Bernanke in the Hole... Jackson

By "The Greek"

Speaking in Jackson Hole, Wyoming, Ben Bernanke appropriately themed his address, "Reducing Systemic Risk." For that matter, however, the Kansas City Fed, the host of the event, would not be outdone. The group entitled its symposium, "Maintaining Stability in a Changing Financial System!"

Article interests (NYSE: BAC, C, FNM, FRE, MHP, MCO, V, MA), (AMEX: DIA, SPY, SDS, DOG, QLD) and Nasdaq: QQQQ.

Truly Ben Bernanke's Fed is in the Hole, quite literally, in Jackson Hole, Wyoming. The yearly confab of the Federal Reserve Bank of Kansas City draws central bankers from around the world, and offers all sorts a reason to write off a pseudo-vacation as a business expense.

But, Ben's gang is in a figurative hole as well this year, as turmoil after chaos, collapse after crisis, and generally a ton of trouble streams across his desk and that of the Treasury Secretary on a regular basis these days. Poor Ben could sure use the clean air and peaceful grace of the Grand Teton Mountain right about now. Hopefully, he'll energize up for the latest crisis that awaits him in Washington on Monday morning, that of capital deficiency at Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). As for Friday though, there was no rest for the weary, as all eyes were focused on Benjamin again.

We tortuously sieved through Benjamin's remarks for you, so don't bother, unless you suffer of insomnia. We cover Ben's key points in the paragraphs that follow, and do our best to add some color to keep you awake at the same time.

The Marshall is in Town

Even so, Ben seems to gain some charisma when he heads westward, and his own commentary was enough to raise even The Greek's unibrow. Citing the obvious, Ben noted that times is tough, and the trouble ain't over yet. Spitting a dill weed stem from his mouth, the Marshall called on his posse to stay alert as the "financial storm" has not yet subsided, and is "becoming apparent in the form of softening economic activity and rising unemployment." The Marshall even gave the outlaws some credit, when he stated that economic strife combined with inflation born of the commodity boom, created one of the most challenging economic and policy environments in memory. Is it just me, or does it sound like Bernanke reads The Greek every once in awhile... you know, maybe for weekend relief?

Economic Loop-D-Loop

When Ben made mention of an "economic feedback loop," I wondered if he was perhaps in touch with the little girl inside himself... or what. What he meant though, for you truck drivers and barge pilots who read the blog, was that he cut rates aggressively in his first response to the turmoil. His hope was to ease credit conditions in order to stave off economic weakness that might in turn drive an economic feedback loop, adding to the financial markets crisis. We should note here that we love our truck driving fans and sea faring contingent. Please honk your horn as you cruise by 1st and 81st (or up the East River) to show the love... and to lower property values in the hood enough to open up some opportunity for the homeless Greek. Quoting an infamous Philadelphian, "Cha cha cha..."

The Fed Boss-man then offered his critics an I told you so, when he reminded the Wyoming audience that he had expected commodity prices to ease as a result of global economic growth deceleration. You gotta give the man his due though, because he deserves it on this point. His success hinged on this assumption, and all signs point toward the possibility that Ben is in fact a genius. However, he qualified his statement, saying this would be the case as long as unpredictable variables did not lead to a reversal of recent trend. We're sure that in that regard, he is specifically concerned with two drivers in particular, the first being Iran. Hey, I went an entire week without mentioning Iran and suffered through a bit withdrawal as a result. I needed a fix, so give me a break. Fact is, I have an important article due regarding Iran, so keep in touch.

The second factor that likely concerns Ben is manipulation, but he and the SEC have been actively working to institute opportunistic, totalitarian-like control of the markets in question in order to fix this issue. You know what I'm talking about, the pick-and-choose naked shorting rule that traders and hedge funds now have to worry might show up in their trading pits some day.

The second element of Ben's genius is one The Greek's Steven Ferguson is concerned about, the ever-flowing cash spigot. I think we have to agree that the intended effort, to allow for more orderly deleveraging, has prevented panic and perhaps economic collapse. I know many of you angry readers want people who make mistakes to suffer the consequences, but there was serious risk related to that, perhaps just punishment, and that was the repercussion of system failure. Kala!, which means "good" with a tone of "right" in Greek, if we're not suffering now, I would hate to see true pain. Ferguson's concern, and mine, is that we may be sowing the seeds of future runaway inflation.

The third element, my dear friends, is the totalitarianism I mentioned previously. Some of the nascent regulation was clearly needed, especially in the mortgage market. We would like see the rating agencies handed their heads as well, since we believe negligence on that end played a great role in this catastrophe. After all, if the debt was not investment grade rated, derivative markets would not have assumed so. So, now Ben oversees the nation's financial system, and perhaps is planning a White House coup as well.

One other necessary bit of help the common man needs is a credit card borrower's bill of rights. These people are just raping the poorest of this nation. Miss two payments in a row and you'll understand. The same companies that are pleasant to you in your dealings today, will take you outside, rob, beat and rape you, and then collection agents who buy your debt on the cheap will turn you over and do it all again. Imagine being poor, missing a payment on your debt and then witnessing your APR skyrocket to 30%, effectively pricing your monthly payment into impossibility. It can drive you into bankruptcy, and certainly is not a motivator to pay debt. Inspiration is not born from impossible circumstance. It's happening to the poorest of this nation, and it's unfair! I don't care if it's in the contract or not, it's still criminal.

(We will cover the rest of Ben's discussion in a follow up piece, so stay tuned)

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