by CKR
The New York Times Magazine has a long article on Ben Bernanke and the current economic troubles.
I have absolutely no claim to knowing any economics, so this may be totally out of line. But it's clear that manipulating interest rates (indirectly at that) is a blunt tool for the current problem of distrust. The distrust stems from the exotic slice-and-dice of mortgages, sold with the assurance that risk had been eliminated, or decreased, anyway. That turned out not to be true, and, further, mortgages were being handed out like pamphlets at Berkeley's Sather Gate. A big part of the problem seems to be that people don't know how much of which complex securities are rotten.
So here's my suggestion: make known what goes into those securities. This could be done voluntarily by those offering (or having offered) those securities. If they have the computers to slice and dice, they can use those same computers to calculate the risks and all those other good things that the financial types like to chart.
Of course, we now have embarassment and worse attached to making that information known, so it is unlikely that the perpetrators, er, financial institutions will provide the information voluntarily.
Ben Bernanke and others, like our Treasury Secretary and even President, might be able to do some jawboning. Ultimately, it might be smart for Congress to pass legislation requiring more disclosure of what it is that people are investing in. It's one thing for people to be stupid enough to put their money into hedge funds with about the same information as the contents of a bottle of snake oil, but we are now seeing that that lack of transparency can damage the country's, and perhaps the world's economy. But action by Congress will take much too long for the present problems.
Bernanke wanted to bring transparency to the Fed. Here's an opportunity, even if it wasn't exactly what he originally had in mind.