VI.D Preview: up to 600 Bank Failures by 2011 – Fed ex-Gov

Doom Transcripts: Index & Guide

We’re now a bit over half done coding the under construction transcript VI.D for AEI’s November 12, 2009 event "Is It Possible to Reprivatize the U.S. Financial System?"¹

As usual, there have been some interesting moments. Somewhere around the 37th minute former Federal Reserve Governor and FOMC member Mark Olson casually dropped this into the mix.

Second, those that are really on the margin, and 2010 is going to be a very difficult year, I think, for the financial services world. My … There are now guesses as to how many additional banks will go through resolution over the course of 2010. I think the number will probably be in the range or close to 200 this year. I would not be surprised if it’s 400 in the next year.

Since there wasn’t an audible gasp from the audience at that point, I can only presume that this wasn’t exactly new information to the guys at the Wohlstetter center, although it certainly got my attention.  I’m looking forward to the conference’s extra-long Q&A session.  Maybe someone will bring this up again there.

AEI itself provides an Event Summary, but there’s lots more detail on the tape.  Here’s a gem from former Atlanta Fed researcher Bob Eisenbeis on how the GSEs are being used as policy instuments these days.

Now keep in mind that if the Fed talked about how it’s going to exit from this printing-money strategy that it’s followed and essentially, literally, what it’s done is printed money to buy mortgages — essentially laundering them through Freddie and Fannie in a cooperative arrangement.

Even the event title is an implicit admission that the US is, at least temporarily, running a command economy as far as the banking system is concerned.  While we are being distracted by cries of recovery, the grownups are evidently busy in the back rooms trying to unscramble a few eggs.

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[1]: "Is It Possible to Reprivatize the U.S. Financial System?", AEI event homepage, November 12, 2009.

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