Bernanke: "shut down those threatening MY system"

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Okay, so that's not exactly what Bernanke said. But in a testimony for the Financial Crisis Inquiry Commission (which will no doubt inappropriately not place the blame for the financial "crisis" on the Fed) he pushed regulators to be ready to shut down large banking institutions which are deemed to "threaten to bring down the financial system," a newly granted power as a result of the recent financial overhaul law. Once again, our law makers manage to use a crisis which they created to further expand the powers that be.

Bernanke's s testimony is intriguing (and not at all atypical). A good deal of his statements are at least partially true; however, he pairs these truths with false assumptions and false logic, allowing him to reach conclusions which expand regulatory powers and which are entirely wrong. For instance, he states that "Too-big-to-fail institutions were both a source ... of the crisis and among the primary impediments of policymakers' efforts to contain it." He fails to recognize that "too-big-to-fail institutions" are a construct of policymakers. In a true free market, there are no too-big-to-fail institutions.

Re-interpreting his comments in this light, Bernanke is actually saying "policymakers were both a source ... of the cirsis and among the primary impediments of their own efforts to contain it."

Bernanke continues on to suggest that a framework promoting the "appropriate mix of prudence, risk-taking and innovation" must be provided. He incorrectly assumes that he and other regulators know that appropriate mix and can properly guide us to reach that mix (typical assumptions of all regulators). No individual truly knows that appropriate mix, but I am confident that prices resulting from the free market can direct us there.

Admitting that regulators won't allow themselves to sit by idly and not meddle, here's to them shutting down the only too-big-to-fail financial institutions actually threatening our well-being: Fannie, Freddie, and the Fed.

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