Fed: Financial Storm Still Taking Toll

Credit Crisis, Inflation Poses Major Challenge For Regulators, Says Bernanke

(AP)  Federal Reserve Chairman Ben Bernanke said Friday the financial crisis that has pounded the U.S. - coupled with higher inflation - is taking a toll on the economy and poses a major challenge to Fed policymakers as they try to restore stability.

"Although we have seen improved functioning in some markets, the financial storm that reached gale force" around this time last year "has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment," Bernanke said in a speech to a high-profile economics conference here.

While Bernanke welcomed the recent drops in oil and other commodities' prices, and believes inflation will moderate this year and next, the Fed chief also warned the inflation outlook remains highly uncertain.

The Fed, he said, would monitor the situation closely and will "act as necessary" to make sure that inflation doesn't get out of hand.

The current financial and economic environment is one of the most challenging to Fed policymakers "in memory," he acknowledged.

Given those dueling economic cross-currents - weak economic growth and higher inflation - many economists believe the Fed will leave rates where they are at its next meeting on Sept. 16, and probably through the rest of this year.

Wall Street was buoyed by Bernanke's remarks, a dip in oil prices and growing speculation that Lehman Brothers Holdings Inc. could be sold. In late morning trading, the Dow rose more than 150 points to the 11,600 level.

The economy is the top concern for voters and of keen interest to presidential contenders Sens. Barack Obama and John McCain, who are gearing up for their party's conventions. Financial and credit problems are expected to smolder into next year. And, the unemployment rate, which jumped to a four-year high of 5.7 percent in July, is expected to keep rising.

The bulk of Bernanke's speech dealt with the need to bolster oversight of the nation's financial system to make it better able in the future to withstand future shocks.

To that end, Bernanke recommended that regulators work on ways to assess the health of the entire financial system, rather than the condition of individual banks, Wall Street investment firms or other financial companies - as is currently the focus.

"Such an approach would appear well justified as our financial system has become less bank-centered," he said. "Some caution is in order, however, as this more comprehensive approach would be technically demanding and possibly very costly both for the regulators and the firms they supervise." He added that "stress tests" for a range of financial firms might also be helpful.

Bernanke's remarks come amid renewed worries on Wall Street about the financial health of Fannie Mae and Freddie Mac. The mortgage giants' stocks have gotten hammered this week as investors became increasingly convinced a government bailout is inevitable.

Although the Fed chief didn't mention the companies, he said one of the critical questions facing the country is how to strengthen the financial system and at the same time protect against "moral hazard," where financial companies gamble with risks because they believe the Fed or the government will ultimately bail them out.

"Some particularly thorny issues are raised by the existence of financial institutions that may be perceived as 'too big to fail,' and the moral hazard issues that may arise when governments intervene in a financial crisis," Bernanke said.

Mitigating that problem is another challenge facing policymakers, he said.

Bernanke repeated his call for Congress to provide new regulatory powers to insulate the economy from damage if a Wall Street firm collapses. He again urged Congress to give the central bank explicit authority to oversee systems that process payments and other financial transactions by investment firms and banks.

This year's Fed conference examines past and present financial crises, and the challenges confronting Bernanke and other central bankers as they try to help stabilize financial markets worldwide.

The Fed's handling of the credit, financial and housing debacles is likely to spur debate at the forum, which is sponsored by the Federal Reserve Bank of Kansas City and draws Fed policymakers, economists, academics and international central bank officials.

[noloyalisti]

Mission Accomplished for the Reagan Republicans. The rich are sitting pretty while they destroy the government and take over the world for their friends, the big rich corporations.

[walt1944-2009]

Apparently Bernanke has not heard the diagnosis from John "THE GREAT LANDLORD" McCain who says that the economy is in great shape, jobs are plentiful, and prices are stable; all thanks to the "Ferengi" economic policies of the Great Emperor George W. Bush!!!!

Of course, McCain was talking about his own PERSONAL economy when he said this, and since he makes so much money, he has just stopped keeping track of it anymore allowing his staff to keep track of it for him!

Now, how can we expect McCain to be "fiscally responsible" with the government''s checkbook, when he doesn''t even know where his own checkbook is????? Perhaps Cindy will handle that for him when she becomes "first lady"!!!

