ALERT: Bernanke orders an Operation Twist QE Code Red

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

The Fed is not just doing QE via Operation Twist, it is also throwing in some mortgage-backeds to up the ante a little bit.

QE all the way, baby! Take that, Eric Cantor. Take that, John Boehner. Take that, Mitch McConnell. Take that, Jon Kyl.

Do I have to get out the Nicholson clip again?…

OK I will.

Cantor: Governor Bernanke, did you order the code red?

President Obama: You don’t have to answer that question.

Bernanke: I’ll answer the question. You want answers?

Cantor: I think I’m entitled to them.

Bernanke: You want answers?

Cantor: I want the truth!

Bernanke: You can’t handle the truth! Son, we live in a world with depressions and those depressions have to be guarded against by men with balls. Who’s gonna do it, you? You, Speaker Boehner? You, Representative Kyl Boeher? You, Senator McConnell? I have a greater responsibility than you can possibly fathom. You weep for price stability and you curse the Federal Reserve. You have that luxury. You have the luxury of not knowing what I know – that the quantitative easing, while tragic, probably saved lives. And, my existence, while grotesque and incomprehensible to you, saves lives.

You don’t want the truth because deep down in places you don’t talk about at fundraisers, you want me against this depression, you need me against this depression. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom that I provide and then questions the manner in which I provide it. I would rather you just said thank you and went on your way. Otherwise I suggest you pick up a weapon and stand at post! Either way, I don’t give a damn about what you think you’re entitled to.

Cantor: Did you order the Code Red?

Bernanke: You’re goddamn right I did.

Conclusion: Don’t bully the Ben Bernank.


Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.

Source: Federal Reserve Board


Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.