October 14th, 2008
04:16 PM ET

Bernanke abandons the back room

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Diane Swonk
Senior Managing Director & Chief Economist, Mesirow Financial

In a ground-breaking move, Chairman Bernanke appealed directly to Wall Street by preempting an official announcement (due out this morning), and explaining his intent to directly infuse banks with capital, in the op-ed pages of the Wall Street Journal.

Above him on the page was Senator Chuck Schumer's support of the Fed-Treasury plan, which is expected to include $250 billion in preferred share purchases in our largest bank and bank holding companies (Morgan Stanley and Goldman Sachs included).

What is so remarkable about this effort is the way in which it was communicated. The Fed and the Treasury have learned that back room deals, negotiated on an ad hoc basis, added more confusion than clarity about the state of the financial system, and ultimately undermined, instead of reinforced, investor confidence. The initial failure to accept the Paulson deal was especially costly in terms of the public's confidence in our financial leadership.

So, Ben adapted. He and his friends at the Treasury kept us abreast of the events unfolding, both at home and abroad, to more effectively unfreeze credit markets over the last week. Talks with bankers and their governments were confirmed before "official" agreements were announced. And then, Ben circumvented the speculative media and made his appeal directly to the public and investors in the pages of the Wall Street Journal.

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Filed under: Diane Swonk • Economy • Finance
soundoff (4 Responses)
  1. Mary V., Salt Lake City, UT

    I heard yesterday, that 85% of Americans are technically bankrupt.

    And thanks to Bush/Cheney our nation is not far behind with a national debt growing over........ $10..........TRILLION.

    WE are borrowing money from China, Saudi Arabia and Dubai.

    Thanks Republicans you've done a fine job!

    October 14, 2008 at 7:47 pm |
  2. JC- Los Angeles

    What's most stunning in the collapse of America is that there doesn't appear to be one person who got it right and did the opposite of all of our failed leaders.

    To hear comments like "in a ground breaking move" and "what is so remarkable about this effort" and "so, Ben adapted" is both startling and the height of hyprocricy.

    In actuality, what is so remarkable is that Ben Bernanke actually still holds his job; how does someone do such a poor job that $700 billion is needed to fix things and still retain employment?

    Rather than fawning over the horrid Ben Bernanke, the media should request he step down and then write a pleasant piece about his constitution.

    October 14, 2008 at 7:22 pm |
  3. Cheryl Sherwood

    I find it amazing that Sarah Palen continues to state she is glad to have been exanurated from all charges, and or abuse of her power, regarding Trooper Gate, when clearly she was not. I have not heard a reporter call her out on this. I believe she has defintley been given a pass by the media.
    Hillary, would not have been given this free pass. What's the deal here??

    October 14, 2008 at 4:57 pm |
  4. Annie Kate

    I certainly hope all this works and that the credit market unfreezes soon. My daughter's college, University of Alabama, was reported on local news this morning to be impacted because their money market account that they use to pay daily operating expenses had been frozen. They could only get about half of what was needed. So now the question is what do they do about the rest they need and will this have an impact on classes, etc. You expect after you pay through the nose for college tuition, dorm, books, etc. for the college to stay solvent and educate your child in their chosen field – especially at a large state school.

    Annie Kate
    Birmingham AL

    October 14, 2008 at 4:43 pm |