Leading Asset Managers turned on the TMZ in Boston, talking about "the Fed," its Lady of the Left, and what a worldwide defaulting credit bubble means for U.S. consumers and investors.
(All asset manager quotes are from the Asset Manager Showcase, with the exception of former Fed Chairman Ben Bernanke, who was interviewed on July 28 in Boston by LPL Financial Chief Investment Officer Burt White.)
Financial Advisor magazine held its 5th Annual Asset Manager Showcase in Boston on October 7 and 8. Top asset managers were eager to dish on Federal Reserve Chair Janet Yellen and discuss the origin and ramifications of a gargantuan global credit bubble that is beginning to let its air out.
Ben Bernanke on the Fed, Global Economics and His Legacy
"Janet was way more experienced than I was when she became the Fed [chair]," Bernanke told LPL Financial convention attendees. "You learn a lot. The world is complicated," he added. "You have to learn something about politics, psychology, markets. It's a fascinating job really." Bernanke said he wanted to make the Fed as open and transparent as possible. He praised President Obama for giving the Fed "the independence and scope it needs".
He said eight years as chairman was enough for him "just in terms of politics."
Bernanke has a sense of humor about our world problems as well: "Every day I pick up the Wall Street Journal and I say, 'All of that is a serious problem. I hope somebody does something about it, and it's certainly not going to be me.'" (Perhaps Bernanke forgets that he rode us down to zero and kept us there for five-plus years.)
In responding to his notorious 2011 quote about the problems in the subprime market being contained, Bernanke claims that the subprime market was a very small market, but that major institutions were more exposed than the Fed thought. "Investors just didn't stay away from subprime mortgages but from all securitization and all credit," he said.
Bernanke described it as "a run, a panic" that spread through all the credit markets, and he placed blame squarely on "weaknesses in risk management at these big institutions." Bernanke’s explanation begs the question: What if the Fed did not create this easy-money extravaganza in the first place.
Many of us have heard that even Bernanke could not get a bank refinancing on his home mortgage. However, if most of us were super-rich and loans-at-less-than-inflation where available to us, we would be scooping up islands and little airports. We would not be bemoaning saving an extra 50 bps on our mortgages.
Bernanke attempted to save his reputation for the history books by insisting that it was he (and Congressional approval) alone responsible for saving AIG because they had collateral, unlike Lehman Brothers. He began to spin a story "a la TMZ." And, so it goes, Ben was having dinner with his wife, Anna, when she said, "I hate to tell you, honey, but I spent $200 on a dress today." Ben allayed Anna's fears by saying, "That's OK. Today I spent $85 billion on a rotten insurance company." As a Fed claim-to-fame story, many would argue that this bailout helped one investor of AIG! Bernanke portrayed it as his own $85 billion call that saved a globally intertwined system.