Full Text: Bernanke Congressional Testimony – ‘Unusually Uncertain’ – July 2010
Source: Board of Governors of the Federal Reserve System
Chairman Ben S. Bernanke
Semiannual Monetary Policy Report to the Congress
Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.
July 21, 2010
Chairman Dodd, Senator Shelby, and members of the Committee, I am pleased to present the Federal Reserve’s semiannual Monetary Policy Report to the Congress.
Economic and Financial Developments
The economic expansion that began in the middle of last year is proceeding at a moderate pace, supported by stimulative monetary and fiscal policies. Although fiscal policy and inventory restocking will likely be providing less impetus to the recovery than they have in recent quarters, rising demand from households and businesses should help sustain growth. In particular, real consumer spending appears to have expanded at about a 2-1/2 percent annual rate in the first half of this year, with purchases of durable goods increasing especially rapidly. However, the housing market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction.
Full Text: Fed Statement – FOMC June 24
Release Date: June 24, 2009
For immediate release
Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Is An Unsettled Bond Market Telling Us Something About Prospects for Recovery?
A story out on the Associated Press wire today is the best explanation of all of the hullabaloo you hear from bond traders regarding big government programs and bailouts meant to stimulate the economy.
Most days for lunch I retire to the conference room and switch the TV on to CNBC. During those segments when they go octobox and have eight people on at once discussing the generalia of the larger economy it always seems like it’s the bond guys and the commodoties gals who are fretting while the stock traders are pumping out the positives.
AP makes it a bit more clear:
To understand how this is all connected, you have to think like a bond trader. Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.
Yields on 10-year Treasury notes, a benchmark for home mortgages and other consumers loans, jumped from 2.5 percent in March around the time of the Fed announcement to as high as 3.7 percent in recent days as signs that efforts to stabilize the financial system and economy were starting to pay off. And 30-year mortgage rates jumped more than a quarter-point this week to 5.29 percent, the highest level since December, Freddie Mac reported.
“If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity,” said economist Ed Yardeni, who runs his own investment firm. “Even worse, they could abort any necessary recovery in home sales and prices.”
Full Text: Fed Chairman Ben Bernanke, Testimony to Congress, June 3 – Economic Outlook
(Source: Board of Governors of the Federal Reserve)
Current economic and financial conditions and the federal budget
Before the Committee on the Budget, U.S. House of Representatives, Washington, D.C.
June 3, 2009
Chairman Spratt, Ranking Member Ryan, and other members of the Committee, I am pleased to have this opportunity to offer my views on current economic and financial conditions and on issues pertaining to the federal budget.
Economic Developments and Outlook
The U.S. economy has contracted sharply since last fall, with real gross domestic product (GDP) having dropped at an average annual rate of about 6 percent during the fourth quarter of 2008 and the first quarter of this year. Among the enormous costs of the downturn is the loss of nearly 6 million jobs since the beginning of 2008. The most recent information on the labor market–the number of new and continuing claims for unemployment insurance through late May–suggests that sizable job losses and further increases in unemployment are likely over the next few months.
Transcript: Ben Bernanke Stress Tests Speech, Jekyll Island, Georgia
(Source: Board of Governors of the Federal Reserve)
My remarks this evening will focus on the Supervisory Capital Assessment Program, popularly known as the banking stress test. The federal bank regulatory agencies began the assessment program in late February and concluded their review with the release of the results just last Thursday. This initiative involved an unprecedented, simultaneous supervisory review of the 19 largest bank holding companies in the United States. Its objective was to ensure that these institutions have sufficient financial strength to absorb losses and to remain strongly capitalized, even in an economic environment more severe than currently anticipated. A well-capitalized banking system is essential for the revival of the credit flows that will underpin a sustainable economic recovery.
Full Text: Bernanke Statement on Stress Test Results
(Source: Board of Governors of the Federal Reserve)
This afternoon marks the culmination of the Supervisory Capital Assessment Program. Three independent federal banking supervisory agencies–the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation–have worked closely and collaboratively since late February to simultaneously assess the financial conditions of the 19 largest bank holding companies in the United States. These institutions play a vital role in our economy, holding among them two-thirds of the assets and more than one-half of the loans in the U.S. banking system. More than 150 examiners, economists, accountants, and other specialists conducted a rigorous and comprehensive review of these firms, one unprecedented in scale and scope.
Document: U.S. Big Banks Stress Test Results
(Source: Board of Governors of the Federal Reserve)
Click for Stress Test Results, May 7, 2009
Bank Stress Tests – Six of 19 Will Need Further Capital
While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said. The Federal Reserve is now hearing appeals from banks, including Citigroup Inc. and Bank of America Corp., that regulators have determined need more of a cushion against losses, they added.
By pushing conversions, rather than federal assistance, the government would allow banks to shore themselves up without the political taint that has soured both Wall Street and Congress on the bailouts. The risk is that, along with diluting existing shareholders, the government action won’t seem strong enough.
The Daily Graphic: They Missed the Recession
The Daily Graphic: The Economic Downturn in Graphics
I found this page at the BBC. Titled the Economic Downturn in Graphics, it includes several graphics like those pictured below. Go check it out by following the link above or clicking on either of the two graphics below. Pay special attention to the U.S. bank bailouts picture below. We all decry the the $700 billion bailout bill from last fall. The amount of skin the Federal Reserve has in the game is staggering. Who watches or holds accountable the Federal Reserve?
Full Text: Ben Bernanke Speech – The Financial Crisis and Community Banking – March 20
(Source: Board of Governors of the Federal Reserve System)
CHAIRMAN BERNANKE:
When I addressed this convention three years ago, with all of five weeks under my belt as Chairman of the Federal Reserve Board, I opened my remarks with three observations: that community banks played a critical role in the U.S. economy, that community banks were generally doing well, and that community banks faced a changing business environment that posed important challenges. I am struck that all three observations, at least to some degree, still hold true today. Community banks continue to play a critical role in our economy and, in many cases, have an opportunity to step in and make sound profitable loans, where some competitors have pulled back. Relatively speaking at least, community banks are doing better as a group than other segments of our financial system, but at the same time they are far from immune to current conditions. And, surely, it is still true that the business environment poses important challenges to community banks.
The Daily Graphic: Auto Parts Manufacturing Employment
The U.S. Dept. of Treasury announced an auto supplier support program on Thursday. In looking around the web for a picture of employment in the U.S. auto parts industry I found this at the website for the Cleveland Federal Reserve Bank.
Government Officials Knew About AIG Bonuses Well Before Last Weekend
This from the New York Times tonight:
Interviews with senior Federal Reserve and Treasury officials, as well as members of Congress, leave little doubt that the bonus program was a disaster hiding in plain sight. Mr. Geithner is not the only one who appears not to have understood the populist fury the bonuses would set off.
Career staff officials at the Treasury, Fed and Federal Reserve Bank of New York exchanged e-mail messages about the A.I.G. bonus program as early as late February, according to a person familiar with the matter. A.I.G. itself revealed the bonus plan in regulatory filings last September.
