Like Sam Zell, Ben Bernanke Panics
Like Sam Zell, whose only prescription for the ailments of newspapers is to slash staff and quality, the only solution Ben Bernanke seems to have at the Federal Reserve for the credit and financial crisis is to cut interest rates and bail out financial companies, such as Bear Stearns, which was so badly run it did not know how to protect itself.
The result in both cases is to fuel a building panic which may sweep aside institutions that could have been protected. The emergency is growing day by day.
Last summer I questioned at just what price the Pakistan and the sub-prime mortgage crises could be contained. But it has been the sub-prime crisis which has proved most uncontainable. The ill-regarded diplomatic and military policies of the U.S. have at least kept Pakistan a viable entity out of reach of the terrorists thus far. But the housing downturn has spread to other sectors of the economy and there has been no containing it. It turns out that the better-regarded economic experts of the Bush Administration have fallen on their faces, while the diplomats and defense experts have survived, if not exactly prospered.
What now? I think Bernanke is going to have to go. He is not up to the job. It turns out to have been a mistake to continually slash interest rates, because it hasn't eased the market's concerns and it has generated a veritable collapse of the dollar as well as growing inflation.
We are getting to the point with the banking industry that Franklin D. Roosevelt's bank holiday of 1933 may have to be repeated. It clearly needs a time-out.
The answer is not to bail out a firm with a $2-a-share purchase price (for a company whose stock was $130 a share not long ago), and a $30 billion federal guarantee.
Such panic-stricken steps by wooly-minded intellectuals are adding to the panic, not abating it.
And the price of oil is shooting so high, I just wonder whether this ship is going to get around Africa or not. Perhaps we will all be stranded in Mombasa...or Mogadishu.