The income umbrella (AP photo/Charles Dharapak)

Federal Reserve Board Chairman Ben Bernanke went before House and Senate committees this week and talked about a factor that seems to be helping banks at the the expense of life insurance companies: A prolonged period of artificially low interest rates.

Bernanke said, in response to a question from one of my own senators, Sen. Robert Menendez, D-N.J., that questions about ultra-low interest rates can cause problems by, for example, causing some investors to “reach for yield” — by investing in overly risky assets — is a complicated one.

The Fed is using “regulatory and supervisory tools” as the first line of defense against dangerous reaching for yield, Bernanke said.

It seems to me that maybe this answer is close to the heart of the current troubles plaguing issuers of long-term disability insurance, long-term care insurance, fixed annuities, and pretty much any product offering long-term financial guarantees.

One problem is that Congress requires the Fed only to think about the job market and monetary stability. The Fed’s mission statement says nothing about insurance companies, pension plan managers, 401(k) plan account holders, and others who are trying to save for obligations that are likely to materialize many years in the future.

A suggestion: Maybe someone should get someone in Congress to add “the interests of long-term savers” to the list of goals the Fed ought to think about.

Another problem is that I think the Fed is trying to use the hammer of low interest rates to fix the economy, because the ability to lower rates is the hammer it has, and the Fed is not noticing that what the situation really calls for is a chisel.

One of the factors crippling the economy is that lenders are terrified of getting hauled before a congressional committee or thrown in prison because they made a foolish loan.

Maybe, in 2023, we’ll look back in realize that one of the people who looks like financial saints today was actually a fraud. But, really, today, those financial saints and Blue Child companies are the only folks who benefit from access to low rates.

Microsoft can get low rates. Big insurance companies can borrow money at low rates.

Even though I’m a really nice person, I’ve paid all of my bills on time (except one $70 bill that I didn’t know I had, and I paid that once I found out about it), a former Federal Reserver governor (Laurence Meyer) taught me in two classes before he was on the Fed, and my father banks with the same bank branches that my grandfather and my great-grandfather banked with, I can’t really get credit at any rate. My credit card has a $500 credit limit.

I don’t really want more credit than that (except, occasionally, when I’m buying airplane tickets), but I’m sure there are millions of people and hundreds of thousands of businesses that are pretty good risks but have virtually no practical access to ordinary, law-abiding credit because we trigger some kind of automated credit bureau alarm system, and the lenders are terrified that we’re all a bunch of crooked liars.

When Bernanke says the Fed will use “regulatory and supervisory tools” to prevent problems, I think that shows he’s missing an important point: That fear and faulty. rigid scoring systems are doing way more harm to the economy than a modest increase in interest rates would do.

“The beatings will continue until the bankers stop acting scared and hand out cheap loans (to Microsoft, Apple and Warren Buffett)” is not a good way to get the financial system back on firm footing.

See also: