Bernanke : markets ``far from normal,

Discussion in 'Economics' started by ASusilovic, May 13, 2008.

  1. Federal Reserve Chairman Ben S. Bernanke said financial markets remain unsettled and the central bank will increase its auctions of cash to banks as needed.

    While markets have improved, they remain ``far from normal,'' Bernanke said today in the text of a speech to an Atlanta Fed conference at Sea Island, Georgia. ``We stand ready to increase the size of the auctions if further warranted by financial developments.''

    Bernanke's comments contrast with those by Treasury Secretary Henry Paulson and Wall Street leaders including Vikram Pandit, chief executive officer of Citigroup Inc., who say the worst of the credit crisis is over. The Fed chief said it will take ``some time'' for financial firms to resolve the crisis by raising new capital and strengthening their management of risk.

    The flight from risk since August has made financial institutions reluctant to lend to each other, driving up banks' borrowing costs. The central bank has made its own balance sheet available to both banks and bond dealers through three new lending tools, and an expansion of existing programs.

    Bernanke said the Fed's efforts have yielded ``some improvement,'' while also noting that the steps raise questions regarding moral hazard, or protecting those who take on risk.

    The central bank's extension of the federal safety net raised questions about whether the government should now use taxpayer money to stem mortgage foreclosures, the primary cause of market distress.
  2. Micro managing the economy, what a screwed up fed. Let the markets sort things out you freaks.
  3. That, and OUTRAGEOUS greeeeed... when common sense is tossed out the window while high risk and high leverage become "bidness as usual".

    I wonder what will pass for "normal" when this mess is finally cleared. (Hope it ain't barter.)
  4. Couldnt we easily see the taf becoming entrenched, aswell as tslf and discount rate on par with fed funds rate? These things are as sticky as the addiction for negative real interest rates.
  5. Sure, and probably worse. It's all inflationary and currency-debasing... which historically has ended in rejection of the issuer's paper money and bankruptcy of the vast majority of its citizens.
  6. mokwit


    ``A bankruptcy filing would have forced Bear's secured creditors and counterparties to liquidate the underlying collateral,'' Bernanke said in his speech. ``Given the illiquidity of markets, those creditors and counterparties might have sustained losses.''

    Shock horror, the Fed might have failed in its mission to assure banking profits. There could have been losses for banks that screwed up!

    This shows you just how bent the Fed really is.

    LEH whose CEO Fuld is a Director of the NY Fed was just there in an advisory cacity of course, like just before the TAF was extended t Brokers to stop LEH et al going down. None of those hedge funds present would have acted on any priveliged information.