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The biggest risk, according to Bernanke, is the lack of political will to give banks the support they need.
Helicopter Ben is of course referring to political will to resuscitate the F.I.R.E. economy.
part 1:
part 2:
http://www.cbsnews.com/stories/2009/...n4862191.shtml
"Mr. Chairman, I'm gonna start with a question that everyone wants me to ask: when does this end?" 60 Minutes correspondent Scott Pelley asked Bernanke.
"It depends a lot on the financial system," he replied. "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 gonna 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."
Asked if he thinks the recession is going to end this year, Bernanke said, "In the sense that this decline will begin to moderate and we'll begin to see leveling off. We won't be back to full employment. But we will see, I hope, the end of these declines that have been so strong in a last couple of quarters."
"But you wouldn't say at this point that we're out of the woods?" Pelley asked.
"No," Bernanke replied. "I think the key issue is the banking system and the financial system."
"Unemployment, as we sit here, is about 8.1 percent. I wonder, do you expect double digit unemployment?" Pelley asked.
"Well, it's hard to forecast exactly where we're going. Unemployment is rising. Job losses are still very severe. And no doubt, the unemployment rate's gonna go higher than it is. But I think, again, that if we do succeed in stabilizing the financial system, that we'll begin to see a slower pace of decline, and eventually, a stabilization that will set the basis for a recovery," Bernanke said.
"You seem to be saying that we're not heading into a new American Depression?" Pelley asked.
"I think we've averted that risk. I think we've gotten past that and now the problem is to get the thing working properly again," the chairman said.
*****
Still hell bent on kickstarting securitization and the old game.
*****
Bernanke told 60 Minutes we were close to a second Depression and he is determined to not let the major banks fail on his watch.
"One of the things that I think many people watching this interview don't understand, is why there are multiple bailouts, four bailouts of AIG, three bailouts of Citigroup. There is a sense that this is a band-aid approach, that we're not getting to the root of the problem," Pelley remarked.
"Well, part of the issue is that, you know, the economy has gotten a good bit worse. You know, the first part of the crisis was subprime and other assets that were toxic. Now, we're in a second phase, which is that the economy is very weak," he said. "So the economy's weakness has meant that some of the initial attempts to stabilize the banks haven't been enough, and we've had to do more."
"You know, Mr. Chairman, there are so many people outside this building, across this country, who say, 'To hell with them. They made bad bets. The wages of failure on Wall Street should be failure,'" Pelley remarked.
"Let me give you an analogy, if I might," Bernanke said. "If you have a neighbor, who smokes in bed. And he's a risk to everybody. If suppose he sets fire to his house, and you might say to yourself, you know, 'I'm not gonna call the fire department. Let his house burn down. It's fine with me.' But then, of course, but what if your house is made of wood? And it's right next door to his house? What if the whole town is made of wood? Well, I think we'd all agree that the right thing to do is put out that fire first, and then say, 'What punishment is appropriate? How should we change the fire code? What needs to be done to make sure this doesn't happen in the future? How can we fire proof our houses?' That's where we are now. We have a fire going on."
Bernanke told Pelley that "fire" is still burning.
*****
The FIRE is still burning, you don't say?
*****
"Are you committing in this interview, that you are not going to let any of these banks fail? That no matter what their balance sheet actually looks like, they are not gonna fail?" Pelley asked.
"They are not gonna fail," Bernanke said. "But what we can do, should it be necessary, is try to wind it down in a safe way."
In other words, Bernanke thinks government should stabilize failed financial companies and take them apart slowly. "So, for example, in the case of AIG, we've prevented a bankruptcy, because of the chaos that would create. But we're also demanding that AIG divest itself, sell off its subsidiaries, and use the proceeds to pay back the government," he said.
*****
"When I called and proposed this interview about a year ago, your representative laughed out loud. And said, 'The Fed chairman never does an interview.' Why are you doing this?" Pelley asked.
"Well, it's an extraordinary time. It's an extraordinary time. This is a chance for me, I think, to talk to America directly," Bernanke said.
It's also a chance for America to understand where he comes from.
Ben Shalom Bernanke grew up in one of the few Jewish families in Dillon, S.C., today a town of 6,000 people.
His grandfather, Jonas, immigrated from Eastern Europe, landed at Ellis Island, and came to Dillon to start a drug store.
"Our family came here in 1941. My grandfather, Jonas Bernanke bought this building, made it to the JB Drugs, after his initials," Bernanke told Pelley.
Later, his father and uncle took over the store which has since become a restaurant.
*****
"Well, I got into economics, because I wanted to make things better for the average person. When I see a job loss number, 650,000, like we saw last month, I know that's not just a number. That's 650,000 lives that have been disrupted. Families that have had to move or take children out of school. Houses that may be in danger of foreclosure. I know something about what people are going through," Bernanke said.
And that makes it all the more outrageous when he hears of financial firms handing out perks and bonuses after they've taken bailout money. "The era of this high living, this is over now. And that they need to be responsible and use the money constructively," he said.
"And you would say what to those bankers right now in this interview?" Pelley asked.
