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

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

Postby kennynah » Tue May 13, 2008 9:09 pm

13 May 2008 12:50 GMT
Bernanke: Financial turmoil in markets easing
WASHINGTON (AP) - Turmoil in financial markets has eased somewhat, but the situation is still "far from normal," Federal Reserve Chairman Ben Bernanke said Tuesday.


The central bank has taken a number of unconventional steps -- especially since March, when the credit crisis intensified -- to help squeezed banks and big investment firms overcome problems and try to get credit flowing more freely again.

Those efforts appear to be paying off and "have contributed to some improvement in financing markets," the Fed chief said in prepared remarks delivered via satellite to a financial markets conference sponsored by the Federal Reserve Bank of Atlanta in Sea Island, Ga.

Bernanke noted some improvements in the markets for certain mortgage-backed securities, such as those backed by Fannie Mae and Freddie Mac, as well as some fixed-rate mortgages and corporate debt.

Moreover, the Fed's extraordinary decision in March to let investment firms go to the Fed for emergency loans "seems to have bolstered confidence," Bernanke said.

"These are welcome signs, of course, but at this stage conditions in financial markets are still far from normal," he said.

For instance, there are still strains involving a widely used interest rate called the London interbank offered rate, or Libor, Bernanke said. And "funding pressures" have also been evident in the "strong participation" of commercial banks in a Fed auction program that has made billions of dollars available in short-term cash loans, he said.

Bernanke said the Fed policymakers "stand ready" to further increase the size of these loans in the future if warranted by financial developments.

In his speech, Bernanke did not talk about the Fed's next move on interest rates or the broader state of the U.S. economy, which many fear is on the edge of a recession or in one already.

(truncated)
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Re: Bernanke Speech: Financial turmoil in markets easing 13may08

Postby millionairemind » Wed May 14, 2008 9:40 am

http://www.forbes.com/home/2008/05/13/f ... ets22.html
Market Scan
Bernanke Talks Big Picture As Inflation Looms
Maurna Desmond, 05.13.08, 4:45 PM ET


Ben Bernanke sure can talk, but others seem to think its time to act -- possibly including a reversal of the Federal Reserve's easy-money policy of the past year.



On Tuesday, the Federal Reserve chairman voiced his theoretical concerns about the potential moral hazard that could be posed if the U.S. central bank bailed out financial companies that had made mistakes. While Bernanke waxed about the Fed's rich philosophical history, other Fed officials chirped about more Main Street issues like rising inflation and the mortgage crisis.
Bernanke was lukewarm about the efficacy of recent moves saying that the recent Fed interest rate cut and lending to investment banks had "contributed to some improvement in financing markets." (See "Wall Street Test Drives New Loans") "These are welcome signs, of course, but at this stage conditions in financial markets are still far from normal," he said.

The Fed chief talked about the difficulty in determining whether a financial institution should be helped because it's hard to tell if some companies are failing because the market is falling or just because management made imprudent decisons.

"The Federal Reserve is governed by ideas, and there is a need to look at the underlying principles guiding its actions," said Michael Feroli, an analyst at JPMorgan."When it comes to monetary policy, you need to have a philosophy. It is important to say, 'what does it mean to be the lender of last resort?"

While Bernanke explained his reasoning, others wanted action.

According to TradeTheNews.com, Janet Yellen, the San Francisco Fed president, said at a conference in Vancouver that financial stability is the core responsibility of the central bank. She added that the Fed "cannot be complacent about inflation." (See "Knowing When To Say When")

Yellen said the Fed has done what needed to do to push economic growth higher, and that there need to be rate increases in a timely manner to avoid fueling inflation. Yellen said that the worrisome U.S. mortgage market remains a top concern and that further housing price decliness are among her biggest worries.

Thomas Hoenig, p resident of the Kansas City Federal Reserve Bank, warned that inflation could become a "way of life," and that current U.S. price increases are at an unacceptable level. Hoenig said that curbing inflation is a major challenge for the Fed. Though Hoenig said the troubles in the U.S. economy will pass, he identified the housing crisis and energy prices as key concerns.

Investors seem to be increasingly worried about inflation. The yield on the 10-year Treasury note, a bellwether for the world's credit markets, shot up to 3.91% from 3.78% late on Monday. As inflation rises, investors demand higher returns on bonds since the purchasing power of the money invested will be eroded. The 10-year yield ended the first quarter of this year at 3.43%.
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Re: Ben Bernanke

Postby kennynah » Thu Jun 05, 2008 3:26 am

helicopter went to his alma mater, harvard, and spoke....market indexes tanked as a result

"significant" higher inflation....read as possible rate HIKE....the sentiment is enuf to kill an early rally...

**********************

04 Jun 2008 18:45 GMT

FED: Bernanke's address at Harvard compares current situation to the 1970s, says inflation now is significantly higher than he'd like and infl expectations should be monitored.

But he says "Importantly, we see little indication today of the beginnings of a 1970s-style wage-price spiral." He says US econ is more energy efficient and Fed is more credible now, but challenge is to prevent further price pressures and for Fed to maintain commitment to price stability.

