Tuesday, November 18, 2008

Facing Congressional Flame Throwing, Bernanke a Little Too Quiet?


He has yet to say that a bail-in or bail-out or a "bridge" for GM (or "autos") may be a step in buying time for his monetary policy to work, to 'work through the system'.

To the extent that real economic activity and credit creation (default on a credit report) is being affected by foreclosures, some of which may be "prevented" at the margin (maybe up to 75%, based on IndyMac figures), he hasn't offered an opinion of how that relates to his view of monetary policy, in the short term. (He could use the words "urgent" and "necessary", without stepping outside his lane, right? Greenspan used to cajole and remind legislators of their responsibilities, using all kinds of suasion.)

The conscious step to give the Treasury key responsibility for tough decisions, like who fails and who succeeds, is obvious and understandable. But ... there is more to the big picture than just the necessary liquidity programs, yes?

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