SIG HEIL, BUSH!!!!!
sig heil, DADDY WARBUCKS, McCain!!!!!

[underdogus87]

don''t worried be happy!! Im ready for the soup lines

[tawpdawg111]

Ben-

It appears you are another of Bush inept appointees who couldnt successfully regulate so much as a game of slowpitch softball.

[credibility2]

To walt1944: McCain made these remarks months ago at a debate. He has since changed his stance. Even the great Obama has done the same on many issues he was once committed too. The only problem is that when McCain does it he''s ridiculed and railed against for being out of touch, etc. But when Obama does the same type of thing, well, it''s because he now has clarity. Right! And, Obama made over $4Mil. McCain files his taxes separately from those of his wife and last year made less than $500K. At least McCain married into money and got all of the houses, but his wife controls most of them as income properties. Unlike Obama, who is very disconnected and gets his property by doing payback favors for indicted felons like Tony Rezko. And, remember Kerry and his wealthy wife Terese, the Heinz heiress. Dems didn''t like it when Kerry was pounced on in 2004 by Repubs, much the same as Dems are pouncing on McCain in 2008! Perhaps some of you thought memories were short? There are also many many wealthy Dems, so don''t just blame the Repubs on their wealthy status.

[credibility2]

To walt1944: McCain made these remarks months ago at a debate. He has since changed his stance. Even the great Obama has done the same on many issues he was once committed too. The only problem is that when McCain does it he''s ridiculed and railed against for being out of touch, etc. But when Obama does the same type of thing, well, it''s because he now has clarity. Right! And, Obama made over $4Mil. McCain files his taxes separately from those of his wife and last year made less than $500K. At least McCain married into money and got all of the houses, but his wife controls most of them as income properties. Unlike Obama, who is very disconnected and gets his property by doing payback favors for indicted felons like Tony Rezko. And, remember Kerry and his wealthy wife Teresa, the Heinz heiress. Dems didn''t like it when Kerry was pounced on in 2004 by Repubs, much the same as Dems are pouncing on McCain in 2008! Perhaps some of you thought memories were short? There are also many many wealthy Dems, so don''t just blame the Repubs because of their wealthy status.

[credibility2]

To walt1944: McCain made these remarks months ago at a debate. He has since changed his stance. Even the great Obama has done the same on many issues he was once committed too. The only problem is that when McCain does it he''s ridiculed and railed against for being out of touch, etc. But when Obama does the same type of thing, well, it''s because he now has clarity. Right! And, Obama made over $4Mil. McCain files his taxes separately from those of his wife and last year made less than $500K. At least McCain married into money and got all of the houses, but his wife controls most of them as income properties. Unlike Obama, who is very disconnected and gets his property by doing payback favors for indicted felons like Tony Rezko. And, remember Kerry and his wealthy wife Teresa, the Heinz heiress. Dems didn''t like it when Kerry was pounced on in 2004 by Repubs, much the same as Dems are pouncing on McCain in 2008! Perhaps some of you thought memories were short? There are also many many wealthy Dems, so don''t just blame the Repubs because of their wealthy status.

[credibility2]

My apologies for the repeated posts; the "publish" button wasn''t working, or so I thought. So sorry folks!

[deacon20081]

Bernanke repeated his call for Congress to provide new regulatory powers to insulate the economy from damage if a Wall Street firm collapses. He again urged Congress to give the central bank explicit authority to oversee systems that process payments and other financial transactions by investment firms and banks.
-----------------------------------------------------
When Big Brother controls all these transactions we the public have our lives turned on or off at the whim of politicians.
Don''t like this person? No sweat flip a switch and all of tha mans funds and credit history is erased.

[noloyalisti]

I like the way Bernacke and the Fed and the current government crime family pretends to care about us. The only reason they want us is to make us slaves to their corporate masters. Like Wal-Mart and the rest of the communist sympathizers. And Exxon and Chevron, using our tax payer funded military to go on CHristian Crusades for oil.

[ontheleft]

The economy is doing just fine for those who own seven houses.

[gce65]

After the latest of many Wall St fiascos--the mortgage-backed securities scam--the rest of the world is going to be very wary of any "great financial investment deals" being offered in the future.

Just give Wall St a year or two, if they haven''t devised a new scam already, to come up with the next junk bond or overinflated stock or paper-value-only financial vehicle.

