BUNNING DOESN'T GET IT

Speaking about the Fed bailout of Bear, Stearns earlier this month¹, Sen. Bunning can't connect the dots. He condemns the intervention as a violation of the free market and in the next breath, blames the regulators for not being on top of the situation.

SEN. JIM BUNNING (R-KY): Thank you, Mr. Chairman. I'll be brief.
First of all, I want to know -- first question: How big do you have to be to be to big to fail? That's the question I ask first. I am very troubled by the failure of Bear Stearns and I do not like the idea of the Fed getting involved in a bailout of that company. But before making a final judgment, I want to hear from our witnesses, why they thought it was necessary to stop the invisible hand of the market from delivering discipline. That is socialism. At least that's what I was taught, and I would imagine everybody at that table was taught the same thing. And it must not happen again.

I am also troubled that the regulators who were supposed to be watching the types of mortgages being written did not do their job, neither did the regulators who were supposed to make sure one firm did not become exposed to too much risk.

Other questions need to be asked. Does anyone else think they will get Fed intervention if they get into trouble? Who let our financial system become so fragile that one failure jeopardizes the health of the entire system? I am sure many other questions will come up as well. I look forward to the hearing and will follow up during the questions.

¹Federal News Service

April 3, 2008 Thursday

PANEL I OF A HEARING OF THE SENATE BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE;
SUBJECT: TURMOIL IN U.S. CREDIT MARKETS: EXAMINING THE RECENT ACTIONS OF FEDERAL FINANCIAL REGULATORS;
CHAIRED BY: SENATOR CHRISTOPHER J. DODD(D-CT);
WITNESSES: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE BOARD OF GOVERNORS; CHRISTOPHER COX, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION; ROBERT STEEL, UNDERSECRETARY OF TREASURY FOR DOMESTIC FINANCE; TIMOTHY GEITHNER, PRESIDENT, FEDERAL RESERVE BANK OF NEW YORKLOCATION: G-50 DIRKSEN SENATE OFFICE BUILDING, WASHINGTON, D.C.
SECTION: CAPITOL HILL HEARING
LENGTH: 36612 words
PANEL I OF A HEARING OF THE SENATE BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE SUBJECT: TURMOIL IN U.S. CREDIT MARKETS: EXAMINING THE RECENT ACTIONS OF FEDERAL FINANCIAL REGULATORS CHAIRED BY: SENATOR CHRISTOPHER J. DODD
(D-CT) WITNESSES: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE BOARD OF GOVERNORS; CHRISTOPHER COX, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION; ROBERT STEEL, UNDERSECRETARY OF TREASURY FOR DOMESTIC FINANCE; TIMOTHY GEITHNER, PRESIDENT, FEDERAL RESERVE BANK OF NEW YORK
LOCATION: G-50 DIRKSEN SENATE OFFICE BUILDING, WASHINGTON, D.C. TIME: 10:00 A.M. EDT DATE: THURSDAY, APRIL 3, 2008