Fed Chairman Ben Bernanke to Abandon Lenders and Investors

by | BiggerPockets.com

Bernanke and BushThe President and others in office continue to tell us how well our economy is doing. Lets take a look at some of the latest news to see how things are really doing . . .

Today, according to Breitbart.com, the Federal Reserve added 31.25 billion dollars in temporary reserves to the US money markets Thursday in three different operations, the latest move to keep credit markets from drying up.

The New York Fed added 7.0 billion dollars in 14-day repurchase agreements, 16 billion in seven-day repurchase agreements and 8.25 billion in one-day repos. The Fed has injected some 200 billion dollars into the financial system since August 9 in a bid to boost credit flows which have seized up due to problems linked to the distressed US mortgage market.

Does it sound like things here in the states are healthy??

I look at phrases like “credit flows which have seized up due to problems linked to the distressed US mortgage market” and “the latest move to keep credit markets from drying up” as bad signs, don’t you?

So, thanks to the Mortgage Disaster, the fed has now pumped $200 BILLION dollars into the economy to keep it afloat . . . I’m not quite convinced by the argument that we’re in for a smooth sailing economy.

To further my sinking feeling about things, the Mortgage Bankers Association released a report today, stating that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high. Further, with home sales falling, the inventory of unsold homes rising and prices stagnant, some speculators are choosing to default on their mortgages.


As I’ve said in the past, while the economy is certainly weak, and the housing market continues to look bad, despite what the NAR and the Government say, this is the perfect time to learn about investing. There are opportunities presenting themselves everywhere in the country, and if you can learn how to capitalize on the foreclosure market, you can do quite well, even in this crazed economy and market.

Fed Chairman Ben Bernanke Announces Plan to Abandon Lenders and Investors

With that in mind, I thought it would be important to mention the words of Fed Chairman Ben Bernanke, who commented in a speech last Friday, the central bank is ready to cut rates if turmoil in financial markets starts spilling over to the general economy. But, Bernanke added, “it is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions.

Interesting . . .
So the chairman doesn’t think the Fed should protect lenders or investors, even though the Government did nothing but encourage all of the activity that led to the current Housing-Mortgage-SubPrime-Economic Crisis.

Looks like we’re on our own folks . . .

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded BiggerPockets.com when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 850,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.


  1. Joshua – I know our mamas used the same hackneyed old saying when we were kids.

    “If Stevie told you to jump off the bridge, would you?”

    If the investors are gonna now complain they were encouraged to defy what you and I know amount to economic physics, it’s not, in my opinion, Bernanke’s obligation to kiss the booboo and make it better.

    The problem is, he’s treating folks like adults. He’s not leaving them on their own. They’ve been on their own since day one. The fact they all thought they could jump off the roof and fall up instead of down, isn’t Bennanke’s problem – OR his fault.

  2. I’ll agree with you partially. Unfortunately, many people were lured in by the allure of great deals, low rates, rising prices, etc. and the government encouraged loose lending practices to enable this. Once things started to catch up with people, the government came in and put the blame on the lenders.

    Businesses will do anything to make a buck. Government regulation exists to protect the people from these businesses and their practices. Why wouldn’t a poor person get a no-doc loan to buy a house if it is being offered to them? The problem is that unfortunately, many people are uneducated and the regulators never stepped in to protect them from the businesses out making a buck. If the rules for lenders were more strict in the first place, we wouldn’t be in this situation.

    As for the government . . . they caused this problem. They need to fix it.

    Bernanke isn’t to blame directly, but he is someone with the power to do something about it all.

  3. Your final comment re: Bernanke’s power, is of course true.

    I think, perish the thought, he believes folks should
    be responsible for their own actions.

    The ‘poor’ folks you mention, are, at least percentage wise, a small number. I empathize with them. They’ll go back to being renters, as that’s what they should have remained in the first place. I think you and I can agree on that.

    Since they bought with no money down, and probably had their closing costs paid, they’ve got nothing to lose.

    Bernanke believes what our grandparents taught us. That we should keep our noses clean, work hard, and try not to be so damn dumb that you can’t see something’s too good to be true.

    Once and for all we all, Bernanke is gonna send folks who’ve brazenly violated not only economic physics, but plain common sense – to stand in the corner for a well deserved timeout.

    Seriously Joshua, at what point to you draw the line? At what point do you tell the fat lady to stop whining and stop eating 7,000 calories a day? At what point do you finally say, “You made the decision, you reap the consequences – good, bad, or ugly?”

  4. It is true that the government participated in what is now a mortgage loan debacle. For example, the state of VA offers 10 year interest only loans to first time home buyers as one financing option and the state has the first right of refusal should the homeowner decide to sell the home…hence the term and inventory, in some cases, for state-owned homes.

    First-time homebuyer classes are a joke and do not discuss the advantages and disadvantages of the various mortgage types. I have taken several to see what was actually discussed. They are dog and pony shows designed to accomodate the large number of attendees and to amuse them and massage their audience’s fervent desire to pursue the American Dream…nothing more.

    None of this is to say that the first-time buyer is right for picking the high-risk mortgage or for not making good on the debt. It is however, clear evidence of the complicity of the state in promoting and profiting from what are to the states risky investment instruments.

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