What's your interest rate?
That I'm earning?
No, on your house. Do you have a mortgage?
Oh, yes, we refinanced.
Oh, perfect. When?
About 5%. A couple of months ago.
Good time. (Mark's note - well if anyone knows, it would be him...)
We had to do it because we had an adjustable rate mortgage and it exploded, so we had to.
So, did you get a fixed rate at 5%? I think this might be the most valuable piece of information. (Laughter.)
Thirty years fixed rate at a little over 5%.
Hence it appears Ben was just one of the millions in this group - I will assume he had enough down on the house to not be upside down, or perhaps he qualified for one of President Obama's special programs that let's even those 25% underwater still refinance.
3 other fascinating tidbits from said interview
1) Despite the very obvious nexus of our problems (along with many other things) as the easy money policies of Alan Greenspan (which Bernanke was of course sitting right alongside at the Fed, voting for the same policies), Bernanke thinks the Fed had very little to do with it. Simply amazing in its arrogance.
So, I'm a fringe economics type, I'm not personally, but I'm saying a reader picks up TIME Magazine, and they see this and they go, oh, my God, Ben Bernanke, low interest rates caused this whole thing. He's just an extension of that devil man, Alan Greenspan. Low interest rates, this is the whole cause. What's your bullet answer to that?
It's hard to give a bullet answer.
Monetary policy in the early part of this decade was accommodated for good reasons. There was a recession in 2001, there was the jobless recovery, inflation was very low. Keeping interest rates low to get the economy back on track was a reasonable thing to do. I think there are a lot of forces that led to the crisis, a whole range of things were relevant there. I don't think that monetary policy was a particularly important source of the crisis.
2) All this time I had thought that the master plan was for the Federal Reserve to take in all these toxic loans and as the American people lose interest, use their balance sheet to quietly suffer losses for the years to come. But it appears in fact with the Treasury (taxpayer) guaranteeing all losses, we'll still take the bullet; just in a more direct fashion. No losses to the Fed; recall we've guaranteed $400 BILLION to Fannie/Freddie - and they are looking into extending that to a larger number as we speak (before Dec 31st) because after the new year, it appears Treasury will have to go to Congress if they want an amount larger than $400 BILLION. Keep in mind this rescue of Fannie/Freddie were sold to the American people by Hank Paulson as up to $200 BILLION. But it keeps growing bigger... and bigger... and bigger, because Fannie, Freddie and FHA are being as used as tools to make more bad loans to keep this housing market supported. Let's see what they can do in the next 10 days; either way - no skin of the Federal Reserve's nose.
And are there lurking dangers in those mortgages that you purchased that we don't even know about now?
Well, the mortgages are guaranteed. The credit, even if they go bad, Fannie and Freddie with the backing of the U.S. Treasury will pay them off, so the Fed is not taking any credit risk by holding these mortgages.
3) I'd love to see the answer to the following question when administered with some truth serum.
Do you think Congress is fiscally illiterate? Economically illiterate?
No, of course not. But what they have to deal with is not just a question of understanding. It's a question of making very, very tough choices, and in a political environment, where people understandably are resistant to cuts in programs or benefits, or increases of taxes. So, there needs to be tough choices made, there needs to be leadership. And I don't envy Congress those choices, because they're very difficult ones to make.
The rest of the interview is the usual self patting on the back... after reading this interview in full, I now understand why Ben does not think of himself as an arsonist who is applauding himself for saving the house he set fire to. (a hollow victory in my mind) In his view, the Federal Reserve pretty much had almost nothing to do with the whole crisis, so the hero worship is more than worthy. A good insight to know as we move forward, about the mind set of these people as they work in their ivory towers saving us.