NewsMax.com recently talked to well-known money manager Marc Faber, who shared his views on the U.S. central bank, bank failures, and bailouts with the Internet news site. Dr. Faber is famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash. On the Fed:

The Federal Reserve has misled the public, and its fiscal policy has greatly damaged the U.S. economy. But the big Wall Street banks and brokerage firms will be bailed out by the Fed if they get in trouble because they’re members of the same “club.”

Those are the opinions of Marc Faber, economist, author, former Managing Director of Drexel Burnham Lambert, and editor of The Gloom Boom & Doom Report, a monthly investment newsletter.

“Let’s say if I’m a manufacturer and I’m a bad businessman and I go out of business, who’s going to help me? But Bear Stearns and the Wall Street elite because they’re tied into the Treasury and the Federal Reserve and they lunch together, it’s a club… and they’re bailed out. I mean it’s a joke.”

“The first thing that people should do is stop listening to the Federal Reserve in America, and specifically to Mr. Ben Bernanke,” Faber said in a recent CNBC interview.

“They are misleading the public and investors by claiming they want to have a strong dollar and that they’re concerned about inflation. But when it comes to actions, they show no concern about inflation and [about] the ordinary Americans and middle class at all.”

Getting The Shaft?

Dr. Faber is also forecasting an explosion of bank failures over the coming year. According to NewsMax.com:

In Faber’s recent note to investors he writes with extreme pessimism that he expects 150 bank failures in the next 12 months.

“I think a lot of banks are already bankrupt,” Faber says.

“And a lot of insurance companies and financial institutions, but they hide their rotten assets in level three asset categories, where you don’t need to value them.”

“I think the financial sector by and large has much larger problems than is perceived by the investment community. The stock market to some extent is telling you that, is giving you the price signals.”

The Swiss-born investor also feels that the Fed acted irresponsibly when it bailed out Bear Stearns. The news site explained:

Yet after the Bear Stearns bailout, the Fed has essentially promised bailouts for the largest firms if they go belly up, says Faber.

“It’s a very questionable practice in life to have a financial sector that made so much money in the good days, and when something goes bad the government just bails them out. It sets a very bad precedent.”

Source:

“Marc Faber: Bernanke, Fed a ‘Joke’”
NewsMax.com, July 10, 2008

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