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 . . .

>

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

Category: Bailouts, Economy, Federal Reserve, Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “Bernanake: We’re Laying the Groundwork for Recovery”

  1. Dsylexic says:

    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.

  2. lark angel says:

    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.

  3. batmando says:

    “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.

  4. fresno dan says:

    “…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.

  5. “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..

  6. Andy says:

    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.

  7. “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.

  8. Concerned Citizen says:

    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.

  9. dsylexic says:

    what consumption?.stop consuming so much already!.americans consume way way too much.
    is moderation a 4 letter word?

  10. Winston Munn says:

    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

  11. MarkTX says:

    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…

  12. constantnormal says:

    NewSpeak: “We’re Laying the Groundwork for Recovery”

    TrueSpeak: “We’re digging our own graves”

  13. Steve says:

    Ehhhhhhhhh Ehhhhhhhh
    Too late!

  14. jim says:

    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

  15. Geert says:

    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

  16. Ken says:

    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.