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

[kennynah]

the Commercial side still sees falling rental, occupancy and prices.

and so how come the gahmen telling us that we will see goodyears ahead, that this economic slowdown is behind us? bluffing us? or just pure incompetent ?

[millionairemind]

Bernanke Feared a Second Great Depression
Taking His Case to the People, Fed Chairman Defends Aggressive Actions to Stem Financial Crisis, Calls for Regulatory Overhaul
By SUDEEP REDDY

KANSAS CITY, Mo. -- Federal Reserve Chairman Ben Bernanke on Sunday said he engineered the central bank's controversial actions over the past year because "I was not going to be the Federal Reserve chairman who presided over the second Great Depression."

Speaking directly to Americans in a forum to be shown on public television this week, Mr. Bernanke pushed back against Kansas City area residents who suggested he and other government officials were too eager to help big financial institutions before small businesses and common Americans.

"Why don't we just let the behemoths lay down and then make room for the small businesses?" asked Janelle Sjue, who identified herself as a Kansas City mother.

"It wasn't to help the big firms that we intervened," Mr. Bernanke said, diving into a discourse on the damage to the overall economy that can result when financial firms that are "too big to fail" collapse.

"When the elephant falls down, all the grass gets crushed as well," Mr. Bernanke said. He described himself as "disgusted" with the circumstances that led him to rescue a couple of large firms, and called for new laws that would allow financial firms other than banks to fail without going into bankruptcy.

Mr. Bernanke appeared stoic at times as he sought to explain his actions during the financial crisis at the town-hall-style meeting with 190 people at the Federal Reserve Bank of Kansas City hosted by the NewsHour's Jim Lehrer. But he also joked with the crowd, saying "economic forecasting makes weather forecasting look like physics." He quipped that he could face malpractice charges if he offered investment advice -- although he then recommended that a questioner practice diversification and avoid trying to time the stock market.

The hourlong session was the latest unusual forum where the Fed chairman has explained his actions in recent months, including bailouts and massive lending. Mr. Bernanke appeared before the National Press Club in February, agreed to an interview with CBS's "60 Minutes" in March and took questions on camera from Morehouse College students in April.

Sunday's setting offered the former Princeton economics professor a chance to speak outside of congressional testimony and speeches to economists, as his tenure leading the central bank faces increasing scrutiny. With just six months left in his term as chairman, Mr. Bernanke will learn in the coming months whether President Barack Obama will reappoint him to another four-year term or replace him.

Mr. Bernanke repeatedly used the frustrations voiced by people in the room to show his limited options during the crisis and reiterate the need for a regulatory overhaul.

David Huston, who called himself a third-generation small-business owner, said he was "very frustrated" to see "billions and billions of dollars" sent to large financial firms and called the government approach "too big to fail, too small to save."

"Small businesses represent the lifeblood of small cities, large cities and our American economy," he said, and they are "getting shortchanged by the Federal Reserve, the Treasury Department and Congress."

Mr. Bernanke responded that "nothing made me more frustrated, more angry, than having to intervene" when firms were "taking wild bets that had forced these companies close to bankruptcy."

More than 20 people asked questions of the Fed chairman, on topics ranging from bailouts to mortgage-regulation practices to the Fed's independence, a topic that drew the most forceful tone from the Fed chairman. Mr. Bernanke suggested that a movement by lawmakers to open the Fed's monetary-policy operations to audits by the Government Accountability Office is misunderstood by the public.

Congress already can look at the Fed's books and loans that could be at risk for taxpayers, he said. Under the proposed law, the GAO would also be able to subpoena information from Fed officials and make judgments about interest-rate decisions based on requests from Congress.

"I don't think that's consistent with independence," he said. "I don't think people want Congress making monetary policy."

After appearing before lawmakers three times last week, Mr. Bernanke broke little new ground in explaining the state of the economy. He said the Fed's expected economic growth rate of 1% in the second half of the year would fall short of what is needed to bring down unemployment, which he sees peaking sometime next year.

"The Federal Reserve has been putting the pedal to the metal," he says. "We hope that's going to get us going next year sometime."

[millionairemind]

Fed sees signs of economic improvement

By Alan Rappeport in New York

Published: July 29 2009 21:42 | Last updated: July 29 2009 21:42

The pace of economic decline has moderated or stabilised in most parts of the US, the Federal Reserve said on Wednesday, with manufacturing, residential property and even employment showing some signs of improvement.

According to the Beige Book, which offers a picture of the economy based on anecdotal evidence provided to the US central bank, overall economic activity has stabilised at a low level since its last report in early June when most regions reported that conditions were weak or worsening. The report adds to mounting evidence that the worst recession in the past 50 years is easing.

The more optimistic tone was a welcome shift from reports earlier in the year signalling that the economy was in freefall. Many obstacles remain, however, and the Beige Book warned that commercial property, consumer spending and the labour market were still severely weakened.

Retail sales remained sluggish in most of the Fed’s 12 districts, with consumers focused on cheaper necessities while luxury goods “languish”. Car sales were mixed early this summer, with purchases of new cars stalling while five regions reported growing strength in sales of less expensive used cars.