"I'd say that their job right now is to find a way to make loans to creditworthy borrowers, to get their banks back on the path of making good loans, safe loans, and to have a reasonable sense of humility based on, you know, what's happened in the last 18 months," he replied.
*****
Broken records everywhere - if the consumers are tapped out, even the most creditworthy (and aren't they the most creditworthy because they don't have a history of taking on more debt than is necessary?) than Ben's plan is hopeless.
And of course we can't have public comment from the Treasury of the Fed without someone blaming those evil Chinese savers!
But seriously, the message to viewers is - the design of the economy is fine - we just need better regulation.
*****
"You're supposed to keep them out of trouble. So, how did all this happen?" Pelley asked.
"Well, a lot of mistakes got made. No question about it. But, you know, this was a much bigger thing than any single firm or any single individual," Bernanke replied. "Over the last dozen years or so, enormous amounts of savings has flowed into the United States, and some other industrial countries. That savings has come from China and East Asia. It's come from oil producers. And hundreds of billions of dollars, it has come into our financial system. And, you know, that would be great if we took that money and invested it wisely, and got a high return. But instead, our financial system didn't do a good job. We had a regulatory system that was like a sandcastle on the beach. When you had little small waves just lapping up against the sand castle, everything looked good. But when you had a big breaker come in, suddenly the system wasn't strong enough to deal with it."
"Does the Federal Reserve bear any responsibility for missing what was happening to the banks, as it was happening?" Pelley asked.
"Well, like other regulators, we probably could have done more. We've already done a lot of - put a lot of effort into reviewing our practices. And reviewing the bank's practices. We are trying to strengthen our regulation at every point that we can. So, I don't want to deny that we certainly could have done a better job, and others could have done a better job," Bernanke conceded.
*****
A nice softball there near the end of the interview.
"Does the Fed bear responsibility? No, not really. Oh ok, thanks Ben, can I please kiss your butt a little bit more before we end this?"
*****
Asked what the first signs of recovery will be, Bernanke told Pelley, "Well, I think that one sign would be that a large bank is successful in raising private equity. Right now, all the private money is sitting on the sidelines saying, 'We don't know what these banks are worth. We don't know that they're stable.' And they're not willing to put their money into the banks."
"If you had a message for the American People in this interview, what would it be?" Pelley asked.
"Scott, I'd say three things. I'd say, first of all, that the Federal Reserve is here, and is gonna do everything possible to support this recovery. The second thing I would say is that we have to understand, though, that recovery is not gonna happen until the financial markets and the banks are stabilized. And we do have a plan, we have a program for that. But it's gonna take some patience," Bernanke said.
Helicopter Ben is of course referring to political will to resuscitate the F.I.R.E. economy.
part 1:
part 2:
http://www.cbsnews.com/stories/2009/...n4862191.shtml
"Mr. Chairman, I'm gonna start with a question that everyone wants me to ask: when does this end?" 60 Minutes correspondent Scott Pelley asked Bernanke.
"It depends a lot on the financial system," he replied. "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 gonna 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."
Asked if he thinks the recession is going to end this year, Bernanke said, "In the sense that this decline will begin to moderate and we'll begin to see leveling off. We won't be back to full employment. But we will see, I hope, the end of these declines that have been so strong in a last couple of quarters."
"But you wouldn't say at this point that we're out of the woods?" Pelley asked.
"No," Bernanke replied. "I think the key issue is the banking system and the financial system."
"Unemployment, as we sit here, is about 8.1 percent. I wonder, do you expect double digit unemployment?" Pelley asked.
"Well, it's hard to forecast exactly where we're going. Unemployment is rising. Job losses are still very severe. And no doubt, the unemployment rate's gonna go higher than it is. But I think, again, that if we do succeed in stabilizing the financial system, that we'll begin to see a slower pace of decline, and eventually, a stabilization that will set the basis for a recovery," Bernanke said.
"You seem to be saying that we're not heading into a new American Depression?" Pelley asked.
"I think we've averted that risk. I think we've gotten past that and now the problem is to get the thing working properly again," the chairman said.
*****
Still hell bent on kickstarting securitization and the old game.
*****
Bernanke told 60 Minutes we were close to a second Depression and he is determined to not let the major banks fail on his watch.
"One of the things that I think many people watching this interview don't understand, is why there are multiple bailouts, four bailouts of AIG, three bailouts of Citigroup. There is a sense that this is a band-aid approach, that we're not getting to the root of the problem," Pelley remarked.
"Well, part of the issue is that, you know, the economy has gotten a good bit worse. You know, the first part of the crisis was subprime and other assets that were toxic. Now, we're in a second phase, which is that the economy is very weak," he said. "So the economy's weakness has meant that some of the initial attempts to stabilize the banks haven't been enough, and we've had to do more."
"You know, Mr. Chairman, there are so many people outside this building, across this country, who say, 'To hell with them. They made bad bets. The wages of failure on Wall Street should be failure,'" Pelley remarked.
