On Apr 2, 1:23 pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Wed, 2 Apr 2008 13:10:00 -0400, "Ed Huntress"

wrote:
I haven't seen what
the Fed has been saying about it lately so I don't know what the official
position is.

=============
In your opinion, how much credibility does the data from the Fed,
BLS, etc. now have?

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

April 2, 2008, 12:51PM EST text size: TT
What Bernanke Didn't Say
In his first congressional appearance since intervening to prop up
Bear Stearns, the Fed chief refused to call it a bailout--nor would he
say there's a recession
by Peter Coy

Two words are hard to drag out of Ben Bernanke's mouth: recession and
bailout. The Federal Reserve chairman predicted on Apr. 2 in prepared
testimony to the congressional Joint Economic Committee that the
economy "will not grow much, if at all, over the first half of 2008
and could even contract slightly." What he didn't say is that the U.S.
was in a recession.

As for the Fed's financing to help JPMorgan Chase's takeover of Bear
Stearns, Bernanke said "Sudden failure of Bear Stearns likely would
have led to a chaotic unwinding of positions in those markets and
could have severely shaken confidence." But he didn't call it a
bailout.

Bernanke faced tough questioning from senators and representatives in
his first appearance before Congress since the Fed arranged the
emergency weekend agreement by JPMorgan Chase (JPM) to take over Bear
Stearns (BSC) on Mar. 16. The Federal Reserve supplied $29 billion to
the deal in exchange for $30 billion worth of hard-to-sell assets
owned by Bear Stearns, such as mortgage-backed securities.

In response to a question from the committee chairman, Senator Charles
Schumer (D-N.Y.), Bernanke said, "A recession is possible. But a
recession is a technical term defined by the National Bureau of
Economic Research depending on data which will be available quite a
while from now, so I'm not yet ready to say whether or not the U.S.
economy will face such a situation."

Most of the questions concerned the Bear deal, not the economy, which
many economists believe has already entered a recession. Several
committee members asked, in effect, why the Fed appeared to be bailing
out Wall Street but not Main Street.

An Extraordinary Action
Bernanke had three answers: First, he said, "A default by Bear Stearns
could have been severe and extremely difficult to contain." Second, he
said, the Fed expects to get all of its $29 billion back. Third, he
agreed that action to help homeowners is essential, but that's a job
for Congress, not the Fed.

There were a few flashes of drama. One came in response to a question
by Senator Sam Brownback (R-Kan.) about why Bernanke intervened to
stop Bear from failing. Brownback asked whether other failing firms
might get similar treatment. Bernanke said he "thought long and hard"
before intervening, and called it an extraordinary action. He said he
hoped he would never have to do it again.

Schumer peppered Bernanke with questions about the Bear bailout and
then juxtaposed that with what he believed was a lack of help to
millions of people at risk of losing their homes. "I hope that you
will use your position to jawbone this administration to get behind
the housing relief effort before Congress," Schumer said. "Addressing
the housing crisis head-on will do as much to instill confidence in
the markets as lowering interest rates or bolstering regulatory
oversight of wayward mortgage lenders and financial institutions. We
need to do all of it."

Market Reaction Mixed
Later in the hearing, Senator Edward Kennedy (D-Mass.) raised his
voice, repeatedly asking Bernanke to give his views on fiscal measures
that could be taken by Congress and the Bush Administration. Bernanke
declined to do so.

Market reaction to Bernanke's testimony was mixed. Stocks initially
dipped, then rose slightly. Economists at Bear Stearns noted Bernanke
"downplayed risks [of] inflation," which they interpreted as "leaving
the door open to a further rate cut on Apr. 30." They speculated that
it would be only a quarter-percentage-point cut, however.

Bernanke said he expects more economic growth in the second half of
this year and into 2009, helped by the government's $168 billion
stimulus package of tax rebates for people and tax breaks for
businesses as well as the Fed's aggressive rate reductions. "Much
necessary economic and financial adjustment has already taken place,"
he said, and monetary and fiscal policies are in place "that should
support a return to growth in the second half of this year and next
year."