Ben Bernanke & US Fed 01 (May 08 - Nov 10 )

[blid2def]

Rather surprising that this hasn't been posted here. Anyway:

Wiki entry on the "Bernanke Doctrine" (speech he gave in 2002 on how he foresees a deflation fight will look like):
- http://en.wikipedia.org/wiki/Bernanke_D ... -Nov2002-0

Here's the full speech itself:
- http://www.federalreserve.gov/boardDocs ... efault.htm

[iam802]

hmm... based on the article that GR provide, one of the steps is to depreciate the USD.

But, as of today, USD is still pretty strong.

How does this play out?

Globally, are other countries really fine with USD being depreciated?

[winston]

Stocks were thrilled today, surging upward, triggered by Bernanke's optimistic words that the recession may end this year.

( Do you really think that there could be a rebound this year ? 600,000 people are losing their jobs every month. Do you think things can just suddenly turn around ? )

The market also celebrated his assurances that the U.S. Government has no plans to nationalize the banking industry.

( There was never a plan to nationalize the banks. They just have to come out with a plan when they were all going bankrupt. Credit Cards, Commercial Properties, SME's Loans, Corporate Bonds - pick your next shoe to drop ).

[mocca_com]

source : http://www.marketwatch.com/news/story/b ... TNMostRead

THE FED
Big banks will not be allowed to fail, Bernanke says
Recovery later this year is not out of the question, says Fed chief
By Greg Robb, MarketWatch
Last update: 12:51 p.m. EDT March 10, 2009WASHINGTON (MarketWatch) -- Federal Reserve Board Chairman Ben Bernanke stressed Tuesday that major financial institutions would not be allowed to fail given the fragile state of financial markets and the global economy.
In a speech in Washington, Bernanke repeated that a sustainable economic recovery will "remain out of reach" until the banking sector is stabilized.
A recovery later this year is not out of the question, Bernanke said.
'It was the...collapse of banks and other institutions in late 1930 and early 1931 that made the Great Depression great.'

— Fed Chairman Ben Bernanke
If efforts by the Fed and the Obama administration can get the banks back to being reasonably stable, "then I think there is a good chance the recession will end later this year and 2010 will be a period of growth," he said.
In the end, the economy is bound to recover, he said. The only question is how quick.
The central bank is not anticipating deflation, he said.
On Tuesday, financial shares led a broad market rally after an intense sell-off, with investor sentiment bolstered in part by word from Citigroup that it was profitable in the first two months of the year. Some analysts pointed to Bernanke's speech as a positive factor.
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But Bernanke zeroed in on the question of big banks, the fate of which has been hovering over financial markets.
The continued viability of systemically-important financial institutions is "vital" to the recovery, Bernanke said in a speech to the Council of Foreign Relations.
"We have reiterated the U.S. government's determination to ensure that systemically important financial institutions continue to be able to meet their commitments," Bernanke said.
Some senior Republican members of Congress, including 2008 Republican presidential candidate John McCain, and even one president of a regional Fed bank, have recently called for the government to pull back from assisting large financial institutions.
They are worried that the government is throwing good money after bad in propping up these troubled institutions, including Citigroup (CCitigroup Inc
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Video: Hot Stocks: Financials
Citigroup shares surge more than 25%, guiding battered financials higher after CEO Vikram Pandit says the firm was profitable during the first two months of the year. Bank of America, J.P. Morgan & Chase also gain."Close them down, get them out of business. We've got to bury some big ones and send a strong message to the market," Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, said on ABC News over the weekend.
Bernanke's comments could be viewed as a forceful rebuttal to Shelby and McCain, and a warning against nationalization, analysts said.
Bernanke said he hopes the view that the market can handle the failure of a systemically important firm is "no longer seriously maintained" given the power of the financial crisis in the wake of the collapse of Lehman Brothers and the government takeover of Fannie Mae and Freddie Mac last September.
"It was the...collapse of banks and other institutions in late 1930 and early 1931 that made the Great Depression great," he said.
Under the Obama plan, big banks are undergoing a "stress test" that is expected to be complete at the end of April. At that time, the government has committed to provide capital under attractive terms or give the banks six months to find private capital.
Increasing the oversight
While this is underway, the Treasury and Fed are not sitting still, but instead are stepping up oversight of critical firms, Bernanke said.
"We are already beginning significant work in terms of strengthening the systemically-critical firms," Bernanke said.
There was a sense of regret from Bernanke that some firms have become too interconnected to fail but also a sense that the government had no choice, said Robert Brusca, chief economist at FAO Economics.
The money that has gone into banks has already had "beneficial results," Bernanke said.
Bernanke met with President Obama and his top economic advisors on Monday behind closed doors to discuss the economic outlook and the financial market crisis. The Obama team has yet to spell out important details of how a public-private partnership will remove toxic assets, primarily mortgage securities, off the balance sheets of banks.
Administration officials said the details could come within a few weeks.
White House spokesman Robert Gibbs said Obama is pleased with the coordination between Treasury and the Fed in response to the crisis. Bernanke said he didn't expect any "major disagreements" with Treasury over the repair of the financial system.
The bulk of Bernanke's address included a summary of his thinking about how to improve the regulation of financial markets. He spent some time describing the idea of one systemic regulator to oversee the entire financial market looking for signs of stress before matters get out of hand. Read Bernanke takes away punch bowl: commentary
Many members of Congress want the Fed to take that new role but Bernanke played it coy and said the issue would have to be solved down the road and depended on what Congress had in mind.
Bernanke said the U.S. regulators failed in their duty to maintain a stable financial system leading up to the crisis, but added that the "details of the story are complex."
Bernanke said Congress should give the Fed authority over critical Wall Street payment-and-settlement systems.
The Fed chairman suggested that regulators need to examine mark-to-market accounting during financial crises, but rejected calls for immediate suspension of the rules.
Mark-to-market requires banks to set their holdings at market prices. Critics argue that this is impossible when some markets dry up.
In general, it is a good idea for banks to use mark-to-market, he said. However, in periods of crisis, this accounting treatment can be misleading, he said. See full story.
Greg Robb is a senior reporter for MarketWatch in Washington.

[winston]

From Casey Research:-

"We've averted" the risk of a depression, Federal Reserve Chairman Ben Bernanke said this week. "Now the problem is to get the thing working properly again."

Appearing on CBS network's 60 Minutes, Bernanke told correspondent Scott Pelley that concerted efforts by the government likely averted a depression similar to the 1930s. He also stated the nation's largest banks are solvent and that he doesn't expect any of them to fail; and that the U.S. recession will come to an end "probably this year."

Is this finally the light at the end of the tunnel for the U.S. economy?

We don't want to appear as perpetual gloom-and-doomers, but fact is, when Bernanke tries to predict the future, he's usually wrong.


Prediction: The subprime mess is grave but largely contained, Bernanke reassured the Federal Reserve Bank of Chicago in a speech on March 15, 2007.

While rising delinquencies and foreclosures will continue to weigh heavily on the housing market, it will not cripple the U.S. economy, he said. "Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited."

Reality: The median price of a home sold in the U.S. fell to $170,300 in January 2009, down 26% from a year and a half earlier, according to the National Association of Realtors. This housing crash has spread pain more widely than any before it. Home prices fell about 30% during the Great Depression, according to calculations by Yale University economist Robert Shiller. But back then, the nation was less concentrated in urban centers, and much fewer Americans owned homes.

Other housing downturns in recent decades have been regional; this one is national. Prices in the fourth quarter of 2008 fell in nearly 90% of the top 150 metro areas, according to the Realtors group. And 5.4 million homeowners, about 12%, were in foreclosure or behind on mortgage payments at the end of last year. The Federal Reserve now estimates home prices could fall 18%-29% more by the end of 2010.


Prediction: "I expect there will be some failures" of smaller banks, said Bernanke in February 2008. "Among the largest banks, the capital ratios remain good and I don't anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system

Reality: IndyMac Bank failed in July 2008, with $32 billion in assets. Washington Mutual failed in September 2008, the largest bank failure in history with $307 billion in assets. Wachovia was sold to Wells Fargo in October 2008, amid concerns about its financial health, and Citigroup still scrambles to raise cash from both the government and private sources.


Fortunately for Bernanke, and unlike us at Casey Research, he doesn't make a living by being right about the future. If he did, we strongly suspect that by this time, he would find himself without subscribers.

Thus, it is a mystery to us why the mainstream media still seem to eagerly soak up his every word, much like a devout Catholic would absorb a papal ex cathedra proclamation. But until the last American has woken up to Bernanke's fallibility, that likely won't change.

In the meantime, we recommend using the Fed chair's economic outlooks as a contrarian indicator – if he says the market looks good, run for cover as fast as you can.

[mocca_com]

US economy could rebound in 2009, says Fed chief
Posted: 05 May 2009 2357 hrs

WASHINGTON: Federal Reserve chief Ben Bernanke said on Tuesday the recession-hit US economy could rebound this year but warned of further "sizable" job losses and vulnerability of the financial system.

"We continue to expect economic activity to bottom out, then to turn up later this year," he told a key congressional panel.

He said key elements of his forecast were assessments that the housing market, at the epicentre of global financial turmoil, and consumer spending was beginning to stabilise.

Recent data, he said, suggested that the pace of economic contraction might be slowing, including "some tentative signs that final demand, especially demand by households, may be stabilising."

Bernanke said that an "important caveat" was that his forecast assumed continuing gradual repair of the financial system still reeling from turmoil.

Financial markets and financial institutions remain "under considerable stress, and cumulative declines in asset prices, tight credit conditions, and high levels of risk aversion continue to weigh on the economy," he said.

"A relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall," he said ahead of results to be released on Thursday from "stress tests" conducted by authorities on 19 top banks.

News reports on Tuesday said that 10 of the 19 banks subject to the tests might need to raise more capital and those affected could include banking giants Wells Fargo, Bank of America and Citigroup.

When pressed by a lawmaker, Bernanke refused to disclose the test results but said many US banks needing fresh capital would be able to meet their needs through the market without further government support.

"I have looked at many of the banks and I believe many of them will be able to meet their capital leads without further government capital through either issuance of new capital or converges of exchanges or sale of assets and other measures that would raise capital," he said.

The stress tests will cap a period of suspense that began when President Barack Obama's administration unveiled in February its overhaul of a program to restore stability to the financial system of the world's largest economy.

The United States entered into recession in December 2007 following a home mortgage meltdown that triggered a credit crunch and financial turmoil across the globe.

US economic growth contracted a massive 6.1 percent in the first quarter of 2009 after a 6.3 percent slide in the previous quarter.

Bernanke said even after a recovery got underway, the rate of growth of real economic activity was likely to remain below its longer-run potential for a while.

"We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly," he said.

"In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes," he explained.

The most recent information on the labour market - the number of new and continuing claims for unemployment insurance through late April - suggested that "we are likely to see further sizable job losses and increased unemployment in coming months," Bernanke said. - AFP/de

[winston]

By LenaHuat » Mon May 25, 2009 8:49 am

Bernake said 'black swan' events shaped his future and quoted Beatle John Lennon ("Life is what happens to you while you are busy making other plans").

http://www.usatoday.com/money/economy/2 ... eech_N.htm

[millionairemind]

W - Wanna combine the Ben Bernanke thread with this one?

June 11, 2009, 7.08 am (Singapore time)

Fed report shows losses on Bear Stearns, AIG holdings

WASHINGTON - The US Federal Reserve drew back the curtain on its emergency repairs to the financial system on Wednesday, showing US$5.3 billion in losses on assets taken over from firms it bailed out in 2008.

In a report on its US$2.1 trillion balance sheet, the Fed also said it earned US$1.2 billion from loan programs and US$4.6 billion in interest on its holdings of Treasury and other securities in the first three months of the year.

The Fed is making more information available about its finances, and its rescues of investment bank Bear Stearns and insurer American International Group (AIG) in order to show the public it is using its resources wisely, a senior Fed official said, speaking to reporters on condition of anonymity.

It will issue a monthly report on its balance sheet two weeks after the last Wednesday of every month, another Fed official said during a briefing.

By offering a more detailed glimpse of its holdings, the Fed also hopes to address congressional concerns that it lacks accountability, the senior Fed official said.

The Fed has pumped more than US$1 trillion into the US financial system since the global credit crisis began in August 2007. Members of Congress have questioned some of the Fed's emergency actions and demanded more information about who has benefited from loans and support.

However, the senior official said the Fed will still resist making public the names of firms that need to borrow from its emergency loan facilities. Making those names public would stigmatise borrowers and discourage them from taking advantage of last-resort borrowing opportunities, which would defeat the purpose, the official said.

While the special vehicles set up to hold assets from Bear Stearns and AIG have lost value, advisors to the Fed say they are likely to realise gains if held to maturity, the official said. -- REUTERS

[millionairemind]

July 1, 2009, 11.21 am (Singapore time)

Rates could be near zero for years: Fed's Yellen

SAN FRANCISCO - US benchmark lending rates could stay near zero for a couple of years based on the amount of slack now in the economy, San Francisco Federal Reserve Bank President Janet Yellen said on Tuesday.

'My staff has looked at 12 different ways to calculate the output gap,' and every one points to a large gap between current and potential output, she told reporters after a speech in San Francisco.

Bets in futures markets on a rate increase as soon as late 2009 are 'jumping the gun', she said.

The jobless rate is likely to continue climbing this year, and the moment the recession ends is 'not the right time to take away the punchbowl', said Ms Yellen.

She added that views circulating that the Fed risks triggering some kind of hyper-inflation by not rushing to raise interest rates are 'misplaced'.

Ms Yellen is a voting member of the Federal Open Market Committee in 2009. -- REUTERS

[winston]

Rates could be near zero for years: Fed's Yellen

If the USD suddenly crashes, i dont see how interest rates can remain at zero %. It will be a Black Swan event though..