By Meagan Wiseley – University of New Mexico/Talk Radio News Service

Chairman of the House Financial Services Committee Barney Frank (D-Mass.) said Friday that on the economic front, America received good news and bad news today following the Labor Department’s announcement of a 10.2% unemployment rate.

“Although 190,000 more American’s lost their jobs…that is substantially less than the pace at which they were losing jobs until fairly recently,” Frank said during remarks at a conference sponsored by NoLimits.org, a progressive on-line organization founded by Frank’s sister.

Frank said the American Recovery and Reinvestment Act, or the stimulus bill, had a positive impact in deterring unemployment, explaining that unemployment rates would be higher if the stimulus bill hadn’t passed.

Frank also said that the lack of regulation in the financial sector, which he contributed to Alan Greenspan, the former Chairman of the Federal Reserve, led to the AIG crisis and the following recession. He praised the current Chairman of the Federal Reserve Ben Bernanke for his willingness to collaborate with Congress over new financial regulatory reforms.

Frank remained positive about the economic outlook.

“We are making progress … things are getting better virtually on every front [and] I am confident that when we are through with financial regulations…the kind of things that got us in trouble in the past won’t get us in trouble in the future,” Frank added.

Federal Reserve Chairman Ben Bernanke wants Congress to make it less profitable for financial firms to collapse. On Thursday, he explained to members of the House Financial Services Committee that they should look into removing incentives for firms to become “too big to fail.”

“One of the big concerns about these large firms [is] they are not subject to the discipline of the market because lenders do not believe that this firm will be allowed to fail. That has to be eliminated and fixed… I would not be satisfied with any resolution authority that did not have a strong presumption and a strong mechanism for allowing these firms, when being taken over by the government, to impose significant losses on not only shareholders but also creditors,” Bernanke said, referring to his support of a new consumer protection agency proposed by the Obama administration.

In addition to the creation of an oversight council, or “resolution regime,” comprised of various financial agency and department representatives, to “monitor and identify emerging systemic risks across the full range of financial institutions and markets,” Bernanke’s suggestions for financial reform also included allowing Congress to grant federal agencies the power to respond to risks posed by firms under their scope.

After proposing tighter regulatory measures for large firms, such as Lehman Brothers, Bernanke advised the committee to consider stricter regulatory lending policies for Fannie Mae and Freddie Mac, as well as the Federal Housing Administration.

“I think in the near future we need to have a plan for Fannie and Freddie…I think the GSEs do need to be addressed in the near term, not just for systemic risk reasons, but because there’s a lot of uncertainty in housing and what’s going to happen to the housing structure, housing finance system. So I hope that in the very near future, I believe that’s the intention, I hope in the very near future we’ll have some proposals on that,” he said.

When asked by Rep. Jeb Hansarling (R-Texas), the committee’s top Republican, whether or not the current administration’s proposed agency would negatively impact the job sector, Bernanke replied, “It depends,” adding later that only an overreaction – in the form of too much regulation – on the part of Congress would threaten the jobs market.

By Justin Duckham-Talk Radio News Service

President Barack Obama interrupted his vacation in Martha’s Vineyard Tuesday to nominate Ben Bernanke to a second term as Federal Reserve Chairman.

Bernanke, who was initially appointed to the position by President Bush in 2006, was credited by Obama with preventing additional damage to the troubled U.S. economy.

“Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall,” Obama said. “Almost none of the decisions that he or any of us made have been easy.”

The President went on to promise an overhaul of the financial regulatory system, describing it as a necessary step for economic recovery.

Bernanke will face a Senate confirmation hearing before embarking on his second term. Chairman of the Senate Banking Committee Chris Dodd released a statement Monday saying that although he believed Bernanke was the right choice, the Federal Reserve Chairman will nevertheless face a thorough review from the Committee. (6:18)

 

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By Courtney Ann Jackson- Talk Radio News Service

Financial conditions are strained but have improved, according to the Federal Reserve Chairman Ben Bernanke’s semiannual Monetary Policy Report to Congress.

“Today, financial conditions remained stressed, and many households and businesses are finding credit difficult to obtain. Nevertheless, on net, the past few months have seen some notable improvements,” Bernanke said Wednesday before the Senate Committee on Banking, Housing, and Urban Affairs.

Bernanke cited the narrowing spread of interest rates in short-term money markets, adding that equity prices are nearly beginning to recover to their levels from the end of last year. Bernanke also noted that the banks have raised “significant amounts of new capital.”

According to the Chairman, many of these improvements are due, in part, to policy actions by the Federal Reserve to encourage the flow of credit.

“Some banks are still short of capital, other banks are concerned about future losses, they’re concerned about the weakness in the economy and the weakness of potential borrowers,” said Bernanke. “Banks should be making loans to credit-worthy borrowers. It’s in their interest, the bank’s interest, as well as the interest of the economy and we’re working with banks to make sure they do that.”

During questioning, Bernanke explained to Committee members that consumer protection, transparency, and accountability continued to be priorities for the Federal Reserve.

Despite positive signs of economic recovery, “the rate of job loss remains high and the unemployment rate has continued its steep rise,” says Federal Reserve Board Chairman Ben Bernanke. “Job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending,” he said. (0:21)

 

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By Mariko Lamb – Talk Radio News Service

The pace of economic decline has shown signs of gradual stabilization since April, but the labor market continues to weaken, said Federal Reserve Board Chairman Ben Bernanke during testimony before the House Committee on Financial Services Tuesday.

