"What Did Chairman Bernanke Know and When Did He...Hey What's For Lunch?"

In July 1973 our country was embroiled in the greatest and certainly most dramatic political crisis in it's history, Watergate.  White House council John Dean had testified in late June that his president, Richard Nixon, had full knowledge of the Watergate break-in and was an active participant in attempting to cover it up.  The country was now gripped with one question, "What did the President know and when did he know it?"  On one side there was John Dean, claiming that President Nixon was guilty of illegal and impeachable offenses.  On the other side was President Nixon, who denied Mr. Dean's accusations.  It was one man's word against another without any physical proof to back either man's account.  Or was there proof??

On July 16, 1973 Assistant to the President, Alexander Butterfield was called before Congress.  Chief Minority Council Fred Thompson asked, "Mr. Butterfield, are you aware of the installation of any listening devices in the Oval Office of the president?"  Mr. Butterfield answered affirmitavely and the rest was history.  The tapes proved that Mr. Dean's account was accurate.  A little over a year later President Nixon resigned to avoid impeachment.

Now, what if Mr Butterfield had responded to Mr. Thompson's question, "yes I am aware of such a taping system" and Chairman Sam Ervin banged his gavel down and said something dramatic like, "Ok, gentlemen, lets break for lunch...awe hell I've had enough of this investigation, lets shut it down."  Lets further imagine that the press and the American people also said, "Yeah, screw what's on the tapes, who really cares."

Well I feel like something very similar happened last week.  If you remember our little piece last Monday titled, "Hi Fellas, What are Y'all Talking About?", we told you about Bloomberg News obtaining Ben Bernanke's redacted day book through "The Freedom of Information Act".  The day book showed that Bernanke, Federal Reserve President of New York Tim Geithner and every head of every Wall Street firm as well as the heads of many of the biggest hedge funds and private equity groups had lunch on March 11.....WITH BEAR STEARNS BEING THE ONLY FIRM NOT REPRESENTED!

As you remember, both Chairman Bernanke and President Geithner testified in front of Congress that they did not become aware of Bear Stearns grave situation until Thursday night March 13.  Rumors of Bear Stearns liquidity problems were swirling around the Street on Monday, March 10.  By Tuesday, March 11, the rumors were blowing like a gale force wind.  I know people on bank funding desks that were cutting back on Bear's repo lines and I knew hedge funds yanking their prime brokerage cash out of Bear.  A run on the bank situation was building.  On the same day, Chairman Bernanke and President Geithner came to have lunch with everyone but Bear, and the subject didn't come up?!  Did Bernanke even say, "Say did someone forget to call Schwartz? Cayne? Molinaro??" and then talk about..I don't know...the history of check clearing?  I'm going to vote that they talked a lot about Bear Stearns and I'm going to guess that the Chairman knew all about the grave situation at Bear much earlier than Thursday evening.

Why is that so important?  It's vital because the reason that Chairman Bernanke gave the world for the dramatic and ground breaking (and maybe....unauthorized) actions the Fed took to broker a devastating deal with Bear Stearns and JPM Chase and provide financing on $30 billion of tier three assets was because there was no other choice.  The liquidity situation at Bear had become so bad that the firm would have to either be bailed out, or taken into bankruptcy on the following Monday.  Under this scenario, the Fed had no choice but to step in and save the financial system.  But what if they knew three or four days earlier?  They certainly could have given the major market players some assurance that an orderly merger or take over of Bear Stearns would be accomplished within a relatively short time period (2 weeks, a month at most?).  They could have done this.....AT LUNCH on Tuesday!  After all EVERYBODY WHO MATTERED WAS THERE! 

Regardless, Bloomberg News went out and used the "Freedom of Information Act" to verify that a meeting took place on March 11.  They listed all the attendees and the notable absence of Bear Stearns. Bloomberg reports that Bernanke and Geithner testified that they did not know of Bear's situation until Thursday March 13...and then THEY STOPPED REPORTING THE STORY! Hell, I don't know ONE major news source that even mentioned it.  Just Monkeybusinessblog.com and Dealbreaker.com and two or three other blogs that were kind enough to put our post on their sites.  What the heck is going on?  Isn't this like Watergate's Butterfield telling you there's tapes of what exactly was said and then nobody caring to listen to them?  If they haul Bernanke back in front of Congress and ask him to explain what went on at this lunch what is he going to say?  Honestly, I'm scared if I keep talking about this the brakes on my car are going to mysteriously give out!

Something stinks, and time won't make it "less stinky". 

Comments

[John]

Just more talk from liberals who hate America, and the troops.

[atauber]

i keep on saying that this was simply a REVENGE from the FED on BSC because they did not want to help the FED in 1998 in the LTCM fiasco thats why they pulled the plug on Friday taking back the line of credit they had given them a few hours before.

[The butcher]

Was Bernanke under oath? Did he commit perjury? I used to love America and I still do but as I get older and as the days tick-by my belief in our system is beginning to wane. This is all a charade…..bring in the clowns.