It was a room full of pople who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.Bernanke Admits The Truth
Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. had made an urgent and unusual evening visit to Capitol Hill, and they were gathered around a conference table in the offices of House Speaker Nancy Pelosi.
�When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York.
As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program �Good Morning America,� the congressional leaders were told �that we�re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.�
Mr. Schumer added, �History was sort of hanging over it, like this was a moment.�
When Mr. Schumer described the meeting as �somber,� Mr. Dodd cut in. �Somber doesn�t begin to justify the words,� he said. �We have never heard language like this.�
Congress was stunned because Bernanke finally admitted the truth (or at least came closer to doing so). Congress ought to be reading blogs rather than listening to clowns like Paulson and Bernanke.
How many times have we heard Paulson the Parrot sing the praises of the strong dollar and the soundness of the US financial system? For more on the "sound banking system" please see You Know The Banking System Is Unsound When.... and Don't Worry, The Banking System Is Sound.
The market called Bernanke's Bluff, and came close to a virtual meltdown.. For now, Armageddon was Postponed as Fed Intervenes In Money Markets.
The list of reasons the financial system is unsound grew massively today, by the tune of a $1.2 trillion taxpayer funded bailout designed to bail out the wealthy at the expense of the poor.
Earlier today Paulson has the gall to state "this will cost the tax payer less than the alternative".
No one bothered to ask why it should cost the taxpayer anything at all.
Furthermore, Paulson once again proved he needs simple arithmetic lessons. Shifting losses from those who should bear them (stock and bond holders of failing companies) to the taxpayers is not going to save the taxpayers a dime, rather it is going to cost them plenty, $1.2 trillion plenty as noted in US Taxpayer: A Giant Dumpster For Illiquid Assets.
The Whole Truth And Nothing But The Truth?
Of course not.
Bernanke did not really admit the truth, he only hinted at it. Congress was too dumb to pick it up. The truth is the US financial system is insolvent.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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