New York Fed President William Dudley has spoken. He represents Goldman Sachs, where he was a partner and managing director until 2007. Goldman owns part of the NY Fed and is one of the 21 “primary dealers” – TBTF banks and security dealers from around the world, many of them bailed out by the NY Fed – to which the NY Fed hands the money that it prints on orders from the FMOC, in exchange for Treasuries and mortgage-backed securities, currently $85 billion a month. If it sounds incestuous, so be it.
Goldman et al. want free money for as long as possible no matter what that does to the real economy, savers, or pension funds. Creating bubbles? No problem. They’ll make money off them. “We at the Fed have been working hard to help homeowners and the overall housing market recover,” Dudley said, hence Housing Bubble II, with home prices jumping 26% in Nevada year over year in May, and 12.2% nationwide, according to CoreLogic, the bubbliest rise since 2006, just before Housing Bubble I blew up.
And that’s good. But Goldman doesn’t want the financial system to blow up again, of which it is one of the largest beneficiaries. You can milk a cow many times, but you can bleed it only once. Hence, a modicum of prudence.
That’s exactly what Dudley proffered in his speech at the Business Council of Fairfield County, Stamford, Connecticut. Concerning the national economy, he served up the usual fare of how it was muddling through, with some things getting better, such as employment. And then he drew the line in the sand – dotted with some ifs.