The Three Stooges

The classic comedy trio came to mind as I was watching Ben Bernanke, Hank Paulson and Chris Cox testify before the Senate Banking Committee - I just couldn't help myself. The hard part was deciding who was who. I finally settled on Cox as the mean-spirited Moe, which only seems appropriate given his role as SEC chief, even though he didn't say much. Both Bernanke and Paulson sport the bald pate to qualify as Curly, and both are hapless enough to play either of the remaining characters. I finally flipped a coin and cast Paulson as Curly, and Bernanke as Larry.

My wife, who really had no exposure to Paulson prior to watching his performance yesterday, asked, "What's wrong with him?" His uneasy, stammering responses had her convinced he was the victim of some debilitating illness, or that he was an octogenarian, or that he just doesn't know what the heck he's talking about. I assured her that he's only 61, in good health, and highly educated, and that his most recent stint was running Goldman Sachs (which he deftly maneuvered out of the bulk of its subprime exposure just prior to his departure, leaving Goldman as the best performer on the Street).

No, his problem was the same problem that afflicts so many people when they're put on the spot and either don't know the answer to the question or don't want to give it: he was lying through his teeth. The more I watched him, the more I thought that if you put a bad toupee and moustache on him, took off his glasses, and took about 20 years off him, you'd have Uncle Rico from "Napoleon Dynamite." Come to think of it, Bernanke wouldn't make a bad Napoleon, the way he lets Wall Street bully him. Napoleon's cooler, though.

To wit: Bernanke said his own personal forecast called for meager growth in the near term, followed by more robust growth later in the year as monetary and fiscal stimulus kick in. Okay, Ben, so if the economy's going to continue growing, and with inflation still a serious threat (did anybody catch the 13.7% year-over-year spike in import prices reported this morning?), then why are you easing as though we were in the Great Depression? Why do you exude a sense of panic, of impending doom? Your actions say "economic armageddon," even as your words say "growth will slow."

"Curly" Paulson echoed those sentiments in his stammering, stilted responses. The duo's concerted remarks prompted New York Senator Chuck Schumer to point out that his discussions with Street firms indicate considerably greater concern than the responses he was getting from them, which generated the following response from Paulson: "Um ... aahhh ... well ... er ..." Schumer just might have been the most reasonable, realistic and least political person in the room.

True to form, Bernanke promised that the Fed stands ready to cut rates further as an insurance policy against the downside risk to growth (but wait - the economy's going to continue growing, just slower, right? I mean, how much slower than 4Q07's +0.6% pace can we get?). However, the head of the central bank of the world's largest economy didn't say whether he stands ready to fight inflation. Why? Because he doesn't. Ben Bernanke is a pansy.

What do the markets think of Bernanke? Immediately after his comments, options on Fed funds futures contracts suggested that of all the possible outcomes for the Fed funds target between now and the March 18 FOMC meeting (we have to say "between now and then," because Ben has cheerfully - okay, Ben does nothing cheerfully - proven that he's more than willing to cut just days before a scheduled meeting to acquiesce Wall Street), the second most likely is a whopping 100 basis point cut. If that's not viewing a guy as soft, I'm not sure what is.

Others don't think too highly of him, either. Both Democratic candidates for President have said they'd can him. At this stage of the political game, why does a candidate say they'll do anything? Because it's the right thing to do? No, because they think it's the popular thing to do. And canning the worst Fed Chairman we've ever had would undoubtedly be a popular move.

Is it too early in Ben's tenure for me to label him "worst ever?" Maybe. But I don't think we can afford to give this clown more time to screw things up, especially when our economy is the most fragile it's been in about 80 years.

Back to "Curly" Paulson. Among the stammering were a couple of out-of-character remarks for Hank, who is nearly Bernanke's equal when it comes to pandering to Wall Street. Referring to his latest brilliant plan, "Project Lifeline," which followed "Project Hope" (I'll get back to that in a minute), he acknowledged, "None of these efforts are a silver bullet that will undo the excesses of the past years."

He also warned against making permanent the recent stimulus plan's provision to raise the limits on loans Fannie Mae and Freddie Mac can buy from $417,000 to $729,750. "Raising the loan limit flies in the face of the affordable housing mission," he said. I never knew Hank was such an idealist when it comes to housing and the markets. Check that - he's not. More likely, he knows just how precariously undercapitalized Fannie and Freddie are, and he doesn't want them imploding before he can get the heck out of Washington.

As for "Project Hope" and "Project Lifeline," the latter seems to represent an admission that the former was an abject failure. As will be the latter. What's next, "Project Resuscitation?" "Project Lazarus?" I should have a contest to name the next Treasury project. The winner gets an abandoned house - Lord knows there are plenty of them to give away.

"Moe" Cox pledged to "increase transparency" in the capital markets, something that's been promised since ... the last recession, which was exacerbated by accounting irregularities. Cox reported that the SEC currently has more than three dozen subprime-related investigations underway, and the FBI is investigating 16 companies. The ratings agencies have also come under the SEC's scrutiny.

Meanwhile, the losses just keep on coming. It's so comforting to have these three on that wall. Listening to them brought to mind Kevin Bacon, in the closing parade scene in "Animal House," shouting, "All is well!" while chaos and panic rage all around him.