Fed’s Bernanke sees recession ending ‘this year’ if nation stays the course

March 15, 2009

(ChattahBox) — Ben Bernanke in a very rare interview by an active Fed chairman appeared on “60 Minutes”  tonight. The chairman of the Federal Reserve gave a good news – bad news forecast, saying that the U.S. recession will come to an end “probably this year,” but he also cautioned that the nation’s 8.1% unemployment rate will continue to rise.

Bernanke  told correspondent Scott Pelley that concerted efforts by the government likely averted a depression similar to the 1930s, but that the nation must stay the course.  “This (economic) decline will begin to moderate and we’ll begin to see a leveling off,” Bernanke said when pressed about whether he sees the recession ending this year.

At the same time, Bernanke expressed concern that political leaders and the public will withdraw support for efforts aimed at stabilizing the shattered banking system.

“The biggest risk is that, you know, we don’t have the political will,” he said. “We don’t have the commitment to solve this problem, and that we let it just continue.” In which case … we can’t count on recovery.”

The recession, which began in December 2007, took a sharp turn for the worst last September after the collapse of the Wall Street brokerage Lehman Brothers. Bernanke, a former economics professor who’s extensively studied the 1930s said: “Lehman proved that you cannot let a large internationally active firm fail in the middle of a financial crisis. The same error was made 80 years ago when the U.S. government let thousands of banks fail, contributing to the Great Depression, he said. He also said the nation’s largest banks are solvent and that he doesn’t expect any of them to fail. One sign of a recovery would be success by a large bank in raising private capital, he said.

He also elaborated on comments earlier this month that the bailout of American International Group Inc. made him angrier than any other incident during the financial crisis, saying he “slammed the phone more than a few times on discussing AIG.”

“It’s absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets,” Bernanke said. Yet failing to rescue the company would “risk enormous impact, not just in the financial system, but on the whole U.S. economy,” he said. Bernanke said “the era of this high living” is over for bankers and that banks must “find a way to make loans to creditworthy borrowers” now.

Bernanke also gave some indication of how he saw things playing out after the recovery takes hold saying, the Fed will have to raise interest rates and reduce the supply of money to “make sure we have a recovery that does not involve inflation.”. He also reiterated his call for an overhaul of the nation’s financial regulations, the first in decades,to prevent similar financial conflagrations.


Comments

One Response to “Fed’s Bernanke sees recession ending ‘this year’ if nation stays the course”

  1. Ron on March 16th, 2009 1:06 pm

    While Bernanke attempts to explain the reasons for the economic meltdown, he fails to mention how much of the blame goes to the Federal Reserve and their easy money policies under Greenspan. Working productive Americans are bailing out the financial establishment that destroyed our economy along with 45% of the wealth in the world and now the American taxpayers and our children will be forced to live a far lower standard of living with reduced prosperity and opportunities due to this but only we pay the price.

    Washington has bailed out the banks, Wall Street & their Washington special interests and much of the cost is added to the national debt to by paid by this and future generations while real estate and investments continue to fall. We believe a growing repudiate the debt movement could actually save our wealth and the markets and suggest this is a better alternative than Washington’s plans to monetize the debt in future years and tax and destroy our remaining wealth by depreciating the dollar.

    The Campaign to Cancel the Washington National Debt By 12/21/2012 Constitutional Amendment is starting now in the U.S. See: http://www.facebook.com/group.php?gid=67594690498&ref=ts

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