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.

[sparks224]

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

[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.

[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???

[tothestars2]

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

[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?

[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.

[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.

[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

[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

[sparks224]

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

[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]

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

Brilliant observation.

[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.

[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.

[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!

[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.

[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.

[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.

[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.

[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).