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Fed Chief Gives Gloomier Outlook On US Economy

Posted by Charlie Kilo on July 15th, 2008

Its just the beginning, Ben. But you already knew that:

A weakening housing market, a strained banking system, and rising oil prices threaten the U.S. economy, and restoring financial market stability is a top priority, Federal Reserve Chairman Ben Bernanke said on Tuesday.

It was a gloomier assessment than the central bank’s policy-setting panel gave in late June, when it said risks to economic growth had diminished somewhat.

Ben Bernanke

Bernanke, in his semi-annual testimony on economic conditions to lawmakers Tuesday, acknowledged that financial markets had grown increasingly anxious in recent weeks, particularly over the financial condition of mortgage finance companies Fannie Mae and Freddie Mac.

He stressed that the outlook for economic growth and inflation was unusually uncertain.

Jim Rogers: Fannie and Freddie … let it die!

Posted by Charlie Kilo on July 15th, 2008

Way to go Jim Rogers!

Confidence Ebbs for Bank Sector and Stocks Fall

Posted by Charlie Kilo on July 15th, 2008

The house of cards begins to fall:

Even as the Bush administration moved to rescue the nation’s two largest mortgage finance companies, confidence in the banking sector spiraled downward Monday. 

In Southern California, lines snaked around branches of IndyMac Bancorp, the large lender that was seized by federal regulators on Friday, as customers hurried to withdraw their money. As the anxiety spread through the financial markets, two other big banks, one in Ohio and another in Washington State, were compelled to assert that they were sound.

Even as federal regulators issued assurances that depositors’ savings were safe, Wall Street analysts circulated lists of lenders that might be vulnerable. Shares of regional banks plunged in one of the sharpest declines since the 1980s.

Breaking: Paulson Seeks Authority to Shore Up Fannie, Freddie

Posted by Charlie Kilo on July 13th, 2008

Unbelievable:

Treasury Secretary Henry Paulson sought authority from Congress to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, aiming to stem the collapse of confidence in the largest sources of U.S. mortgage financing.

Paulson proposed that Congress enact legislation giving the Treasury temporary authority to buy equity “if needed” in the firms, and to increase their lines of credit with the department from $2.25 billion each. The Federal Reserve authorized the companies to borrow directly from the New York Fed, in a step that could provide funding before the bill is passed.

Paulson Offers No Hint of Fannie, Freddie Bailout

Posted by Charlie Kilo on July 11th, 2008

Watch The Fed ride in on their white horse to “save” this one:

Alarm swelled on Friday that Fannie Mae and Freddie Mac might run short of capital, placing the fragile U.S. economy at even greater risk, as the Bush administration offered no hint of a government bailout of the largest U.S. providers of financing for mortgages.

Treasury Secretary Henry Paulson, responding to reports a government takeover was under consideration, said “our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission.”

Worries about Fannie and Freddie grew after The New York Times said the administration was considering a plan to put the companies, thought to have implicit government backing, into a conservatorship if their problems worsen, citing people briefed about the plan.

‘The game is over. There won’t be a rebound’: An interview with Michael Hudson on the economy

Posted by Charlie Kilo on July 7th, 2008

Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JPMorgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world’s first sovereign debt fund for Scudder Stevens & Clark.

Dr. Hudson was Dennis Kucinich’s chief economic advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A distinguished research professor at the University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached at mh “at” michael-hudson.com.

Read the Interview here.

Federal Reserve to be investigated by IMF

Posted by patriot on July 1st, 2008

It’s never one been audited, but it looks like the Fed may be investigated:

Humiliation for Mr. Dollar: Ben Bernanke, the chairman of the United States Federal Reserve Bank, faces a general investigation by the International Monetary Fund. Just one more example of the Fed losing its power.

Bad times get worse for Ben

Posted by Charlie Kilo on June 9th, 2008

Sucks to be Ben:

Last month, I noted the apparent change in the Federal Reserve’s policy emphasis from their last meeting on April 30 (Self-Inflicted US Misery Asia Times Online, May 28, 2008). Finally, the Fed had become cognizant of the growing world inflation threat, a threat seemingly exacerbated and intensified by the Federal Reserve’s rapid fire “shock therapy” policy of cutting interest rates, which was initiated in response to the subprime/structured finance crisis that hit the markets late last summer. From September to April, the Federal Reserve’s benchmark Federal Funds Target rate was repeatedly and rapidly slashed, from 5.25% to 2%. Eschewing the slow and steady policy of his predecessor Alan Greenspan, who cut 25 basis points at a time, Bernanke cut fast and hard, twice, on January 22 and March 18, reducing the rate a full 75 basis points at a time.

Did it work, did it save the US and the world economy from the howling chasm of the subprime/structured finance crisis? For a while, or, at least until Friday, the application by the Fed of electric defibrillation paddles to the markets seemed to have had its proper effect, helped by the Fed’s switch of role in mid-March to be the preacher at the shotgun wedding of brokerage houses Bear Stearns and JP Morgan…

Fed paints gloomy picture of economy

Posted by patriot on June 3rd, 2008

Um, ya think?

Federal Reserve Chairman Ben Bernanke painted a gloomy picture of the economy on Tuesday but hinted that the central bank was prepared to hold steady on interest rate cuts.

“For now, policy seems well positioned to promote moderate growth and price stability over time,” he said.

The Fed has already cut the key federal funds rate 7 times since September, to the current rate of 2%, down from 5.25% before the easing began.

Overall, however, he detailed myriad problems still facing the economy.

Fed sees the light

Posted by patriot on May 21st, 2008

Well, duh. Central planners can be real dough-heads sometimes…

The Federal Reserve sees worse economic problems ahead, according to new forecasts from the central bank released Wednesday.

But even so, the Fed may be reluctant to cut interest rates any further than it already has, the minutes from its last meeting show. (The minutes were also released Wednesday.)

The Fed lowered its economic growth forecast for the year. At the same time, it raised its projections for inflation and unemployment. The combination of slowing growth and rising prices created a difficult situation that made the Fed’s latest decision to cut rates on April 30 a “close call.”

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