Part 2 of 3

By Katie Kieffer

I always invite TIME Magazine’s “Person of the Year” to my New Year’s Eve Party. Since TIME‘s award winner is typically a liberal or a misguided moderate, my hospitality affords me the opportunity to “convert” the recipient. 2009′s winner was Fed Chairman, Ben Bernanke.

Calculating conservative woman that I am, I asked Bernanke if he would not only attend the party but also be my bar’s lead mixologist.

Bernanke agreed to both requests so I asked him to stop by my house earlier this week so we could practice making the cocktails for New Year’s. I decided to show Bernanke how to fix our economy under the guise of a James Bond martini-making lesson. Here’s how I taught Bernanke to make a proper martini for my New Year’s Eve party and fix our country’s economy:

Many of you are familiar with James Bond’s insistence that his martini be “shaken, not stirred.” As Fine Cooking‘s Jim Meehan puts it, “Bond seemed more concerned about the temperature of his cocktail than its appearance; hence his unusual request. Let’s just say he was smarter about outsmarting the bad guy than he was about ordering a drink. You don’t have to shake a martini to get it good and cold.”

I handed Bernanke a martini glass, some Gordon’s, vodka, and Kina Lillet. Then I handed him a cocktail shaker. I said, “I know that you’re a smart man, Ben. You’re a summa cum laude Harvard grad! And so, when I see your tired eyes and watch the poor decisions you make, I think you’re the wrong man for this job. You seem better fit for academia than the real world and I’m going to try to inject some business smarts into you.”

Ben, I think your philosophy for ending the recession is as misguided as Bond’s philosophy for chilling a drink. Just as he thought the best way to chill a martini was to shake it, you seem to think that the best way to fix the economy is to “shake things up.” You told TIME that, “…when orthodoxy fails, then you need to try new things” (such as government bailouts and pumping dollars into the system).

Bernanke: Katie, you just don’t hold back, do you? Here I thought I was coming over for a friendly cocktail lesson and I find out it’s a bludgeoning session!

Katie: Oh, Ben, I like you. I’m honestly just trying to help you. I mean, I would want you to tell me the same thing if I were trying to do something I had no experience in, like coach football. I’ve read about football - and watched it from the sidelines – but I’ve never played the game – how could I be a coach?

You’re overseeing our economy after reading, writing and lecturing about economics at Harvard, Stanford and Princeton, but never actually running a real-world business. Your only business experience of note was waiting tables in a poncho at South of the Border in college! C’mon! You’re a brilliant man – completely qualified to theorize in a hypothetical vacuum but underqualified to make decisions about real-world banking or trading. You admit publicly that you did not anticipate this financial crisis. What kind of weatherman are you if you can’t predict the weather?

Bernanke: You are harsh. I did the best I could with the information I had. If I hadn’t intervened, the recession would be much worse.

Katie: Ben, you are taking this personally. I’m a logical person talking to you about the facts. You brought the Fed into the game in an unprecedented way, and the results include an inflating dollar, skyrocketing unemployment and frozen markets as community banks are locked up and hardpressed to provide loans to small businesses.  Even BARNEY FRANK – someone who bankers thought would never see the light of day – wrote a letter to you on Oct. 29, 2009 stating: “…one of the biggest challenges faced by community banks (but shared by all banks) is how to respond to the calls from Congress to increase lending to stimulate the economy and to work with troubled borrowers on foreclosure mitigation, while dealing with increasingly stringent directives from regulators that can preclude banks from doing just that.”

Bernanke: So, what are you recommending I do, Katie?

Katie: Here’s my suggestion, Ben. Start acting like the fiscally responsible Republican you claim to be. Stop subscribing to the hypocrytical notion that the government is “too big to fail” while cracking the whip on small bankers and investors. Stop your printing press that’s turning our dollar into junk money. Capitalism, innovation and entrepreneurialism will create jobs in this country, not the Fed.

Here’s a secret of mixology: You can create a cocktail that is a drink and a meal in one. You can create a martini and top it with a slice of thick, delicious bacon. Simply shaking the martini ingredients around won’t produce a slice of bacon. That would be magic. The only way to create the bacon is through wealth. I have to give you – my mixologist – the money to buy lots of bacon to top off the martinis for my guests. Likewise, our economy isn’t an inflatable money booth – you can’t just blow dollar bills around and expect consumer confidence to magically rise.

