Ben Bernanke today addressed a number of issues still plaguing the economy. He said that no one could predict how long an economic recovery would take. He acknowledged that the Obama stimulus plan might work .He said that the Fed could go back to its old role once the catastrophe had passed.
Perhaps his most telling comments were about the banking system and banks. Bernanke made it clear that there was more the Fed could do to buy up troubled securities and try to free up the credit markets.
But Bernanke added that America’s banks may need more capital. The markets may have acknowledged that by pushing shares in Citigroup down (C) nearly 20% yesterday. Rumors spread around Wall St. that Citi had lost another $10 billion in it most recent quarter.
Without saying so, the Fed chief is hinting the the government may well end up owned a much larger piece of US banks because nearly everyone already knows that private capital will not touch bank equity no matter how good the "deal" is.
The banking system could still be, in effect, nationalized. Nothing Bernanke said would contradict that.
Douglas A. McIntyre
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