Ben Bernanke Gives All Clear To Go Short

Discussion in 'Wall St. News' started by ByLoSellHi, Feb 14, 2008.

  1. The fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks...''

    Oh Really, Ben? With the fed funds rate at 3%, how much ammo do you have left, Mr. Bigshot?

    Oh, and thanks for the breaking news, Johnny on the Spot.

    Bernanke Pledges `Adequate Insurance' Against Risks (Update1)

    By Craig Torres

    Feb. 14 (Bloomberg) --
    Federal Reserve Chairman Ben S. Bernanke indicated that policy makers are prepared to lower interest rates further to revive the economy as banks make it more expensive to borrow.

    The Fed ``will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,'' Bernanke said in the text of prepared remarks to a Senate Banking Committee hearing today.

    Bernanke and his colleagues are trying to steer the economy through a credit crunch that began with rising delinquencies on subprime mortgages and is now in its seventh month. He acknowledged a widening impact on households and consumers from financial volatility, in remarks that may reinforce investors' anticipation for further interest-rate cuts.

    ``More-expensive and less-available credit seems likely to continue to be a source of restraint on economic growth,'' Bernanke said. ``The outlook for the economy has worsened in recent months, and the downside risks to growth have increased.''

    Fed officials lowered rates at the fastest pace in two decades last month after investors retreated from risk, the unemployment rose and consumer spending slowed. Futures markets show traders expect another half-point reduction, to 2.5 percent, by the end of the next Federal Open Market Committee meeting on March 18.

    `More' to Come

    ``There are more Fed rate cuts in the pipeline,'' said John Lonski, chief economist at Moody's Investors Service in New York, in an interview with Bloomberg Television. He forecast the central bank will lower the main rate to 2 percent by June.

    Bernanke said his own forecast calls for the economy to avoid a recession this year.

    ``My baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt,'' the 54-year-old Fed chairman said. ``Although the baseline outlook envisions an improving picture, it is important to recognize that downside risks to growth remain.''

    Bernanke said ``in the months ahead'' Fed officials will be monitoring inflation closely. Over the year, the central bank will need to ``assess whether the stance of monetary policy is properly calibrated'' to meet the objectives of full employment and price stability, he said.

    Inflation Expectations

    ``To date, inflation expectations appear to have remained reasonably well anchored,'' he said. ``Our policy stance must be determined in light of the medium-term forecast for real activity and inflation, as well as the risks to that forecast.''

    The worst housing slump in a quarter century has combined with lower stock prices and elevated inflation to sap household wealth.

    The economy lost 17,000 jobs in January, the first drop in more than four years. The Standard & Poor's 500 Index has fallen three consecutive months, and is down 7.3 percent so far this year. Residential investment subtracted 1.2 percentage point from growth last quarter, the eighth straight decline, according to government statistics.

    ``The softer labor market, together with factors including higher energy prices, lower equity prices, and declining home values, seem likely to weigh on consumer spending in the near term,'' Bernanke said.

    Paulson Comments

    Treasury Secretary Henry Paulson, testifying with Bernanke and Securities & Exchange Commission Chairman Christopher Cox at today's hearing, said in his testimony that the $168 billion stimulus package enacted this week will help buttress the economy.

    Paulson said in prepared testimony that tax rebate checks will be sent to more than 130 million Americans beginning in May. The measure also includes investment incentives for businesses.

    Still, economists such as Harvard University's Martin Feldstein said the plan may not keep the U.S. out of a recession.

    ``Even if it isn't avoided, will it be enough to cause this to be a modest downturn?'' Feldstein, president of the National Bureau of Economic Research, said in a Bloomberg Television interview on Feb. 12. ``We can't be sure because of the problems in the credit markets,'' he said, estimating the chance of a recession at ``close to 50-50.''

    The Federal Open Market Committee cut the benchmark lending rate a half-point to 3 percent last month, after an emergency 75 basis point reduction in the federal funds rate Jan. 22.

    Extra Yield

    Still, credit markets remain under stress. The extra yield investors demand to buy investment grade U.S. corporate bonds rose to 2.37 percentage points Feb. 12 from 2.24 percentage points on Jan. 21, according to Merrill Lynch & Co. data.

    Fed rate cuts are ``coming when banks already have a significant number of impairments and are trying to protect their own balance sheets,'' said Joshua Rosner, managing director at the New York research firm Graham Fisher & Co. ``They aren't interested in passing on that cut to most borrowers.''

    Writedowns and credit losses at the world's largest banks and securities firms have exceeded $146 billion since the beginning of 2007.
  2. What do you think would happen if most people you know, decided to create an emergency home fund and pulled $2,500 to $5,000 cash out of savings at the bank?

    XLF puts!
  3. LOL!
  4. The Federal Reserve has like 800 billion sitting in a vault somewhere, and then can print more if needed.

    Why fight the fed. It's already been proven that rates will be slashed .75% if a 5% market correction seems likely.
  5. LoL. It's so funny to see the PPT defend themselves on TV.
  6. Div_Arb


    Too funny!
  7. Paulson Stutter!

    How can a man of his stature, professional history, and success talk like that?

    I'm sure he did many things right to be a top guy at GS, but man, is he a poor speaker.
  8. I don't hear a word he's saying. All it sounds like to me is "... blah, blah, blah .. ('keep my job') .... blah, blah, blah .. ('keep my job') .... "
  9. Tums


    thanks for the buy signal
  10. look at the position this poor speaker achieved. Pres of the USA!

    what an idiot!!!

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    #10     Feb 14, 2008