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Bernanke Speaks; The World Listens
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Bernanke Speaks; The World Listens
NATION - 3/16/2009
By Pete Hurrey
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It very well may be that Federal Reserve Chairman, Ben Bernanke is the single most important human being in the world today. Few citizens know about the inner workings of the highly secretive and extraordinarily powerful Federal Reserve Board and the banking system that is governed by Bernanke’s board is a mystery to most Americans. However, in an unprecedented interview on CBS’s Sixty Minutes on Sunday, March 15, the chairman of the ‘Fed’ opened up before millions of Americans and talked with stark candor about the American economy, the state of the banking industry, the recession and his thoughts on a recovery. In addition to the educational aspect of Bernanke’s frank discussions with CBS Sixty Minutes anchor, Scott Pelley, the chairman was openly blunt about his frustration with insurance giant AIG.
At one point in the interview, Bernanke admitted that he angrily hung up the phone when discussing AIG and the organization’s bailout status. Quite a revelation when you consider the fact that the voice of the Fed chairman can cause fortunes to rise or collapse when he speaks.
For those that are not aware, the Fed normally controls the economy by setting interest rates. But after the near collapse of the banking system in the last part of 2008, the Fed chairman took unprecedented control using existing emergency powers granted after the last depression to provide almost a trillion dollars to banks trying to avoid an outright depression.
Bernanke blamed the Fed for the 1929 depression stating at one point that there was nothing done to stabilize the banking and financial system to prevent the collapse. In this case, Bernanke is doing the opposite, propping up banks as best he can in hopes that the system stabilizes and the financial system begins a slow transition back to economic recovery. When Pelley asked Bernanke, "… when does this end?" Bernanke responded with the most positive note in the interview when he said, "It depends a lot on the financial system. The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not going to see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."
Bernanke further explained his statement by stating that the decline in the economy will start to settle and level off with employment levels stabilizing, even though not getting better. Once that level of stabilization has occurred the economy should begin the slow process of recovery, which Bernanke indicated he thought would happen over 2010. Bernanke stopped short of trying to predict where unemployment would ultimately settle. He indicated that he was sure it would rise above the current 8.1 percent, but did not see unemployment levels rising to double digit numbers.
When asked if we were still in danger of a new American depression, Bernanke stated that he thought the country had avoided the immediate risk of depression with the unprecedented steps that have been and are being taken. However, the Fed chair did emphasize that no recovery could happen until the financial system has been stabilized.
On the heels of his remarkable interview, the first ever for a Federal Reserve Chairman, the financial news that carried the morning was the fact that, Bernanke’s thorn – AIG – was going ahead with executive bonuses even though the American people own 80 percent of the failing insurance giant.
Perhaps Bernanke will hang up the phone a bit more forcefully today than before.
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