What other nations are investing in is American companies, American buildings and other solid, time-proven investments. No more scams from the Americans.

[whitemale08]

The first thing that Obama needs to do as President is fire this clown.

Ben Bernanke continues to play the "joker" by saying "we will continue to monitor inflation" when he hasn''t and inflation is out of control running rampant and by some economist around 15 to 20% a yea.

That''s higher then half of all 3rd world countries. And the guy continues to wipe out our savings by keeping interest rates way to low an artificial 2%.

Why would I own a passbook account to get such a lousy return. And don''t say invest in stocks because this "pump and dump" strategy where the markets are up 200 points one day and down the same the next day.

On avereage I haven''t made any significant gains since Bill Clinton left office and in fact after adjusting for hyper-inflation I''m being wiped out there too.

And now John McCain, another Republican, will be worse then George Bush because the guy admitedly knows nothing about the economy.

He believes that what Ben Bernanke and the Fed is doing is just fine and that "defecits don''t matter" so it''s ok to stay in Iraq for 100 years.

You have disgrace the Federal Reserve System and it needs to be shut down immediately because it''s a private cartel of banks who underwrite every major corporation in this country which means if they get in trouble then you''re there to bail them out.

We have no "free market capitalism" in America; only "rogue capitalism" run by crooked Republicans.

[donbl1]

Economy is much better in the Red States.......

If you want to know about inflation''s future, look at the direction of the price of oil and then figure 6 months in advance because of futures......

Same thing happened in the 70''s until the price of oil stopped rising (just flat reduces inflation, BTW).

[deacon20081]

Federal officials say they are preparing to propose a series of regulatory changes to enhance American competitiveness overseas, attract foreign investment and give American investors a broader selection of foreign stocks.

But critics say the changes appear to be a last-ditch push by appointees of President Bush to dilute securities rules passed after the collapse of Enron and other large companies %u2014 measures that were meant to forestall accounting gimmicks and corrupt practices that led to those corporate failures.

Legal experts, some regulators and Democratic lawmakers are concerned that the changes would put American investors at the mercy of overseas regulators who enforce weaker rules and may treat investment losses as a low priority.

[deacon20081]

Hello:
What is the problem if there is strict oversight and control of the financial system? TomMarAlem19
------------------------------------------------------
I am all for oversight....but totally against giving the government absolute control. They can control the Banks but leave our payments and transaction out of it.

[sistatee-2009]

What Bernanke didn''t say is that the Fed CAUSES inflation by printing truckloads of worthless Federal Reserve Notes and dumping them into the money supply.

[whitemale08]

What Bernanke didn''''t say is that the Fed CAUSES inflation by printing truckloads of worthless Federal Reserve Notes and dumping them into the money supply.


--------------------------------------------------------------------------------

Posted by SistaTee at 09:51 PM : Aug 22, 2008--

Exactly, the Constitution says that "Only the Congress has the authority to utter" not a private cartel of banks called the Federal Reserve System.

[tootall10142]

The never ending pursuit to have the best have shiniest have the newest model.This american DREAM that everyone pursues has come to a halt and the dreamers are waking up scratching a broke asss.The spoiled little soccer moms and thier suv they need in the first place but thet were keeping up with the joneses.That 250 dollar cell phone when the 69.95 phone would have served thier purpose.The designer clothes and the fancy shoes all the poopy sheeet that your kids thought they needed to go to school well reality takes a bite and now its boo hoo and the credit card is full and mommy lost her job and daddy cant make the interest payments on a house they couldnt afford in the first place but when the loan company dressed up the loan app. so you could then you signed it.WELL. SYMPATHY CAN BE FOUND IN THE DICTIONARY BETWEEN SH=T AND SYPHYLISS!

[sistatee-2009]

I know; how about the Fed granting THEMSELVES a stimulus package. They could print up a few trainloads of worthless Federal Reserve Note, give them to themselves, and tack it onto "inflation". Oops...that won''t work. They already do that.

[hbevis]

We are in one HECK of a mess with the need for money in this Country. Everyone is living to high for their income. When someone loses their job and the bills get to piling up there is not help.

I think that our real problem started January 1, 1974 when we took away the interest cap that banks could charge. And we started letting Banks operate across state lines. These two things have progressively worse every since.

