HardAssetsInvestor

Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hello everybody, and welcome back to HardAssetsInvestor.com. I’m Mike Norman, your host. We’re here for the second part of my interview with Joseph S. Fichera, who is the co-founder and CEO of Saber Partners. Now, I want to talk a little bit about Bernanke, and this video might air after we actually get the actual vote.

Some people would say that, look, Bernanke was in charge of the Fed at a time when there was rampant fraud going on in the mortgage market. The Fed was very lax in its responsibility to oversee all of that. In addition, when the crisis started to unfold, he was slow in providing liquidity to the market.

Some banks actually failed, not because of solvency issues, but because of a run on the bank. Wachovia is an example.

Eventually, he got with the program. He understood it. But there’s the argument to be made, I think, that he didn’t do such a great job. He cost savers a lot of money at the expense of banks that did very well under quantitative easing. I think you're in favor of reappointment of Bernanke. Why?

Joseph S. Fichera, co-founder/CEO, Saber Partners (Fichera): Well, first of all, as a disclosure, Bernanke is a friend of mine. I served on an advisory council to him when he was chairman of the Economics Department at Princeton in the 1990s. And knowing him both personally as well as professionally, I think he was the one person who did take action, and given his specialty is the Great Depression, and in avoiding a second one, I think we’ve done that.

I think we all like to, right now, in the political process, look backwards and then try to blame someone for not doing too much or too little or too … but he certainly was one who took action. And he has brought transparency as such to the Fed, to his portion of it. He speaks in English rather than in the coded words of Greenspan. And had he made too many changes too soon, when he was first appointed, we would all be saying, “Why are you screwing up from Greenspan, who was the person who knew everything?”

Norman: Maestro, right? That’s what we called him …

Fichera: Maestro. So, I think, looking backwards, we might say … but, when we want to be looking forward, Ben is a person who we would know has been tested. We know what he has done … not everything right in the process. So, we’re not going to grade him an A-plus, or maybe an A-minus. But where would we go? What would we do? Who would the other person be? And, how …

Norman: I hear that all the time. But why is that such a hard job? Let’s face it – and I’m not trying to be flippant here or anything with that question – but the Fed does one thing. It sets interest rates, which is basically a mechanical function. The way this Fed sets interest rates is by manipulating the level of reserves in the banking system, either buying securities or selling securities. That’s all the Fed does.

And, just to add to that observation or that fact, quantitative easing hasn’t worked in Japan. It’s not working here to support aggregate demand to essentially help the real economy, and he continues on with this. And he argues in favor of deficit reduction, which I think, if we’re going to get out of this mess, as you said earlier, requires the fiscal side to come into play, not the monetary side.

Fichera: Well, I think you're right. But, he's not in charge of the fiscal side. He’s tried to strike a balance. Clearly, there are other qualified candidates. Obviously, another Princeton colleague of both Ben and mine, Alan Blinder, would make an excellent chairman of the Federal Reserve.

And I think the notion that markets have always wanted to … have certain predictability and standards, in terms of what changed ... but if we go too far in any direction, we will create greater instability. Then there’ll be a whole period of time trying to figure out what the next guy is going to do.

Look, he’s one part of the machine that needs to be in place. And I don’t think we can use him as a scapegoat for all of it. I think he has accepted certain parts of the responsibility. I think our focus really has to go back to the Congress, right now, to a system where the people wanted change in the way Washington was happening. And they have not seen change. They have actually seen the same thing.