"Let me give you an analogy, if I might," Bernanke said. "If you have a neighbor, who smokes in bed. And he's a risk to everybody. If suppose he sets fire to his house, and you might say to yourself, you know, 'I'm not gonna call the fire department. Let his house burn down. It's fine with me.' But then, of course, but what if your house is made of wood? And it's right next door to his house? What if the whole town is made of wood? Well, I think we'd all agree that the right thing to do is put out that fire first, and then say, 'What punishment is appropriate? How should we change the fire code? What needs to be done to make sure this doesn't happen in the future? How can we fire proof our houses?' That's where we are now. We have a fire going on."
Bernanke told Pelley that "fire" is still burning.
*****
The FIRE is still burning, you don't say?
*****
"Are you committing in this interview, that you are not going to let any of these banks fail? That no matter what their balance sheet actually looks like, they are not gonna fail?" Pelley asked.
"They are not gonna fail," Bernanke said. "But what we can do, should it be necessary, is try to wind it down in a safe way."
In other words, Bernanke thinks government should stabilize failed financial companies and take them apart slowly. "So, for example, in the case of AIG, we've prevented a bankruptcy, because of the chaos that would create. But we're also demanding that AIG divest itself, sell off its subsidiaries, and use the proceeds to pay back the government," he said.
*****
"When I called and proposed this interview about a year ago, your representative laughed out loud. And said, 'The Fed chairman never does an interview.' Why are you doing this?" Pelley asked.
"Well, it's an extraordinary time. It's an extraordinary time. This is a chance for me, I think, to talk to America directly," Bernanke said.
It's also a chance for America to understand where he comes from.
Ben Shalom Bernanke grew up in one of the few Jewish families in Dillon, S.C., today a town of 6,000 people.
His grandfather, Jonas, immigrated from Eastern Europe, landed at Ellis Island, and came to Dillon to start a drug store.
"Our family came here in 1941. My grandfather, Jonas Bernanke bought this building, made it to the JB Drugs, after his initials," Bernanke told Pelley.
Later, his father and uncle took over the store which has since become a restaurant.
*****
"Well, I got into economics, because I wanted to make things better for the average person. When I see a job loss number, 650,000, like we saw last month, I know that's not just a number. That's 650,000 lives that have been disrupted. Families that have had to move or take children out of school. Houses that may be in danger of foreclosure. I know something about what people are going through," Bernanke said.
And that makes it all the more outrageous when he hears of financial firms handing out perks and bonuses after they've taken bailout money. "The era of this high living, this is over now. And that they need to be responsible and use the money constructively," he said.
"And you would say what to those bankers right now in this interview?" Pelley asked.
"I'd say that their job right now is to find a way to make loans to creditworthy borrowers, to get their banks back on the path of making good loans, safe loans, and to have a reasonable sense of humility based on, you know, what's happened in the last 18 months," he replied.
*****
Broken records everywhere - if the consumers are tapped out, even the most creditworthy (and aren't they the most creditworthy because they don't have a history of taking on more debt than is necessary?) than Ben's plan is hopeless.
And of course we can't have public comment from the Treasury of the Fed without someone blaming those evil Chinese savers!
But seriously, the message to viewers is - the design of the economy is fine - we just need better regulation.
*****
"You're supposed to keep them out of trouble. So, how did all this happen?" Pelley asked.
"Well, a lot of mistakes got made. No question about it. But, you know, this was a much bigger thing than any single firm or any single individual," Bernanke replied. "Over the last dozen years or so, enormous amounts of savings has flowed into the United States, and some other industrial countries. That savings has come from China and East Asia. It's come from oil producers. And hundreds of billions of dollars, it has come into our financial system. And, you know, that would be great if we took that money and invested it wisely, and got a high return. But instead, our financial system didn't do a good job. We had a regulatory system that was like a sandcastle on the beach. When you had little small waves just lapping up against the sand castle, everything looked good. But when you had a big breaker come in, suddenly the system wasn't strong enough to deal with it."
"Does the Federal Reserve bear any responsibility for missing what was happening to the banks, as it was happening?" Pelley asked.
"Well, like other regulators, we probably could have done more. We've already done a lot of - put a lot of effort into reviewing our practices. And reviewing the bank's practices. We are trying to strengthen our regulation at every point that we can. So, I don't want to deny that we certainly could have done a better job, and others could have done a better job," Bernanke conceded.
*****
A nice softball there near the end of the interview.
"Does the Fed bear responsibility? No, not really. Oh ok, thanks Ben, can I please kiss your butt a little bit more before we end this?"
*****
Asked what the first signs of recovery will be, Bernanke told Pelley, "Well, I think that one sign would be that a large bank is successful in raising private equity. Right now, all the private money is sitting on the sidelines saying, 'We don't know what these banks are worth. We don't know that they're stable.' And they're not willing to put their money into the banks."
"If you had a message for the American People in this interview, what would it be?" Pelley asked.
"Scott, I'd say three things. I'd say, first of all, that the Federal Reserve is here, and is gonna do everything possible to support this recovery. The second thing I would say is that we have to understand, though, that recovery is not gonna happen until the financial markets and the banks are stabilized. And we do have a plan, we have a program for that. But it's gonna take some patience," Bernanke said.
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