Skip to 1:20 - 1:40 to hear Bernanke's answer "I don't know" when asked who got the money.
If you are trying to make my blood pressure go up... you succeeded.
I'd honestly have to give that argument to Ben. For all the arguments against the Fed, I honestly don't believe Grayson; Is that educated on the issues, understands what is currently happening in world markets, was the right choice to question the Fed Chairman.
The central bank liquidity swap lines hes referring to are almost a necessary evil at this point. If you don't provide dollar liquidity to the ECB and other central banks the individual country's basketcase national banks will collapse, and with a looming $700 Trillion notional OTC derivatives market, sovereign bond market with untold CDS contracts, just waiting to come unwound it would wipe out investors, individual and institutional around the world.
The Fed can control monetary policy in Two ways; It can manipulate the Fed Funds rate at which the banks borrow, and inject liquidity into the system.
The Fed could choose to inject a finite amount of currency into circulation and let the markets work out interest rates, or control the rates at which the banks borrow while funding with liquidity loans that banks make.
What Ben was saying about interest rates going up, in the short term, would have a serious negative affect on the economy if lending and liquidity dry up market positions would become untenable which, i guess, would lead to calls on loans and margins setting off that chain reaction in the world economy. I wouldn't honestly care but, the number of people held hostage by their investments is probably a consideration.
If there were a longer term scenario, the rate at which we service our debt would go up and exacerbate current debt levels.
What the Fed should be questioned on is its continuous lack of regulation under chapter five, and not allowing distressed banks to go into receivership.
You can't provide unlimited liquidity with little or no supervision, and then go and implicitly guaranty or backstop losses. Rep. Grayson should have known this but, he is part of the problem when he votes against, or defunds, regulations that his contributors and constituents benefit from. The belief that you can hit the home mortgage button and get a banana every time is too pervasive.
I know the people I would want questioning the Fed in committee hearings.
Probably a lot of it went up a lot of different noses.......
