Where Are Bernanke’s Critics in the Media after Disclosure of the SocGen Scandal?
You've probably heard about the French trader who has managed to stash away $7 billion before going on the lam. What's the big deal with sticking it to some French bank for $7 billion?
This $7-billion loss by the French bank Societe Generale (SocGen) (EPA:GLE) might have caused the sharp plunge in some European stock markets on January 21 - which spurred the Federal Reserve to make an unprecedented emergency 75-basis-point rate cut on January 22.
One economist drew a correlation between the SocGen scandal and the Fed's decision to make the emergency rate cut.
"[W]hat's interesting is there are a lot of people who are saying it was the SocGen trader who caused the stock market to fall and that Ben Bernanke overreacted," Brian Wesbury, an economist for First Trust Advisors, L.P., said on CNBC's January 24 "Kudlow & Company," "These are by the way, a lot of the same people that said he hadn't acted fast enough, so this guy can't win and I really feel bad for Ben Bernanke right now. He's getting beat up when he shouldn't get beat up."
One of Bernanke's most vocal critics, who regularly rails against the Federal Reserve Board of Governors for not slashing interest rates, is Jim Cramer. But, Cramer hasn't been so vocal about the possibility this emergency rate cut was over-the-top in the wake of the SocGen scandal. Cramer has been willing to dole out criticism, especially about Wall Street Journal Federal Reserve reporter Greg Ip, for not conveying the true sentiment of the Fed in his reporting.
Wesbury has been a long-time critic of the Fed using interest rates to manipulate the economy. He said again on January 25 the Fed was spurred on by panic. But that panic was propagated by the media, and that definitely included CNBC loose-cannon Cramer.
"I don't want to defend necessarily these massive rate cuts," Wesbury said on CNBC's January 25 "The Call." "I don't think the economy is in as bad as shape as many people believe. But you know, it's kind of interesting we're blaming the Fed for panicking when I think it is the markets that panicked. Everybody who sold because SocGen was fixing their books also panicked. And so, in a sense, I think there is way too much panic."