Manufacturing activity remained “subdued” but improved from earlier in the year, as some districts reported that companies were replenishing inventories after months of clearing stocks to cope with the collapse of consumer demand.

The Beige Book painted a divergent picture of the property market, with residential property showing signs of bottoming out while commercial property continues to be a threat to recovery hopes. This comes after the Case-Shiller index showed on Tuesday that US home prices unexpectedly climbed by 0.5 per cent from April to May, but were off by 17.1 per cent year-on-year. The monthly rise was the first since prices peaked in July 2006.

The first-time home buyer tax credit is succeeding at stimulating sales in the low end of the housing market. Many districts, including Minneapolis and San Francisco, reported an improvement in the stricken sector.

Commercial property, however, has become a glaring trouble spot as tight credit and weak demand have crushed sales volume, sending vacancies soaring and rents falling.

Unemployment, which has reached a 26-year high of 9.5 per cent, is an ongoing worry, but there were some glimmers of hope in the Fed’s report. Seven districts said that businesses had begun to take advantage of the job cuts by partaking in “selective hiring” of top talent that other companies have shed. But the labour market is still “slack” and many businesses continue to cut workers, freeze pay or institute furloughs.

“The weakness of labour markets has virtually eliminated upward wage pressure, and wages and compensation are steady or falling in most districts,” acc-ording to the Beige Book.

Economists are hoping that anecdotal signs of improvement in the Beige Book will be supported later this week when the Commerce Department gives its initial estimate on US gross domestic product.

In the first quarter the US economy contracted at an annualised rate of 5.5 per cent and analysts are expecting that output fell by a more moderate 1.5 per cent in the second quarter.

[millionairemind]

Wall Street profits from trades with Fed

By Henny Sender in New York

Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”

A former official of the US Treasury and the Fed said the situation had reached the point that “everyone games them. Their transparency hurts them. Everyone picks their pocket.”

The central bank’s approach to securities purchases was defended by William Dudley, president of the New York Fed, which is responsible for market operations. “We believe that opting for transparency is a greater good,” he said. “If we didn’t have transparency, we’d be criticised on other grounds.”

However, another official familiar with the matter said the central bank “has heard that dealers load up on securities to sell to the Fed. There is concern, but policy goals override other considerations.”

Barney Frank, chairman of the House financial services committee, said the potential profiteering may be part of the price for stabilising the financial system.

“You can’t rescue the credit system without benefiting some of the people in it.” Still, Mr Frank said Congress would be watching. “We don’t want the Fed to drive the hardest possible bargain, but we don’t want them to get ripped off.”

The growing Fed activity has coincided with a general widening of market spreads – the difference between bid and offer prices – as the number of market participants declines. Wider spreads enable banks, in their capacity as market-makers, to make more profit.

Larry Fink, chief executive of money manager BlackRock, has described Wall Street’s trading profits as “luxurious”, reflecting the banks’ ability to take advantage of diminished competition.

“Bid-offer spreads have remained unusually wide, notwithstanding the normalisation of financial markets,” said Mohamed El-Erian, chief executive of fund manager Pimco in Newport Beach, California.

Spreads narrowed dramatically during the years of the credit bubble.

Brad Hintz, an analyst at AllianceBernstein, said he doubted that spreads would ever return to those levels, a development that could be pleasing to the Fed.

“They want to help Wall Street make money,” he said.

[kennynah]

No Change On Monetary Policy Expected In FOMC Statement
8/12/2009 10:20 AM ET

{RTTNews) - The Federal Reserve Bank will wrap up its August meeting today, and economists don't expect any major policy changes in their post-meeting statement due at 2:15 pm ET, though they do expect an acknowledgment of the slightly improving economy.

Economists are expecting the FOMC to hold interest rates at their low range of zero to 0.25 percent, and say the committee may offer an upbeat tone on the economy because of recent data that points to an improvement in the housing and manufacturing sectors.

They are also expecting the FOMC announcement to largely echo what has been recently said by numerous Fed officials in regard to economic recovery and inflation.

In recent weeks, Fed directors, including Fed Chairman Ben Bernanke, have said in statements and town hall meetings that the economy is recovering and that modest growth should be expected for 2009. But they have also said that weakness in income growth and unemployment will likely curb inflation for several years.

Because of this, San Francisco Fed President Janet Yellen and New York's William Dudley have said that there is no urgent need to tighten monetary policy for the next several years. They have said, however, that they have the "tools" in place to unwind the Fed's balance sheet when the time comes.

Vincent Reinhart, a resident scholar at the American Enterprise Institute and a former director of the Fed's Division of Monetary Affairs, told RTTNews that he believes the Fed wants to keep as low a profile as possible, but still wants to take some credit for economic improvement "in an environment in which they feel they are unjustly taking heat."

He also feels that the Fed will not change any policy or signal the orderly end of facilities, because it prefers that "purchase programs die naturally and ad anonymously as possible."

Reinhart said that he doesn't feel that much will change from the FOMC's June statement, in which the committee announced that economic contraction was slowing and that the Fed would continue to take actions to stabilize financial markets and contribute to economic growth.

