The Federal Reserve as Superhero?

The United States has a very long tradition of superhero worship. The ongoing popularity of superhero movies, such as The Watchmen and Hancock seems to justify what we see. There is, perhaps, nothing that the average American audience likes more than a plain schmoe who's a superhero and a regular guy at the same time.

In the past, we've seem to remember that the Federal Reserve was a plain and relatively straightforward organisation. Even under the much-maligned Sir Alan Greenspan, the Fed was pretty vanilla. No off-balance-sheet loan programs, no toxic mortgage debt... in a word, no mystery whatsoever.

Then Mr. Ben Bernanke came along, and then the crash in October 2008 occurred, and suddenly the Federal Reserve is looking even spookier than Goldman Sachs. Now, far from being a stoic, conservative organ of finance, the Fed has turned itself into a front-line warrior, running around like a berserker of old with monetary axes in each hand. Yet, it still lays claim on being a classic, responsible central bank.

Take, for instance, the recent news that the Fed will buy $300 billion of U.S. long-term bonds, as well as $750 billion of mortgage-backed securities. This, added to about $1.25 trillion of toxic assets with unknown -- probably zero -- value, around $1 trillion of government agency debt, and $2 trillion's worth of mystery, creates a balance sheet that would make a hedge-fund manager blanche.

Perhaps the cultural idiom of hero worship has gone to Mr. Ben Bernanke's head. Maybe he sees himself as the mighty superhero Helicopter Ben, successfully fighting off the minions of the evil genius, Deflation Man. We don't know for certain, since we've never met the man, but he strikes us as just an academic schmoe with delusions of grandeur. Whatever the case, though, Mr. Bernanke is putting what's left of financial stability in the United States at risk with his heroics.