Capt. Bernanke Is Sinking the U.S.S. Titanic

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Paul B. Farrell

Jan. 26, 2010, 12:01 a.m. EST · Recommend (20) · Post:

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By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) -- Let's call it "Titanic II," a classic remake. The Fed's the new Titanic. Bernanke, the egomaniacal captain.

His character reminds me of Bogart playing the paranoid, obsessive Captain Queeg in "The Caine Mutiny." Remember that threatened Navy captain who navigates into a fog, panics, nearly rams a battleship? That's "Capt. Ben" in "Titanic II." And given his handling of our banking system and the global economy, he'll sink the Titanic. Capt. Ben's a tragic figure.

The U.S. Coast Guard says about 450,00 gallons of crude oil has spilled in the port of Port Arthur in southeast Texas after two vessels collided. Video courtesy of Fox News.

Worse, Obama's giving ol' Capt. Ben a second chance to pilot into new icebergs dead ahead. The Economist calls them "asset bubbles." Problem? Capt. Ben can't see through his ideological Greenspan/Reaganomics goggles, clouded by his obsessive allegiance to Wall Street's "fat cat bankers."

Nothing new: He failed to see warnings of "icebergs" back in 2007. Yes, and he'll miss any new icebergs, sink the global economy and plunge the world into the eerie depths of the Great Depression 2.

Ideally the Senate will deny Capt. Ben's reconfirmation, Obama's "biggest domestic policy blunder." And last week we even heard Obama hint to possible changes when he announced the new "Volcker Rule," a de facto revival of Glass-Steagall separating commercial banking from the fat-cat, high-risk gambling with derivatives trading and investment banking.

Great PR move, but Wall Street lawyers, lobbyists and traders love their mega-bonuses. So they'll get around any new rules fast. Besides, fat cats really don't need any new Supreme Court cases (like last week's unrestricted political donations) to buy votes in the Senate. Glass-Steagall or not, the fat cats will just double up on their tools for lying, cheating, stealing and manipulating Main Street's 95 million investors.

So assuming the Senate fails to torpedo Capt. Ben, we're stuck with this weird "Captain Queeg." And it's only a matter of time before Capt. Ben runs the U.S.S. Titanic into a battleship, a new iceberg or another black swan.

This "Titanic" sequel was exactly what Jeremy Grantham, founder of the $100 billion GMO money managers, had in mind a couple months ago in his letter to investors: "Lessons Not Learned: On Redesigning Our Current Financial System." Listen to his thriller plot:

"Imagine the company representatives on the Titanic II design committee repeatedly pointing out that the Titanic I tragedy was a black swan event: utterly unpredictable and completely, emphatically, not caused by any failures of the ship's construction, of the company's policy, or of the captain's competence. 'No one could have seen this coming' would have been their constant refrain.'"

Sound familiar? You bet. Capt. Ben's "Titanic II design committee" would include his ol' buddies, Alan Greenspan, Henry Paulson, Lawrence Summers and Tim Geithner. "Their response would have been to spend their time pushing for more and improved lifeboats," says Grantham. However, "by working to mitigate the pain of the next catastrophe, we allow ourselves to downplay the real causes of the disaster and thereby invite another one."

Grantham's not hopeful, but his dialogue rivals the best of James Cameron's "Avatar" and Paul Volcker's Glass-Steagall speeches: "After a crisis ... begin with an open and frank admission of failure. The Titanic, for example, was just too big and therefore too complicated for the affordable technology of its day. Given White Star Line's unwillingness to spend, she was underdesigned" so "the passengers bore the risk of unnecessary speed and overconfidence in 'too big to sink,' while the captain stood to be rewarded for breaking the speed record."

And thanks to Capt. Ben, that describes why fat-cat bankers like Lloyd Blankfein made $410 million the past three years during the meltdown, why his Goldman Sachs staff got average $500,000 bonuses last year, and why one of six Americans are unemployed. Capt. Ben is a lousy, dangerous pilot.

So, absent the Senate rejection or Capt. Ben's withdrawal, we see four huge plot points dead ahead for the "Titanic II," four icebergs still out there from the last fiasco he created to protect the fat-cat bankers using the discredited Greenspan "cheap money" ideology that piled on $23.7 trillion debt.

See the four mega-icebergs flashing: "Crash! Dead ahead!"

Incompetance, criminality, or treason? You be the judge... Motive, opportunity, and a smoking gun, it now seems. Recall the "liquidity crisis" and the alleged dire need for a $700 billion infusion WITHOUT delay? Bernanke's argument was that the credit markets were seizing owing to a lack of liquidity. Then why did he then drain $125 billion from the system in just a few days in the..."

- littlecapitalist | 12:13 a.m. Today12:13 a.m. Jan. 26, 2010

Apple Inc. seemed to blow the doors off estimates for its first quarter on Monday, but the upside came mainly from a shift in accounting rules.

5:31 p.m. Jan. 25, 2010 | Comments: 42

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