“Many of the improvements in financial conditions can be traced, in part, to policy actions taken by the Federal Reserve to encourage the flow of credit,” he said. Federal Reserve recovery programs such as the Term Asset-Backed Securities Loan Facility (TALF) and the Supervisory Capital Assessment Program (SCAP), both implemented this year, have restarted classes of small business and consumer securitization markets, increased investor confidence in the U.S. banking system, and raised equity in public markets.

Despite better conditions in financial markets and optimistic economic prospects, the unemployment rate continues to rise. “Although the unemployment rate is projected to peak at the end of this year, the projected declines in 2010 and 2011 would still leave unemployment well above FOMC participants’ views of the longer-run sustainable rate,” Bernanke said.

Further Federal Reserve and Reserve Bank projections indicate “subdued” inflation over the next two years, a slight increase in output at the end of this year, and a gradual recovery starting in 2010 with some acceleration in 2011.

To quell GOP committee members’ concerns about the Federal Reserve’s extensive intervention in monetary policy, Bernanke said, “The extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed.”

Bernanke emphasized that the Federal Reserve is a non-partisan, independent organization and does not get involved in details of specific policy programs such as healthcare; however, he urged Congress to “think about the implications of the federal budget and make sure that we have a trajectory that will be sustainable for the medium term.”

“Many of the improvements in financial conditions can be traced, in part, to policy actions taken by the Federal Reserve to encourage the flow of credit,” said Federal Reserve Board Chairman Ben Bernanke. Improvements include ensuring financial institutions’ access to short-term liquidity, increasing the stability of the banking system, lowering fixed mortgage rates, and restarting the securitization markets for small businesses and consumer credits. (0:54)

 

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“The extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed,” Federal Reserve Board Chairman Ben Bernanke said to the House Committee on Financial Services Tuesday. (0:33)

 

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By Annie Berman — Talk Radio News Service

In a second hearing on the merger between Bank of America and Merrill Lynch, Federal Reserve Chairman Ben Bernanke testified that he did not threaten to fire Bank of America CEO Ken Lewis if the merge was not finalized.

In his June 11, 2009 testimony, Lewis claimed that he had decided to invoke a Material Adverse Change (MAC) clause, which would have stopped the merger between Bank of America and Merrill Lynch. Based on this information, it is possible that Lewis knew about Merrill Lynch’s major losses before the merger was finalized.

Bernanke claims that he was advising, not threatening, Lewis to not invoke a MAC clause because doing so would have been bad for the economy.

“[Bank of America] was obligated to make the choice they believed was in the best interest of their shareholders and company. I did not tell Bank of America’s management that the Federal Reserve would take action against the board or management if they decided to proceed with the MAC. Moreover, I did not instruct anyone to indicate to Bank of America that the Federal Reserve would take any particular action under these circumstances,” said Bernanke in his opening statements.

Lewis confirmed in his testimony that he wanted to invoke a MAC clause, but claimed that he had no prior knowledge of the huge fourth quarter losses that Merrill Lynch suffered in 2008. The committee concluded that Lewis would not have tried to invoke a MAC clause if he did not know about Merrill Lynch’s potential losses.

In this morning’s testimony, Bernanke also claimed that he did not know about Merrill Lynch’s losses prior to the merger.

“Mr. Bernanke, your staff believed that bank of America knew about Merrill Lynch’s accelerating losses in mid November, a full month before coming to you and weeks before it’s shareholders voted to approve the merger. Those 4th quarter losses rose to over $15 billion out of the pockets of Bank of America’s shareholders… The Fed knew what Bank of America knew [about the Merrill Lynch losses],” said Rep. Dennis Kucinich (D-Ohio).

Additional hearings regarding the merger are expected to take place in July. Treasury Secretary Hank Paulson is expected to testify in these hearings.

Speaking to a group of reporters following the President’s speech on overhauling the nation’s financial regulatory system, Senator Chris Dodd (D-Conn.) called Obama’s plan a “step in the right direction.”

Dodd described the President’s plan, which would give the Federal Reserve the ability to monitor risky investments made by financial companies, as an effort to reinvigorate the marketplace.

Although the Senator admitted that there is “not a lot of confidence in the Fed right now,” he professed that the agency has the necessary experience to properly assume this new responsibility. Dodd added that “sitting around, hoping things will work,” should not be the President’s way of dealing with this nation’s current financial mess.

Congressman Barney Frank (D-Mass.), who joined Dodd in speaking to reporters afterwards, took a swipe at Republicans, accusing them of turning a blind eye over the years as major financial companies made risky investments.

During his speech, President Obama described his plan as a means of “leveling the playing field,” for investors, both big and small. The President stressed his desire to promote free and fair markets by closing loopholes that exist in the current financial system. Specifically, Obama suggested it was time to crack down on intricate financial instruments such as derivatives, which he described as being “so complex, it’s impossible to know their actual value.”

The President also spoke of the need to move the country away from a bubble-based economy, adding that it is the duty of his administration to prevent scenarios in which private innovation negatively impacts the marketplace.

Obama also proposed holding mortgage bankers to higher standards, requiring hedge fund advisors to register with the FCC and creating an independent Consumer Financial Protection Agency to eliminate small print and ‘gotcha’ clauses found in mortgages, credit card and other financial agreements.

The President referred to these proposals as “common sense rules.”