As if Paulson’s bailout were not enough, Bernanke in testimony called for a premeditated rape of the taxpayer. (Thanks to Bill Jones for calling my attention to the Bloomberg article.)
Bernanke had the unbelievable impudence to recommend that the government buy the bank’s devalued assets at their maturity values (par) of 100, when they currently are thought to be in the range of 35 down to 0.
He had the insulting insolence to attempt to sell this additional and outright wealth transfer from taxpayers to banks by telling the Senate Banking Committee that it was accounting rules that was making them value the assets at a fire-sale price. This is a BIG LIE and/or Bernanke is a total idiot when it comes to finance. I think it’s a BIG LIE. I also think he knows no finance. He does not think that the existing prices are accurate reflections of their true values. But there is no better measure of what they are worth than what they can fetch in the market, which is near zero for much of the toxic paper.
If the FDIC sold the assets at auction, they’d fetch what they are worth. As we learn the details of the Paulson-Bernanke approach, we can see that what they propose is far worse than an FDIC procedure.
Congress should scuttle the whole thing, and Bernanke-Paulson should be turned out to pasture where they belong.
7:13 pm on September 24, 2008
