Standpoint: Did Bernanke Really Had a Choice?

Having read another CNBC article about The Case Against former FED chairman Ben Bernanke and how he and the former secreatary of the US Treasury Henry Paulson allegedly mistook the readings of the United States economy in 2007, I was quite emotional and political in my first reactions about what was written about their courses of action.

Their actions might have or might have not prolonged the recession in the United States yet, the questions lies, if they have had let these financial institutions like Bear Sterns and Merrill Lynch fail, would the United States banking system recover faster and stronger from the current financial crisis?

According to the CNBC article The Case Against Ben Bernanke, the problem with this current economic crisis was not liquidity but credit. Yet in the contrary, Oil was reaching an all-time high that period of time where the dollar is forced to devaluate in order to give the much-needed liquidity for the financial markets to continue to work. If credit was the problem, credit could have been the problem because there wasn't much liquidity around. This is considered to be a simple case of scarcity of the much needed liquidity. Having said that, it is definitely not credit but liquidity that became the culprit to this financial turmoil.

Another argument lies is how the FED and the US Treasury Department sponsored the Merrill Lynch and Bear Sterns deal. Critics claim that by letting these very big financial institutions fail, we could have had sent a stronger signal to the other financial institutions about corporate responsibility.

I strongly believe that letting the if not the whole but part of the financial institution fail would yes, be a major blow not only to the United States economy but as well to the global economy. I would presume that Bernanke and Paulson was being guided by history in trying to make things work in the present. The case of the United States Depression Era in the 1930s was quite a classical example of having the "invisible hand" of free-market economics work. But the question still unanswered up to now with the government's action that time is: Is the invisible hand invincible too?