[sparks224]

Yes Ben, the upward-redistribution scheme ("the Tax Cuts", trickle-down, Reaganomics, voodoo-economics, etc.) is still taking its toll.

Brilliant observation.

[jerr11]

Apparently not for McCain.

Seven houses!

Oh I forgot, they belong to Cindy.

McCain''s just the royal gigolo staying in her seven houses!

LOL

[sparks224]

terrorislamz,
You voted for W.
That''s all I need to say.

[trrrorislam1]

NAIVE HUSSEIN SEES AMERICA AS EVIL,,,

and you want to make him PRESIDENT OF THE USA???

Saddleback Church Civil Forum - Obama & McCain 8 of 17
http://www.youtube.com/watch?v=uqsH13unGbM&feature=related

Abortion, evil, Obama and McCain
http://www.youtube.com/watch?v=U0eVomjmCGI

[trrrorislam1]

HUSSEINs VICE PRESIDENT,,,

hmmmm will it be a TYPICAL WHITE PERSON???
http://www.youtube.com/watch?v=r8gnmUyminI

hmmmm will it be one that is clinging to his gun and religion???
http://www.youtube.com/watch?v=xNoJ0q6HrK8
http://www.youtube.com/watch?v=Nmv5NZ4zcdc&feature=related

hmmmm will it be one that wants americans to learn spanish???
http://www.youtube.com/watch?v=BZprtPat1Vk
http://www.youtube.com/watch?v=3W7srmHLclw

hmmmm will it be a RACIST like himSelf, hating whitey and jews???
http://www.youtube.com/watch?v=mfC4OOm1aoM
http://www.youtube.com/watch?v=lI77cU3jsFs&feature=related

RACIST HUSSEIN PICKS,,, RACIST BIDEN AS VP,,, shocker,,,

Obama''''s Racist Vice President Biden
http://www.youtube.com/watch?v=wlxXNyIuyTM

BIDEN SAYS NOW,,, HE IS HAPPY TO BE VICE PRESIDENT TO HUSSEIN,,,

"I mean, you''ve got the first mainstream African-American who is articulate and bright and clean and a nice looking guy."
: SENATOR JOE BIDEN
http://www.youtube.com/watch?v=lxWSVXZVR4c

BIDEN SAYS HUSSEIN NOT READY,,,

BIDEN SAYS HE IS READY TO RUN WITH OR AGAINST MCCAIN,,,

BIDEN SAYS COUNTRY BETTER OFF WITH MCCAIN,,, THAN HUSSEIN,,,

Joe Biden On Barack Obama
http://www.youtube.com/watch?v=RDVUPqoowf8

[ubrew12]

Bernanke: "An implicit expansion of the safety net could exacerbate the problem of ''too big to fail,'' possibly resulting in excessive risk-taking..."

In the 18th century this was known as the ''let them eat cake'' doctrine.

Followed shortly by the ''off with their heads'' doctrine.

[ubrew12]

To modern Republicans ''Free Market Capitalism'' means you are free to be ripped off by a bank, oil, airline, or car company, who are then ''too big to fail'', requiring your tax dollars to insulate them from their own bad decisionmaking.

[tothestars2]

The real problem of today is everyones mindset of, well if I get in financial trouble the government should bail me out because I''m a "victim". For almost 6 years, my wife and I, payed through the courts, 100% of our old debts off. Half our paychecks went to bankrupcty court, and we had to do without some luxeries like cell phones and beer for that duration. We saved our house and have a lot of extra cash on hand now. What the h--l has happened to the american spirit?

[tothestars2]

Btw, it didn''t cost you taxpayers one red cent.

[jt_lancer]

"Bernanke repeated his call for Congress to provide new regulatory powers to insulate the economy from damage if a Wall Street firm collapses."

Apparently, the dozens of existing regulatory powers endowed by the Fed weren''t enough to avert the crisis. Perhaps they were to blame, hmmm???

[sparks224]

"What the h--l has happened to the american spirit?"
Posted by tothestars2

What happened to the "american spirit" in the 1930s?

There was an upward redistribution of wealth as a result of goverment policy, just as we have now.

I can''t believe you right-wingers are sill spouting that Rush Limbaugh nonsene.

[sparks224]

I should say: There was an upward redistribution of wealth as a result of Hoover administration policies. George W is our Herbert Hoover..