Last week and into the weekend I did some mental qrm wrestling with myself over whether I should comment on the remarkable events centering around our central bank and in particular the Federal reserve Bank of New York that seemingly had defied comment for over three days. By yesterday I had pretty much convinced myself that my reactions were probably incorrect and that I shouldn't write about them, which, coming late in the day meant that I didn't write about anything at all. I was wrong.
What had set me off in the first place was a remarkable series of comments made on Friday by the President of the New York Fed, William Dudley, in regard to the state of the real estate market, it's present effect on the economy and what further steps might be taken to imprve the situation. As you probably know (and should if you don't), Mr. Dudley is a former senior economist at Goldman Sachs who was, in his time, the leading "Fed Watcher" on the street. To say he was/is an academic economist is to understate the case--not that there is anything wrong in that mind you but then again there nothing right about it either. His knowing more about the Fed than anyone else is what got him his present job..along with a little help from about a score of well-connected friends from Goldman not the least of which was the oft-mentioned Bobby Rubin.
What kept me from writing about Mr. Dudley's comments was my releutance to criticize the Fed which has been long since I can remember an institution commanding the highest regard in world-wide circles for it's independence and lack of political traits. No more. For Billy the Dud's comments which went straight into the political maw were incorporated into a larger presentation having the imprimatur of Mr. bernanke himself, delivered to Congress and calling for new action on the housing market to include new lending, the leasing of foreclosed property by the Feds, subsidized servicing and a slew of other proposale which supposedly would aid the economy in the belief that the housing market was central to the weak economic figures. That's what I was going to write about and chose not to. Today, the leading article in the Wall Street Journal did and I urge the reading of the same to appreciate their take on the matter which, incidently is not too far from my own. Scooped again.
That is not what troubles me the most, however. What is, is what makes fact of the guy running the most important Reserve bank in the country and indeed, the world to be so damn dumb as to politicize his institution to the degree in which he did in this an election year? Why would you want to make your institution an assuredly campaign issue limiting, therefor, whatever influence it has or should have in what are certain to be grave national and international issues of the coming year. The great thing is we have had is an independent central bank but that only lasts until people think the independence is still there and Billy the Dud has taken a huge step in changing that view. What makes these guys believe that doing their own job is not enough and being unable to resist trying to do someone elses job as well is beyond me. Hubris? Probably but you have to be really dumb as well for in the effort there is no consideration that one is destroying the raison d'etre for one's self. We can lose Billy the Dud as we know him; we can't lose the Fed as we have known it.
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My Really Smart Friend, Larry, called today.
"Seen the new ECB rules on eligible paper/"
"No."
"Better take a look."
"And pray tell for what am I looking?"
"It's like pnorography. You'll know it when you find it."
So I went looking and he was right. It is pornographic. If you think things were crazy bad over in Euroland, we haven't begun to scratch the surface of the levels to which these guys will go to fix the unfixable. Tomorrow
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