Reply #37: Did Bernanke lie in Congress?

[DemReadingDU]

5/14/08 From The Automatic Earth

Bloomberg obtained Bernanke’s March schedule under a Freedom of Information Act request. It was "sanitized", mind you, before they received it.

Yesterday, they published -some of- what they found. It provides some interesting background, in particular about a March 11 lunch meeting with all Wall Street powerboys, with the very notable exception of Bear Stearns’ representatives.

First, I’ll post a comment below on the article Bloomberg published about it today, after that the article itself, and finally, a second comment. Bit of an upside down, but I think it reads best that way.

The issue I see here, to get to the point, is what everybody, including the commenters below, apparently dare not speak by name. From what I digest, reading these three pieces, there’s only one possible conclusion: It is very likely that Ben Bernanke has lied to Congress. And if that is true, so has Tim Geithner, the president of the New York Fed.

Which leads me to an issue that we’ve had some earlier conversations about here, and that I talked about with Karl Denninger and others. When the Chairman of the Federal Reserve testifies, makes statements and answers questions in Congress, is he under oath? I don’t think he’s sworn in.

Now, it has been suggested that all testimony before Congress is subject to perjury. But if that were true and/or enforced, there’d be no need ever for people to be sworn in before testifying. And some people really are sworn in. Government officials are stuck, they swear an oath when they start on their jobs. Chairman of the Federal Reserve is not a government job.

Ergo: perhaps Bernanke is free to lie in Congress.


Here’s a timeline of the Bear events:

* Friday March 7 2008: ”..one bank (which has not been identified) refuses to make a short term loan of $2 billion to Bear.”

* Monday March 10: Bear Stearns publicly denies rumors about its alleged liquidity troubles.

* Tuesday March 11: In chronological order:

1. Bernanke announces plans to lend $200 billion of Treasuries in exchange for debt including mortgage-backed securities.

2. Big Wig lunch, Bear Stearns absent. See articles below.

3. “Hours after the meeting every bank on Wall Street reportedly began refusing to issue credit protection on the debt of Bear.”


* Thursday March 13: The day Bernanke said he first heard of Bear’s problems, according to his statement before Congress. Or, alternatively, one might give the interpretation that he testified that Bear first notified the Fed of its problems om this day.

This may be seen as two different things, but I don’t think it’s really important. If Bernanke knew about Bear’s predicament before the company contacted him about it, he should have said so in Congress. Certainly in view of the meeting he organized two days earlier. The meeting, and Bear's absence, very strongly suggests he did know.

* Friday March 14: Bernanke and Geithner set up a $13 billion emergency loan to Bear Stearns.

* Sunday March 16: Fed agrees to take on $30 billion of mortgage-backed securities and other assets from Bear Stearns, facilitating a take-over by JPMorgan and Chase.



It’s of course not even possible to exclude the biggest rumor of the day from the conversation in a meeting like this. Neither is it possible to set up such a meeting in anything less than 12 hours. There were quite a few people present, and they all have to be tracked down and many flown in.

And that means Bernanke must have known about Bear’s problems around lunch time, Tuesday March 11. At the very latest. Because the meeting had to be organized, though, Monday, March 10, looks far more believable as a “latest” time for him to have known.

You decide.

Three articles included to read...

http://theautomaticearth.blogspot.com/2008/05/did-bernanke-lie-in-congress.html