Humans aren’t perfect and humans run the Fed, so nothing that the Fed does will miraculously be more perfect than what the private sector – full of “greedy” capitalists does. The government is not going to fix things by running away from “orthodoxy” and the proven prosperity that capitalism creates.

Bernanke: Katie, I think you are a smart woman and I might even agree with you after a few of those bacon-topped cocktails you describe.

Katie: Ben, I knew you were reasonable. I’m going to name the cocktail a “Bernanktini” in honor of your New Year’s resolution to reduce the Fed’s power in favor of capitalism, innovation and entrepreneurialism.

Bernanke: Cheers!

By Katie Kieffer

Black and blue is the new red in banking. If you’re a bank, all you want these days is a Snuggie™. Daddy Congress and Mommy Treasury are becoming downright abusive with the spanking paddle. If there were a Bank Protection Services agency it would be full of cases.

Spanking’s merits are debatable for children who are too young to be reasoned with, but woe to the person who spanks an unruly teenager thinking that they will teach them a lesson. The “lesson” will yield strong resentment toward the spanker – not docile obedience.

Banks – like teenagers – are adult-like entities. They are analytical institutions comprised of adults, not babies. So, the government is doing the entire banking industry and the U.S. economy a disservice by treating banks as if they were bratty, screaming children.

Government mother-henning and micromanaging needs to go out the window in favor of a system that will allow banks to get on the fast-track to profit, responsibility and independent growth. As with raising a teenager, it’s effective to show them love by withholding privileges until they reform their behavior. Once they are on a track toward reformation, it is necessary to give them the independence to make their own decisions and mistakes or they will be eternally dependent on their parents.

Screaming and spanking doesn't work for teens – or banks.

Let’s take a look at some of the abusive treatment that banks are receiving, and I’ll offer alternative reforms for consideration:

Spank 1:

Many banks were “rescued” by the government about a year ago when they were on the brink of bankruptcy. Today, “Pressure groups have decided that if banks are an arm of the state, they should be subject to the same scrutiny as the government. … Over the past few weeks, it has become clear that the banks will have to negotiate with more and more lobbyists, unions and campaign groups as government-owned companies are forced to become more responsive to issues in the public interest,” commented Bloomberg News columnist, Matthew Lynn, in his Nov. 29, 2009 Pioneer Press column titled, “Banks need to forget politics to be run well.”

More loving solution:

“Banks must be able to make decisions based on commercial criteria. Otherwise, they will just end up lending money to people who can’t pay it back,” says Lynn. Obviously a parent isn’t going to do their teenager a favor by telling them what to major in and where to go to college. These are decisions they need to make themselves, based on their own interests and experiences, such as internships. Similarly, banks need to have the independence to make loans based on their own institutional interests and experiences so they can make a PROFIT – not cater to interests groups that are clamoring for money, but can’t pay the bills.

We will not get out of this recession until the government steps back and allows banks to go back to private owners who will manage their profitability under strict terms, but not pressure them politically.

Spank 2:

The Treasury recently “announced a plan to publicly embarrass banks failing to modify mortgage loans. The U.S. government plans to begin publicly identifying mortgage lenders who have done a poor job of permanently modifying mortgage loans for homeowners.“

More loving solution:

The Treasury is looking for a silver bullet to solve the financial crisis and diffuse prior government incompetency. But, there isn’t one. Just like a parent or a teacher would fail to reform a deviant teen by putting them in front of their peers for public embarrassment, the Treasury will fail to get money moving again by embarrassing banks. A good parent or teacher would get to the root of the problem and find out if the teen needed therapy, medication, support or socialization. Likewise, the government should get to the root of the lending crisis before it pulls out the embarrassment card.

Banks would lend if they could – it’s their job. There are reasons they aren’t lending, and embarrassment alone isn’t going to shake them out. It’s hypocritical for the Fed to point banks in the direction of making more bad loans – a primary reason we got into this financial crisis to begin with.

There’s many reasons banks have lending standards and reserve the right to reign in credit. With property values down 20 to 50 percent, it isn’t surprising that banks are leery to modify a distressed mortgage or reduce principal debts. The government should focus on big-picture solutions to help the economy grow, such as lowering taxes and cutting spending so that entrepreneurs and small businesses – the fuel of our economy – can hire again. This would stimulate the economy and have a positive ripple effect – giving borrowers and lenders the ability and confidence to work together again.

Our government – with mascot Bo – is as cute as a cupcake, but as impractical as Amelia Bedelia.