On Apr 2, 2:45*pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Wed, 2 Apr 2008 11:50:49 -0700 (PDT), Too_Many_Tools





wrote:
April 2, 2008, 12:51PM EST text size: TT
What Bernanke Didn't Say
In his first congressional appearance since intervening to prop up
Bear Stearns, the Fed chief refused to call it a bailout--nor would he
say there's a recession
by Peter Coy

Two words are hard to drag out of Ben Bernanke's mouth: recession and
bailout.
snip
In response to a question from the committee chairman, Senator Charles
Schumer (D-N.Y.), Bernanke said, "A recession is possible. But a
recession is a technical term defined by the National Bureau of
Economic Research depending on data which will be available quite a
while from now, so I'm not yet ready to say whether or not the U.S.
economy will face such a situation."

Most of the questions concerned the Bear deal, not the economy, which
many economists believe has already entered a recession. Several
committee members asked, in effect, why the Fed appeared to be bailing
out Wall Street but not Main Street.

snip
==============
IMNSHO, it is the "too big to fail" rationale in action, which in
this instance may well have been correct. [B/S had written 10
Trillion dollars of CDSs...]

What is not answered, either in Bernanke's response nor Paulson's
proposed "overhaul" of the securities regulations [which appears
to weaken, not strengthen many of the oversights/controls] is why
firms, financial or otherwise, that are "too big to fail" are
allowed to exist, or if charterered/domiciled outside US control
[e.g. Long Term Capital Management, most other hedge funds, and
the "trustees for the CDO/MBOs] are allowed to solicit customers
or own assets within the US.

The risk "too big to fail" represents (and the gun this hold to
the head of the Fed and US government) has been known from at
least 1984.http://en.wikipedia.org/wiki/Contine...nal_Bank_and_T...

Note that this not need be a single entity, but an aggregated
economic sector such as the S&Ls, which went "belly up" in the
late 80s, showing that nothing had been learned (and acted on)
from the Continental Illinois debacle.http://en.wikipedia.org/wiki/Resolut...st_Corporation

The Congressional intermural "grab-ass" matches and ongoing
Congress/Administration punch-n-judy show to divert the great
unwashed [and generate campaign contributions] continue, even as
the Titanic's list increases...

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).- Hide quoted text -

- Show quoted text -

Very good points George.

TMT