Emphasizes need for productivity growth in last half of speech.
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Re: Ben Bernanke

Postby winston » Thu Jun 05, 2008 4:32 pm

kennynah wrote:helicopter went to his alma mater, harvard, and spoke....market indexes tanked as a result


Did not expect the catalyst that I was looking for, to be the helicopter :(

As mentioned, the catalyst must be a risk that is big, unquantifiable and can affect the market in a huge manner..
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Re: Ben Bernanke

Postby millionairemind » Thu Jun 05, 2008 9:35 pm

winston wrote:
kennynah wrote:helicopter went to his alma mater, harvard, and spoke....market indexes tanked as a result


Did not expect the catalyst that I was looking for, to be the helicopter :(

As mentioned, the catalyst must be a risk that is big, unquantifiable and can affect the market in a huge manner..


How about an unexpected rate tightening coupled with sudden loss of AAA rating for MBIA and others in the junk pile??
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Re: Ben Bernanke

Postby winston » Thu Jun 05, 2008 9:58 pm

millionairemind wrote:
How about an unexpected rate tightening coupled with sudden loss of AAA rating for MBIA and others in the junk pile??


Hi MM,

I've moved your Feng Shui predictions over to "The Unexplained" thread so that we can follow it from there :)

Not sure whether loss of the rating would shake the market that much.

However, a spike in interest rates would definitely be bad for equities. However, that spike must be sharp and fast, as seen during the Asian Financial Crisis..

What could cause a such a sharp spike in interest rates? Probably a sudden plunge in the US$. Would a sudden steep spike in Oil do it ? Or a sudden drying up of liquidity for US Treasuries or US Bonds ?

I need to think harder and look further :(

Take care,
Winston
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Re: Ben Bernanke

Postby kennynah » Thu Jun 05, 2008 10:13 pm

while u ponder...i offer u what happened 1 hour ago...

trichet spoke and was very hawkish about ecb rates...while it was a rhetoric, it caused USD to plunge significantly... now this has no impact yet on the equities right now.. it certainly caused oil to spike ~$2 as a result...

old news, but effective....

it's a bit too difficult to cater for all situations... but that's not stopping us from trying... ;)
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Re: Ben Bernanke

Postby winston » Thu Jun 26, 2008 8:29 am

INTELLIGENCE: (USD) SEC's Cox will meet with Bernanke on Wednesday

(USD) SEC Chair Cox will meet with Fed Chair Bernanke on Wednesday to discuss agreement to oversee investment banks.

In addition, SEC voted in favor of reducing reliance on credit ratings agencies as part of a series of reform.
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Re: Ben Bernanke

Postby winston » Tue Jul 08, 2008 9:10 pm

Bernanke says Fed may extend Wall Street lending
Tue Jul 8, 2008 8:48am EDT

INSTANT VIEW: Fed may extend emergency lending for dealers

Bernanke's speech to FDIC forum

Paulson to reveal more on Fed stability role


ARLINGTON, Va (Reuters) - Federal Reserve Chairman Ben Bernanke said on Tuesday the U.S. central bank may keep an emergency lending facility for big Wall Street firms open past year-end while it seeks to restore financial market stability.

In remarks to a mortgage lending forum sponsored by the Federal Deposit Insurance Corp., Bernanke said credit costs have been driven higher and the pace of U.S. economic growth also has been hurt by market turmoil.

"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end, should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said.

The Fed set up the so-called Primary Dealer Credit Facility, or PDCF, in March as part of its actions in facilitating the purchase of ailing investment bank Bear Stearns by JPMorgan Chase & Co. It said at the time the PDCF would continue for at least six months.

The lending program allows primary dealers -- the biggest firms that deal directly with the Fed -- to borrow directly from the Fed at the discount rate, currently 2.25 percent.


The Fed acted after weeks of turbulence in financial markets had raised fears a credit crisis stemming from rising mortgage defaults was spiraling out of control.

Bernanke said on Tuesday that markets "have improved somewhat since March" but were still under strain.

He said the Fed, working with other regulators at home and abroad, "has redoubled its efforts to strengthen the capital positions, liquidity reserves, and risk-management practices" of financial institutions it supervises.

On Monday, the Fed and the Securities and Exchange Commission reached an agreement on sharing information about banks but Bernanke noted that was to deal with immediate conditions.

"In the longer term, legislation may be needed to provide a more robust framework for the prudential supervision of investment banks and other large securities dealers," he said.

He said that, whereas the SEC now handles oversight of big investment banks under a voluntary agreement with them, in future it should be made clear that a regulator has power to set standards for capital, liquidity holdings and risk management practices of investment banks.

Bernanke said the U.S. central bank and other regulators were considering changes in how derivatives are processed and were assessing so-called repo markets where primary dealers and banks can get secured financing from risk-averse investors.

But he advised caution in making sweeping changes.

"Given the critical role that these markets play in our financial system, we need to proceed in a prudent manner in making changes, especially as long as the broader financial markets are experiencing stress,
" Bernanke said.

Over time, though, changes may be required in how borrowers and lenders use those markets and in how settlement systems that banks use to process transactions within them are operated.

"Given how important robust payment and settlement systems are to financial stability, a strong case can be made for granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems," Bernanke said.

He also suggested that Congress consider whether "new tools" were needed to allow for the liquidation of big securities firms that were near bankruptcy. That would help to counter a market perception that some firms are seen as "too big to fail" by the government so that they will always be bailed out.

"Despite the complexities of designing a resolution regime for securities firms, I believe it is worth the effort," Bernanke said, adding that "a high bar" for such action should be set so that it would not be chosen lightly.
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Re: Ben Bernanke

Postby millionairemind » Tue Jul 08, 2008 10:21 pm

Just TOL and reading between the lines...

If FED continues to keep the emergency lending facility open, do they know something we don't? Credit default swaps premiums continue to climb.... hmm.....
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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