly No.
Next….
All serious people agree that the only legitimate government policy is upward redistribution of wealth. Unserious people may point out that this policy does not ‘work’. That kind of thinking is what makes them unserious. Of course, these policies work. They make rich people richer and screw everybody else. That is what the are designed to do.
Now do we get it?
welcome, DSWright!
re your last 2 questions, my first reaction was “surely you jest!” my 2nd thought is that you forgot the snark tag we use: /s
no one seems to emphasize the FACT that the consortium of NY banks that bernake heads gives 0% “money” to the member banks to “buy” U.S. T-bills at 1-3% interest.
it’s sorta like selling the brooklin bridge and everyone is pretending the transaction is real. it might explain some of the trillions of “national debt” everyone is fussing about.
OT– Breaking:
No one can replace dday, nor do I expect a replacement. Dan, thx for leading discussion and analysis on W$. I also liked ur occupy piece this morning. Though I have to admit I was less than thrilled to learn my terrorist sympathies are officially problematic for Holder. /s. The Serious Ones are SO smart!
As for stimulating the economy, perhaps Bernanke could issue interest free money to the private prison industry. They could invest it in new facilities to be used exclusively for W$… And their protectors in DC.
The Fed had an easy money policy for four years now when the economy sucks, and had an easy money policy during most of Bush’s two terms when the economy was “healthly”. Funny how that works.
As you so aptly point out, this doesn’t do much for real people or the real economy, but it’s great if you’re a TBTF banker getting huge bonuses with all that free money.
The problems isn’t in itself Fed policy, but the current financial industrial complex (including the FED). The industry has ceased to behave in a rational manner with any benefit to society, and has through a period of time, lapsed into a self destructive morass of fraud and corruption. Fed policy hasn’t had an effect on reviving the real economy any more than pumping blood into a zombie would create a healthy person.
Quit wasting time, funds, and political capital trying to revive the financial industrial complex which cause the collapse of the world economy and get on with replacing it.
The policy at fault is allowing private banking to exist at all. Money creation should be a prerogative of the state and all (or most) banks should be state owned as in India.
http://rbidocs.rbi.org.in/rdocs/Content/PDFs/FUNCWWE080910.pdf
describes details.
India has no separate federal reserve.For advantages of state owned banking see
http://rodgermmitchell.wordpress.com/2011/09/14/how-about-socialized-banking/
quantatative easing has always been about bailing out the banks; everything else is secondary…
if the banks were forced to write down all the mortgages on their books, they’d all be insolvent…
if the banks were forced to write down all the mortgages on their books, they’d all be insolvent… , and could be nationalized for pennies on the dollar.
“The correct course would be for the British government to coolly announce that they would stop helping banks such as RBS, and threaten to take away their banking license. After such a menace, loud and clear, the stock prices of the banking corporations would collapse, and the banks could be nationalized cheaply. Meanwhile a PUBLIC bank to lend to SMEs ought to be created (say with the 80 billion pounds brandished to help existing banks).
The same applies everywhere.
Of course, in the USA, the lovers of financiers come around, and like Obama, proclaimed that the USA put its banking house in order, while Europe did not. But Europe did lent trillions, at zero interest (basically) to banks. And what did the banks do? Keep the money to themselves, not recycle it in the economy. That is what is giving many European leaders pause.
In the USA, it has been just the same: the banks kept the money for their own operations and that of their friends. The difference with Europe is that much more money was given (sorry, “lent” at zero interest or so) to them. So indeed, American bankers are more arrogant, as those who are given more often are. ” from
http://patriceayme.wordpress.com/2012/08/04/happy-banking-barack/
The WSJ is propagandizing as usual .The Fed can completely avoid the banking cartel and make direct capital interventions into the economy ,or via the Treasury .As noted above ,QE is bail-out money and write-down welfare for the Fed’ primary constituency ,banksters ,and to fulfill its ultimate mandate,enriching banksters .