Nassim Taleb: Bernanke 'Beyond Unwise, He is Immoral'

Friday, 03 Dec 2010 07:45 AM

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Nassim Taleb, the author and financial guru whose popular 2007 book "The Black Swan" predicted the current financial crisis, has strong words for Federal Reserve Chairman Ben Bernanke.

Asked his opinion of the second round of quantitative easing put in place by Bernanke, Taleb flatly called the Fed chief “immoral” and called on him to stop using the savings of millions of U.S. retirees to subsidize a failed banking system.

“I think that he’s taking a risk with other people’s money, and he’s trying to bail out those who made mistakes with retirees’ money,” Taleb said on CNBC.

“Here we have a subsidy, for a second time, of those who made mistake, taking money away from those who are innocent. That to me is immoral . . . It’s beyond unwise.”

Asked if the actions taken by Bernanke were necessary, given the state of the economy as the crisis began, Taleb was dismissive.

“When a gambler wants to double up, he always invokes these kinds of arguments. ‘Oh, I’m doing it to save you,’” Taleb said.

“If you win, of course, in retrospect, people say it’s a good idea. If he loses, the problem is those who pay the price are not the ones who made those mistakes.”

Taleb squarely placed the blame for the calamity on the U.S. banking industry, calling for the Obama administration to “clean up” the banks and force them to shoulder the real risks inherent in the economy, rather than pawning it off on generations of Americans.

“Someone is taking the upside, society is keeping the downside . . . shareholders and taxpayers,” Taleb charged.

“Bankers are still paying bonuses today. They are still gambling with your money.”

Under orders from Congress, the Fed recently released details of its aid to banks and corporations, many of them foreign, during the crisis.

The money doled out totaled $3.3 trillion, far more than suspected, and went to organizations as varied as bond giant Pimco, General Electric, and major Swiss, Korean, and German banks, as well as most of the big Wall Street banks and directly to major corporations to support financing.

“Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations,” Sen. Bernard Sanders, Ind.-Vt, who wrote the provision on Fed disclosure, said in a statement after the release.

“As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”

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