He added that the Fed would also likely point to stability in consumer spending, a moderation in housing declines and a slowdown in inventory liquidation among business as evidence of a economic turnaround, even if recovery will be "fitful and sluggish."

by RTT Staff Writer

[winston]

Helicopter speaking on Friday ..

[kennynah]

about what topic?

[millionairemind]

The case against Bernanke

By Stephen Roach

Published: August 25 2009 16:02 | Last updated: August 25 2009 16:02

Barack Obama has rendered one of his most important post-crisis verdicts: Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. This is a very shortsighted decision. While America’s head central banker deserves credit for being creative and courageous in orchestrating an unusually aggressive monetary easing programme, it is important to remember that his pre-crisis actions played an equally critical role in setting the stage for the most wrenching recession since the 1930s. It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure. Maybe the patient needs a new doctor.

Mr Bernanke made three critical mistakes in his pre-Lehman incarnation: First, and foremost, he was deeply wedded to the philosophical conviction that central banks should be agnostic when it comes to asset bubbles. On this count, he stood with his predecessor – serial bubble-blowing Alan Greenspan – who argued that monetary authorities are best positioned to clean up the mess after the bursting of asset bubbles rather than to pre-empt the damage. As a corollary to this approach, both Mr Bernanke and Mr Greenspan drew the wrong conclusions from post-bubble strategies earlier in this decade put in place after the bursting of the equity bubble in 2000. In retrospect, the Fed’s injection of excess liquidity in 2001-2003, which Mr Bernanke endorsed with fervour, played a key role in setting the stage for the lethal mix of property and credit bubbles.

Second, Mr Bernanke was the intellectual champion of the “global saving glut” defence that exonerated the US from its bubble-prone tendencies and pinned the blame on surplus savers in Asia. While there is no denying the demand for dollar assets by foreign creditors, it is absurd to blame overseas lenders for reckless behaviour by Americans that a US central bank should have contained. Asia’s surplus savers had nothing to do with America’s irresponsible penchant for leveraging a housing bubble and using the proceeds to fund consumption. Mr Bernanke’s saving glut argument was at the core of a deep-seated US denial that failed to look in the mirror and pinned blame on others.

Third, Mr Bernanke is cut from the same market libertarian cloth that got the Fed into this mess. Steeped in the Greenspan credo that markets know better than regulators, Mr Bernanke was aligned with the prevailing Fed mindset that abrogated its regulatory authority in the era of excess. The derivatives’ explosion, extreme leverage of regulated and shadow banks and excesses of mortgage lending were all flagrant abuses that both Mr Bernanke and Mr Greenspan could have said no to. But they did not. As a result, a complex and unstable system veered dangerously out of control.

Notwithstanding these mistakes, Mr Obama may be premature in giving Mr Bernanke credit for the great cure. No one knows for certain as to whether the Fed’s strategy will ultimately be successful. The worst of the US recession appears to have been arrested for now – a fairly typical, but temporary, outgrowth of the time-honoured inventory cycle. But the sustainability of any post-bubble recovery is always dubious. Just ask Japan 20 years after the bursting of its bubbles.

While financial markets are giddy with hopes of economic revival – in part inspired by Mr Bernanke’s cheerleading at the Fed’s annual Jackson Hole gathering – there is still good reason to believe that the US recovery will be anaemic and fragile. US consumers are in the early stages of a multi-year retrenchment as they cut debt and rebuild retirement saving. The unusual breadth and synchronicity of the global recession will restrain US export demand from becoming a new growth engine.

It would be the height of folly to reward Mr Bernanke for the recovery that never stuck. Yet Mr Bernanke’s apparent reward is, unfortunately, typical of the snap judgments that guide Washington decision-making. In this same vein, it is hard to forget Mr Greenspan’s mission-accomplished speech in 2004 that claimed “our strategy of addressing the bubble’s consequences rather than the bubble itself has been successful”. Eager to declare the crisis over, the Obama verdict may be equally premature.

The Bernanke reappointment is a welcome chance for a broader debate over the conduct and role of US monetary policy. Mr Obama has made sweeping proposals that give the Fed broad new powers in managing systemic risks. I argued in the Financial Times 10 months ago that the Fed should not be granted these powers without greater accountability as required by a “financial stability mandate” – in effect, forcing the Fed to shape monetary policy with an aim towards avoiding asset bubbles and imbalances. Without a revamped policy mandate, it is conceivable that we could face another destabilising crisis.

Ultimately, these decisions boil down to the person – in this case, Mr Bernanke – who is being charged with the awesome responsibility as America’s chief economic policymaker. As a student of the Great Depression, he should have known better. Yes, he reacted strongly after the fact in taking actions to avoid the pitfalls highlighted by his own research. But he lacked the foresight and courage to resist the most reckless tendencies of the era of excess. The world needs central bankers who avoid problems, not those who specialise in post-crisis damage control. For that reason, alone, he should not be reappointed. Let the debate begin.

[winston]

Nassim Taleb has been very anti-Bernanke on CNBC the past couple of times ..

[millionairemind]

When Ben retires (maybe in 4 years time), he will most likely be sitting on the board for Goldman Sachs...