Skip to main content

Paul Kasriel on Bernanke, bank lending

Currently sinking my teeth into this new article from Northern Trust economist Paul Kasriel, entitled, "I Have Come Neither to Praise Nor to Bury Bernanke".

Kasriel begins with the question of whether Ben Bernanke might be re-nominated for a second term as Fed chairman, but moves on to discuss the current state of bank reserves and bank lending. Here's an excerpt:

"No one is indispensable. There are plenty of well-qualified candidates to replace Ben Bernanke as chairman of the Federal Reserve Board of Governors. So, the Republic will survive whether or not Ben Bernanke is re-nominated as Fed chairman. But let us be objective in assessing the job he has done as chairman. In my opinion, Anna Schwartz was
not objective in her July 26 NYT op-ed piece arguing for the dumping of Bernanke.

Ms. Schwartz asserts that Bernanke should not be re-nominated because of his sins of commission as well as his sins of omission. It is not clear to me to what Bernanke sin of commission Ms. Schwartz is referring.

She alludes to the flooding of the financial system with Fed credit, which drove down the overnight cost of funds in the interbank market to almost zero. But was that a policy sin? Did not Ms. Schwartz co-author with Milton Friedman, a Nobel economics prize winner, a tome (
A Monetary History of the United States, 1867 to 1960) of which one of the key conclusions was that the Federal Reserve was too timid in creating credit in the early 1930s?"

Now, I'm no economist or student of banking, and some of the charts and explanations in this article (and other Northern Trust econ. commentaries) may seem daunting at first glance, but Kasriel does a great job of laying out the details in a very understandable way.

Be sure to give this piece a look, especially if you're not already familiar with Paul's work; in my humble opinion, he's an economist worth reading.

Popular posts from this blog

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4.

Slate profiles Victor Niederhoffer

Slate's recent profile of writer/speculator, Vic Niederhoffer has been getting some attention from traders and finance types in recent days. I thought we'd take a look at it here too, to offer up some possible educational value from Vic's experiences with trading and loss. Here's an excerpt from Slate's profile of Victor Niederhoffer : " I've enjoyed getting your e-mails. It sounds like you've thought a lot about being wrong. Well, the reason you contacted me, to call a spade a spade, is that I'm sort of infamous for having made a big, notorious, terrible error not once but twice in my market career. Let's talk about those errors. The first was your investment in the Thai baht, which pretty much wiped you out when the Thai stock market crashed in 1997. I made so many errors there it's pathetic. I made one of my favorite errors: "The mouse with one hole is quickly cornered." That is key. There are certain decisions you make in li

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi