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Re: Bernanke says recession could end in 2009
WASHINGTON — America's recession "probably" will end this year if the government succeeds in bolstering the banking system, Federal Reserve Chairman Ben Bernanke said Sunday in a rare television interview.
In carefully hedged remarks in a taped interview with CBS' "60 Minutes," Bernanke seemed to express a bit more optimism that this could be done.
Still, Bernanke stressed — as he did to Congress last month — that the prospects for the recession ending this year and a recovery taking root next year hinge on a difficult task: getting banks to lend more freely again and getting the financial markets to work more normally.
"We've seen some progress in the financial markets, absolutely," Bernanke said. "But until we get that stabilized and working normally, we're not going to see recovery.
"But we do have a plan. We're working on it. And, I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year."
Even if the recession, which began in December 2007, ends this year, the unemployment rate will keep climbing past the current quarter-century high of 8.1 percent, Bernanke said.
A growing number of economists think the jobless rate will hit 10 percent by the end of this year.
Asked about the biggest potential dangers now, Bernanke suggested a lack of "political will" to solve the financial crisis.
He said, though, that the United States has averted the risk of plunging into a depression.
"I think we've gotten past that," he said.
It's rare for a sitting Fed chief to grant an interview, whether for broadcast or print. Bernanke said he chose to do so because it's an "extraordinary time" for the country, and it gave him a chance to speak directly to the American public. (A transcript of the interview was provided in advance of the broadcast.)
Bernanke spoke at a time of rising public anger over financial bailouts using taxpayer money. Battling the worst financial crisis since the 1930s, the government has put hundreds of billions of those dollars at risk to prop up troubled institutions and stabilize the banking system.
Institutions that have been thrown lifelines include American International Group Inc., Citigroup Inc., Bank of America Corp., mortgage giants Fannie Mae and Freddie Mac and others.
Democrats and Republicans on Capitol Hill have questioned the effectiveness of the rescue efforts and have demanded more information about how taxpayers' money is being used.
Bernanke's TV interview seemed to be part of a government public relations offensive. Treasury Secretary Timothy Geithner appeared on PBS' "The Charlie Rose Show" last week, discussing the financial crisis and the Obama's administration's relief efforts.
The Fed chief on Sunday's broadcast repeated his ire over the AIG bailout, saying that over the past 18 months, that was the case that angered him the most. He says he "slammed the phone more than a few times on discussing AIG."
The government's four efforts to save the troubled insurance giant total more than $170 billion. A collapse of AIG would have wreaked havoc on the global economy, the Fed has said.
AIG ignited fresh outrage over the weekend with news that it's making $165 million in bonus payments to executives on Sunday, most of them in the unit that sold risky financial contracts that caused huge losses for AIG.
When the financial crisis intensified last fall, Bernanke and President George W. Bush's Treasury Secretary Henry Paulson rushed to Capitol Hill for help. That led to the swift enactment of a $700 billion bailout package in October. Since then, banks have received billions in capital injections in return for government ownership stakes in them.
Looking back, Bernanke said the world came close to a financial meltdown. Asked how close, Bernanke responded: "It was very close."
Bernanke admitted that the Fed could have done a better job of overseeing banks. Critics say lax regulatory oversight contributed to the crisis.
Bernanke said he believes all the big banks the Fed regulates are solvent. Big banks won't fail under his watch, Bernanke said — though, if necessary, the government should try to "wind it down in a safe way."
Copyright 2009 The Associated Press
This should be a important week in the stock market, depending if it goes up or down.Re: Bernanke says recession could end in 2009
I think they're just trying to be positive because they know the markets watch their every move. One of the reasons I was so baffled by Obama's continuous doom and gloom bullshit. Didn't help Carter(or this country), and it wont help now.
These guys have to send out positive vibes regardless of whats happening.
Re: Bernanke says recession could end in 2009
All that's going to happen, is they are going to restore the attitude and life of "live beyond your means", and it'll happen again.
If the United States of America can get out or a recession by SPENDING MORE MONEY... let me tell you - we will finally be definitively the greatest country to ever exist, I swear to God. 
Re: Bernanke says recession could end in 2009
They have to throw money at this mess now. The moment they stop is when the whole scheme comes to a screeching halt. Its a house of cards that will always need new decks coming off the assembly line to be thrown at it.
The Citigroup news is obviously a positive sign, but its a small diamond in a sea of shit and its gonna take years to sort this mess out.
We're all damn lucky that civilization didn't collapse last October.
Re: Bernanke says recession could end in 2009
The $700 trillion elephant in the room
SANTA MONICA, Calif. (MarketWatch) -- There's a $700 trillion elephant in the room and it's time we found out how much it really weighs on the economy.
Derivative contracts total about three-quarters of a quadrillion dollars in "notional" amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth.
But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world.
Try as we might to salvage the residential real estate market, it's at best worth $23 trillion in the U.S. We're struggling to save the stock market, but that's valued at less than $15 trillion. And we hope to keep the entire U.S. economy from collapsing, yet gross domestic product stands at $14.2 trillion.
Compare any of these to the derivatives market and you can easily see that we are just closing the windows as a tsunami crashes to shore. The total value of all the stock markets in the world amounts to less than $50 trillion, according to the World Federation of Exchanges.
To be sure, the derivatives market is international. But much of the trouble we're in began with contracts "derived" from the values associated with U.S. residential real estate market. These contracts were engineered based on the various assumptions tied to those values.
Few know what derivatives are worth. I spoke with one derivatives trader who manages billions of dollars and she said she couldn't even value her portfolio because "no one knows anymore who is on the other side of the trade."
Derivatives pricing, simply put, is determined by what someone else is willing to pay for the contract. The value is based on an artificial scenario that "X" will be worth "Y" if "Z" happens. Strip away the fantasy, however, and the reality of the situation is akin to a game of musical chairs -- without any chairs.
So now the music has finally stopped.
That's why stabilizing the housing market will do little to take the sting out of the snapback we are going through on Wall Street. Once people's mortgages were sold off to secondary buyers, and then all sorts of crazy types of derivative securities were devised based on those, and those securities were in turn traded on down the line, there is now little if any relevance to the real estate values on which they were pegged.
We need to identify and determine the real value of derivatives before we give banks and institutions a pass-go with more tax dollars. Otherwise, homeowners will suffer as banks patch up the holes left in their balance sheets by the derivatives gone poof; new credit won't be extended until the raff of the old credit is put behind.
It isn't the housing market devaluation, or the sub-prime mortgage market defaults that have us in real trouble. Those are nice fakes to sway attention away from the place where greed truly flourished -- trading phony instruments to the tune of $700 trillion.
Let's figure how to get out from under that. Then maybe the capital will begin to flow again through the markets. Right now, this elephant isn't just in the room, it's sitting on us.
Re: Bernanke says recession could end in 2009
It's amazing how Obama doesn't seem to get the idea of consumer confidence. But it's kinda a catch 22 at the same time. We can't possibly keep up with our type of lifestyle forever, which would require change and hardship for some like he's talking about. But maybe it would be better to wait with all that depressing garbage (the change people don't like) until the recession is over. It just lowers consumer confidence, which in turn hurts the economy more.
In this case, lying is good.
Re: Bernanke says recession could end in 2009
Really it goes back to what alot have pointed too before, and I want to give a shout out to Randall who's not around much these days (too busy kickin' ass), and like he and others have said, even though government has some responsibility, the biggest problem lies with the American people that don't know how to spend money.
I'm not generalizing everyone, but the MAJORITY of American people, act with their finances, like the spoiled rotten child, who doesn't pay their bills because "I don't want to, I want to go to Universal Studios this weekend", or they're out of money so "I just won't pay them, fuck them", and then run back to mommy & daddy to bail them when someone shows up to break their fingers, and guess who mommy & daddy get the money from?
You got it - apply for a credit card. And it just recycles itself all over.
As long as Americans work this way, it'll be like this, and maybe not this time, but one day, we'll nose dive the fucker, and they'll sit back and be blaming Obama or Bush or Clinton or President Winfrey or whoever the fuck, while they are sitting under a bridge passing the Spam can. It's never their fault.
We're fucked. We might get out of this current situation, but it's putting a band aid on cancer.
Re: Bernanke says recession could end in 2009
Really it goes back to what alot have pointed too before, and I want to give a shout out to Randall who's not around much these days (too busy kickin' ass), and like he and others have said, even though government has some responsibility, the biggest problem lies with the American people that don't know how to spend money.
I'm not generalizing everyone, but the MAJORITY of American people, act with their finances, like the spoiled rotten child, who doesn't pay their bills because "I don't want to, I want to go to Universal Studios this weekend", or they're out of money so "I just won't pay them, fuck them", and then run back to mommy & daddy to bail them when someone shows up to break their fingers, and guess who mommy & daddy get the money from?
You got it - apply for a credit card. And it just recycles itself all over.
As long as Americans work this way, it'll be like this, and maybe not this time, but one day, we'll nose dive the fucker, and they'll sit back and be blaming Obama or Bush or Clinton or President Winfrey or whoever the fuck, while they are sitting under a bridge passing the Spam can. It's never their fault.
We're fucked. We might get out of this current situation, but it's putting a band aid on cancer.
Agreed. That's what I was alluding to as well. These people who are grossly negligent with their finances get depressed when you start to tell them they might have to change their habits (which they need to do).
There is no conceivable way that we can continue the way we are indefinitely. Different people predict different timelines, but they all predict some end. Personally, I would rather see us change before we find who's deadline is right.
