CHARLOTTE, N.C. – While acknowledging that the Federal Reserve was "extremely uncomfortable" about last year's bailouts of big financial companies, Fed Chairman Ben Bernanke said Friday the central bank's strategy to ease the financial crisis is working.

Bernanke was referring to the Fed's unprecedented decisions last year to step in and financially back JPMorgan Chase & Co.'s takeover of then-troubled investment house Bear Stearns and throw its first of four financial lifelines to insurance giant American International Group Inc.

In remarks during a Fed conference in Charlotte, N.C., Bernanke said the central bank was forced to take action because the collapse of those companies would have dealt a serious blow to the financial system and the national economy.

The situation underscores the need for new powers to allow the government to safely wind down such huge firms, he said. Bernanke and Treasury Secretary Timothy Geithner recently asked Congress for such powers.

Since the financial crisis erupted in 2007, the Fed's balance sheet — its assets and liabilities — has more than doubled to $2 trillion from $870 billion. Credit provided under those company bailouts accounts for only 5 percent of the Fed's current balance sheet, Bernanke said.

Still, "these operations have been extremely uncomfortable for the Federal Reserve to undertake and were carried out only because no reasonable alternative was available," he said.

Bernanke also signaled that the central bank is keeping a close eye on the size of commercial banks' reserve balances held at the Fed. If those balances aren't managed right, they could complicate the Fed's task of "raising short-term interest rates when the economy begins to recover or if inflation expectations were to begin to move higher," Bernanke said.

The Fed's radical programs to bust through the financial crisis and spur bank lending to consumers and businesses are helping. Its program to provide financial companies with loans, buy mounds of debt that companies rely on for short-terming financing of payrolls and supplies, and efforts to bolster consumer lending and the mutual funds have eased some credit stresses, he said.

Such efforts by the Fed, along with central banks in other countries, have "significantly reduced funding pressures for financial institutions, helped to reduce rates in bank funding markets and increase overall financial stability," Bernanke said.

Getting banks to boost lending to customers is a key ingredient to any economic turnaround. The Fed chief said he expects to see a "gradual resumption of sustainable economic growth." However, he didn't say when.

Those attending the conference, a two-day event that focused on credit markets and put on by the Federal Reserve Bank of Richmond, had their own predictions.

"My personal feeling is that we've hit bottom, and we're going to be at the bottom for a while," said Wesley Sturges, president of the Bank of Commerce in Charlotte. "We may be able to see positive things late fourth quarter, early part of next year."

During his speech, Bernanke also defended the Fed's decisions to revive the economy by plowing trillions of dollars into efforts to stabilize the banking system and to lower interest rates. Its program to buy mortgage-backed securities of Fannie Mae and Freddie Mac has helped drive down the rate on 30-year mortgages to record lows.

"These are extraordinary challenging times for our financial system and our economy," Bernanke said. "I am confident that we can meet these challenges, not least because I have great confidence in the underlying strengths of the American economy."

To brace the economy, the Fed has slashed a key interest rate to an all-time low of near zero. The central bank has turned to unconventional tools — such as its recent decision to start buying government debt — to pull down interest rates on a range of consumer loans. The goal: entice Americans to go out and spend again, which would help lift the economy out of recession.


http://news.yahoo.com/s/ap/20090403/ap_on_bi_ge/bernanke

Understatement of the year:

"the collapse of those companies would have dealt a serious blow to the financial system and the national economy."

It would have collapsed the world.

I am convinced that pure panic drove the market down some 1500 points after Obama took office. Businesses, fearing the worst, went into hunker down mode thus eliminating more jobs than necessay. The Obama administration didn't adequately start to address the panic until the middle of March. Many jobs could have been saved.

So where are we now in the market. Right where we probably should have been. As for the run this week - short sellers had to cover their positions on Wednesday and on Thursday the announcement of changes to the mark to market rules was responsible for the market gains.

I do think as long as the banks don't get on further shaky ground, 09 will be the turning point.

Wow, Where are all our economic advisors?

i guess 9-11 worked didn't it

I'm just glad it's not only me.

there are a lot of us in that boat

If the Fed's are 'extremely uncomfortable' then something must be done, let's hand out bonuses...

Those bonuses are due to be regulated. They include
bonuses awarded last year-(too late to regulate),
Bonuses due to be awarded this year-(Hopeful thinking, but may be beyond legal limitations.)
and
Bonuses scheduled to be awarded next year-(more realistic!)

Did you realize that Paulson was giving TARP money to Healthy Banks?

Now because Obama and Congress are promising to regulate them and limit executive bonuses they are eagerly repaying their loans, with interest!
We, the tax-payers, are making a 5% profit!

imagine that

Some of those banks didnt want the money in the first place,

This is interesting talks about Paulon extorting the banks

http://www.foxnews.com/video-search/m/22056704/extorting_our_banks.htm#q=judge+napolitano

Yep!
Many of the banks said they didn't want the money to begin with, but it was pretty much forced on them last fall. Then they were told to hold on to it for 5 yrs. Only recently did the Treasury (Geitner) ease the restrictions on them being able to pay it back sooner!

well there was a bush on the original federal reserve board

how much interest is the federal reserve making on these bailout loans ????????????????????????????????????????

the federal reserve is neither federal nor reserved

how much interest is the federal reserve making on these bailout loans ????????????????????????????????????????

LOL

Adj!
reread my post!
LMAO

I saw that last night!

Bush didnt do it!

Extortion is a big accusation.

Its almost hard to believe anyone in government would do that.

LOL
Humor is good!

Not true at all. Some banks were forced practically to take the money. If one big bank said no we don't need the money and another big bank said yes we got to have the money which one would you use. Plain and simple enough for me. It would have been the end of the ones that took the money.

The ones paying the funds back are the ones that didn't need the money and they are healthy enough to make good decisions on there own without government interference. And that is the reason they are paying the money back.

BS!

Watch the video!


http://www.foxnews.com/video-search/m/22056704/extorting_our_banks.htm#q=judge+napolitano

Ok, they're not going to work. They may get us out of this current recession, but that's it. It's not fixing any problem, only treating the symptoms. You want more on this topic, look up my thread called "Reliving History" from a few days ago. I somewhat went into how this current "save our asses now" mentality will bite us in the ass later, hopefully on Obama's watch so he can get full credit for his mistakes.