Fed's Fisher Says Bank Rescue Plan Would Worsen Fiscal `Chasm'

Finally! We are hearing some sense out of someone on the Fed.

Bloomberg is reporting Fed's Fisher Says Bank Rescue Plan Would Worsen Fiscal 'Chasm'

Dallas Federal Reserve Bank President Richard Fisher said the proposed $700 billion rescue of financial institutions backed by Fed Chairman Ben S. Bernanke would plunge the U.S. government deeper into a fiscal abyss.

The plan by Treasury Secretary Henry Paulson to buy troubled assets from financial institutions would put "one more straw on the back of the frightfully encumbered camel that is the federal government ledger," Fisher said today in the text of a speech in New York. "We are deeply submerged in a vast fiscal chasm."

Fisher made the comments as the central bank expands its role in the biggest government intrusion into markets since the New Deal, with Bernanke trying to persuade Congress to approve Paulson's bailout plan.

Bernanke has already cut the benchmark interest rate at the most aggressive pace in two decades, invoked emergency powers to loan to securities firms and pumped billions of dollars into banks to try to restore liquidity. Also, the central bank loaned $85 billion this month to American International Group Inc.

"The seizures and convulsions we have experienced in the debt and equity markets have been the consequences of a sustained orgy of excess and reckless behavior, not a too-tight monetary policy," Fisher said to the New York University Money Marketeers Club.

"I was, and I remain skeptical, that lowering the fed funds rate is the most effective antidote," he said. "Rates held too low, too long during the previous Fed regime were an accomplice to that reckless behavior."

Note:

Kiss Bernanke Goodbye

Bernanke day's are now numbered. Goodbye and good riddance.
Kiss the Paulson plan goodbye too. It is now dead on arrival.

But don't celebrate yet.
Keep Faxing and Calling!
Pour On The Pressure.
Fax Your Congressional Representative.

Following is the current campaign but I will have another one shortly.

Bailout In Installments Is Still Nonsense

To Fax or Call, Please click on the above link.
If you do not have electronic fax get it. It is cheap. $12.
Just Do It. The above link will tell you how.
History is in the making!
Be a part of it.
Fax or call now!

At this point don't assume anything.

Coast To Coast just called me. I will be on national live radio tonight with 20 million listeners for one solid hour starting at 10:00 PM Pacific.

This is going to be fun. Please tune in.

Thanks

Addendum:

Bloomberg doctored the article.

Here is the story as originally posted on Bloomberg:

"Sept. 25 (Bloomberg) -- Dallas Federal Reserve Bank President Richard Fisher said the proposed $700 billion rescue of financial institutions backed by Fed Chairman Ben S. Bernanke would plunge the U.S. government deeper into a fiscal abyss.

The plan by Treasury Secretary Henry Paulson to buy troubled assets from financial institutions would put ``one more straw on the back of the frightfully encumbered camel that is the federal government ledger,'' Fisher said today in the text of a speech in New York. ``We are deeply submerged in a vast fiscal chasm.''

Now here is how it reads after "Update 1"

"Sept. 25 (Bloomberg) -- Dallas Federal Reserve Bank President Richard Fisher said the U.S. Treasury's proposed $700 billion rescue of financial institutions would be ``a critical first step'' toward calming markets even while adding to the U.S. government's fiscal burden.

The plan by Treasury Secretary Henry Paulson to buy troubled assets from financial institutions ``is an incremental addition to the federal government ledger,'' Fisher said today in a speech in New York. Existing federal obligations in Medicare and Social Security mean ``we are deeply submerged in a vast fiscal chasm,'' he said. "

Hmmm.

The actual speech is here; this is what it says:

"Even before tackling the task of cementing capital adequacy, we need to bear in mind that the TARP places one more straw on the back of the frightfully encumbered camel that is the federal government ledger."

The words "a critical first step" do not appear in the speech. Anywhere. The Bloomberg reporter made them up and removed his actual words about a camel's back.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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