Why the Fed Wants a Stimulus Package

As I noted last night, Federal Reserve Chairman Bernanke wants to see an economic stimulus package put into place, even though he thinks there is not a recession in the offing.

So I've been wondering: Why? I think I have a possible answer: The Fed wants to see the sub-prime mortgage crisis dealt with. The reason why is that the sooner the sub-prime crisis passes, the less likely it is that somebody in either the press, the Congress or a state attorney general starts to really dig into the causes of the sub-prime crisis. For if anyone does that, they may discover that the fingerprints of the Federal Reserve are all over the unholy mess.

It could be argued that the financial institutions of this nation were intimately involved in perpetrating a fraud upon the financial markets. The compilation of subprime mortgages into "collaterized debt obligations" was as ethically sound as it would have been to have dipped dogshit into chocolate and then sold them as chocolate bars. While the financial institutions were doing this, the Federal Reserve and the Federal government were asleep at the switch.

The whole subprime mortgage meltdown is reminiscent of the meltdown of Enron. In both cases, the managers played fast and loose in order to make a quick buck at a huge cost to others.

In both cases, the oversight exercised by the Bush Administration was nonexistent. When it comes to watching for and policing financial and corporate misconduct, the Bush Administration has shown all of the diligence of Homer Simpson and the crimefighting skills of Barney Fife. The Bush Administration has deliberately set about to destroy the ability of the Federal Government to do much of anything other than dropping bombs on people. This played out in New Orleans, where the inability of FEMA to do anything at all was a direct reflection of the policies and competence of the Bush Administration.

The subprime crisis was brought about by greed, greed that was ratified by the Bush Administration.

UPDATE:

From Balloon Juice, comes a link to this story that the subprime crisis isn't just limited to housing. The banks were playing the same fuck-fuck credit-worthiness games with automobile loans, which means that as things get worse, the repo men are going to be very, very busy. Either that, or the banks are going to write off most of those, adding to their losses.

And yes indeed, they were also repackaging the auto loans as "collateralized securities", which means that there are another few billions of dollars with of losses to come.

Way to run an economy, Chimpy McDroolbot.