Bernanake: We’re Laying the Groundwork for Recovery
Interesting communique from the FOMC chief, as an OPED in today’s WSJ:
"Over the past year, the Federal Reserve has actively used all its powers and authority to try to help our economy through this difficult time. Central banks around the world have also consulted closely and cooperated in unprecedented ways to reduce strains in financial markets and to bolster our economies. We will continue to do so. However, clearly the time had come for a more comprehensive and broad-based solution.
History teaches us that government engagement in times of severe financial crisis often arrives very late, usually at a point at which most financial institutions are insolvent or nearly so. In these conditions, the consequences and costs of inertia and inaction can be staggering. Fortunately, that is not the situation we face today…
I am not suggesting the way forward will be easy. But the tools are in place to respond effectively and with force. These tools will bolster the capital of our financial institutions, restore confidence in their debt, and offer increased access to funding for businesses. Their application, together with the underlying power and resilience of the American economy, will help to restore confidence to our financial system and place our economy back on a path to vigorous growth."
A recent speech of Bernanke is similar to his piece . . .
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Source:
We’re Laying the Groundwork for Recovery
The necessary policy tools are in place.
BEN S. BERNANKE
WSJ, OCTOBER 14, 2008
http://online.wsj.com/article/SB122394360912831019.html
Current Economic and Financial Conditions
Ben Bernanke
NABE, October 7, 2008
http://www.federalreserve.gov/newsevents/speech/bernanke20081007a.htm
October 14th, 2008 at 7:16 am
I dont know what history books he reads from:
“History teaches us that government engagement in times of severe financial crisis often arrives very late, usually at a point at which most financial institutions are insolvent or nearly so. In these conditions, the consequences and costs of inertia and inaction can be staggering.”
Govt interventions have usually lead to worsening of the problems. Time will tell if Friedman’s acolytes learnt the right lesson.
October 14th, 2008 at 7:20 am
It’s nice to see the Fed/Treas finally enacting policies that were advocated by many who were opposed to the original bail-out plan.
I’d be surprised to see any actual toxic assets purchased via the so-called ‘reverse auction’ process. Let the speculators hang.
It should have always been about restoring confidence is regular daily banking operations, which meant preventing depositor runs & increasing capital reserves.
Better late than never.
October 14th, 2008 at 7:32 am
“government engagement in times of severe financial crisis often arrives very late, usually at a point at which most financial institutions are insolvent or nearly so.”
Given this crisis has unfolded for over a year, why is this instance any different?
Neatly sets up the premise that in the current situation some/most/all banks are not already insolvent.
October 14th, 2008 at 8:39 am
“…usually at a point at which most financial institutions are insolvent or nearly so.”
Aren’t most financial institutions insolvent or nearly so? I mean if we follow our own accounting rules – O silly me, except when we don’t want to.
October 14th, 2008 at 9:05 am
“I am not suggesting the way forward will be easy. But the tools are in place to respond effectively and with force. These tools will bolster the capital of our financial institutions” B.B.
no wonder I was thinking Kneel 4 Cash, or…
“and with force”
past that, nice points, batmando y fresno dan, no kidding..
October 14th, 2008 at 9:17 am
The Global rescue plan still has a long way to go before it can be deemed a success, but it is a step in the right direction and the markets have shown their support. However, it only addresses the current financial crisis and for real long term structural reform there are a number of the key steps (see recent post) that should be taken to ensure we do not end up in this financial quagmire again.
October 14th, 2008 at 9:54 am
“I’d be surprised to see any actual toxic assets purchased via the so-called ‘reverse auction’ process.”
Considering that the rescue package authorized the deployment of $700 billion, and $250 billion has now been earmarked for capital injections, I’d assume the other $450 billion will be used to buy some sort of distressed assets.
October 14th, 2008 at 10:01 am
The markets are not showing their support the financial markets are just realizing which way the financial wind is blowing at the moment. Bulls don’t get too giddy…unless National Consumption picks-up dramatically and quickly at that, we are in for a heep full of hellish economic outcomes.
October 14th, 2008 at 11:03 am
what consumption?.stop consuming so much already!.americans consume way way too much.
is moderation a 4 letter word?
October 14th, 2008 at 11:12 am
The Plan.
Step 1: Government steals from poor
Step 2: Government gives stolen funds to rich bankers
Step 3: Banks lend at interest to poor
October 14th, 2008 at 11:14 am
Bernanake: We’re Laying the Groundwork for Recovery
The groundwork for who’s recovery????
I see a lot of losers in the future whether
his plan works and/or fails…
October 14th, 2008 at 11:15 am
NewSpeak: “We’re Laying the Groundwork for Recovery”
TrueSpeak: “We’re digging our own graves”
October 14th, 2008 at 12:45 pm
Ehhhhhhhhh Ehhhhhhhh
Too late!
October 14th, 2008 at 4:23 pm
A crucial part from Ben’s article not included above is:
“we will not stand down”.
Is he under pressure to resign? Or Insulting/warning those who appointed him!
More on it, and on other hidden points in Ben’s article are pointed out below.
http://marketwarnings.blogspot.com/2008/10/bernanke-and-fed-goals-before-they.html
October 15th, 2008 at 3:05 am
hi Barry
can you correct “Bernanake” in the title.
It’s a pity for the best financial site on the net if it would remain like that.
kind regards
Geert
October 15th, 2008 at 2:38 pm
Bernanke should never give interviews. The FED banking system is the root cause of all these problems. The debts are now so huge they cannot be allowed to get bigger. The System has finally broken down. The Gov. itself should take over ALL the banks and print the currency with no interest coupon attached to it.