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“Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy,” Mr. Bernanke said. “Fostering healthy growth and job creation is a shared responsibility of all economic policy makers.”

Fed Chief Raises Doubts on Recovery


WASHINGTON — The Federal Reserve chairman, Ben S. Bernanke, offered a grim assessment of the nation’s economic health Tuesday, telling a Congressional committee that “the recovery is close to faltering.”

Mr. Bernanke said that the Federal Reserve has acted forcefully to support growth and that it stood ready to do more. But he emphasized that the rest of the government also needs to act on problems including the federal debt, unemployment, housing, trade, taxation and regulation.

“Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy,” Mr. Bernanke said. “Fostering healthy growth and job creation is a shared responsibility of all economic policy makers.”

Mr. Bernanke began his testimony Tuesday by repeating his basic assessment that the economy has grown more slowly than expected, because of unexpected setbacks like the Japanese earthquake and the European debt crisis and because of domestic problems like the ongoing housing crisis.

“The recovery from the crisis has been much less robust than we hoped,” he said, although he also reiterated that the Fed expects faster growth going forward.

The Fed’s primary policy focus is on the pace of price increases, or inflation, which it seeks to maintain at a steady annual rate of about 2 percent. Prices have increased more quickly over the last year, but the Fed has predicted that the increases will abate, and Mr. Bernanke reiterated that forecast Monday.

But Mr. Bernanke’s description of the economic outlook sounded slightly more worried. He has previously said that the economy would recover so long as the government did nothing to interfere, for example through severe short-term spending cuts. On Tuesday, he seemed to suggest that the government needed to act to preserve the recovery.

“We need to make sure that the recovery continues and doesn’t drop back,” Mr. Bernanke told the Joint Economic Committee.

Mr. Bernanke said that the Fed has not exhausted its options.

The central bank, he said, “is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability.”

But his emphasis once again was on the need for the rest of the government to act.

He said that the government should keep four goals in mind: reducing debts to a level that was sustainable in the long term; avoiding short-term reductions that could impede recovery; adjusting spending and tax policies to support growth; and improving the government’s decision-making process.

“There is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy,” Mr. Bernanke said.

18 Responses


  2. Excuse the typos in my last post. The damn dialog box won’t scroll down to let me see what I’m typing.

  3. I hate to start this comment off this way but here goes: I’m not a racist but I’ve always stood behind and been proud of my white anglo saxton heritage and there is nothing wrong with anyone being proud of their race and heritage. That said, I supported Obama in his bid for the presidency. Fool me once…………………………………..

    I’d like to say the guy is an idiot but the truth is that I’m the idiot. This guy in the Whitehouse has so dishonored the office of the President, even moreso than Bush before him. At least Bush would just tell ya, “That’s the way it is so live with it.” While what Obama says is just the oposite of what he’s actually doing.

    My prediction is that there will be a Women in the Whitehouse long before there’s another man of color elected. It shouldn’t have anything to doo woith race but it will thanks to this President.

  4. Obama just went on record as saying Wall Street’s actions might be immoral, but they weren’t illegal.

  5. Discussions are underway to chop up BAC into 4 or 5 smaller operations and to support them with tax payer money, AGAIN.

    Think I’m wrong, stick around and see how this works out. With stock prices dropping under the $6 mark and all the nation despising the first round of bail-outs the only way for this to go is the break up of BAC. And it’s competition isn’t tore up about this prospect either.

    If BAC can’t get assurances of no future litigation from our jack-ass attorney’s general, they are toast. Especially if we can force open the books to show that the assests claimed do not exist and we all know they don’t.

    55 and holding………….

  6. angry&nottakingit: I didn’t address your main premise, which is that the
    note is extinguished, which it might be, but I don’t see that in your case.
    When Merberg assigned the receivables to the bank, the money the bank gave merberg did not extinguish the debtor’s debt, BUT the debtor’s debt was not evidenced by a promissory note, so no provisions of the UCC relevant to prom notes would kick in and THAT IS a distinction with a difference, worthy of further discussion imo.

  7. @angry&nottaking it – that’s very interesting. I take it you are advancing the application of this reasoning to securitized notes. My only reference to antecedent debt is a case I vaguely recall wherein a title company could not use a note to retire an antecedent debt and I can’t find its
    application to securitization, so maybe that’s a part of the case to be disregarded or for you to explain(?)
    Your case taxes the little gray cells, at least mine. Let’s see…..the loans were assigned to the trust in exchange for payment for certificates which evidence a right to be paid at some aggregate rate of the notes or even dollar for dollar, but only so long as (the infamous “so long as”) payments are made (not counting any guarantees)? Well, angry&nottaking it, since you were smart enough to find this case, maybe you can proceed to explain its application to securitization. I don’t doubt it at all; I just can’t formulate it myself. The best inference I can make is that the sec’n investors have no recourse against the debtors, who are the homeowners, and maybe that’s the point.
    Their only recourse is against the bums (who in your case is the borrower, Merberg) who sold them (although maybe not literally) a nasty bill of goods, and that is the actions we are seeing litigated right now. The sec’n investors were falsely made to believe that 1) the income stream would come from four-star debt or 2) their investments came with recourse against someone or something other than the securitizer or that they had any recourse at all (if in fact there is no recourse for them against the homeowner, who in your case is referred to as the debtor). Some people think the people who bought into securitization were aware of the risks. I don’t necessarily buy that. We are livid because our homes are being snarfed by these criminals, so I can image the ire of the investors on the other end who got sold garbage that one Wall Street ceo described as “a bag of s**t”. Now, the investors could be pretty torked
    even if they had recourse against the debtor (the homeowner) because the asset they actually bought into was not the asset they thought they were buying into (loans to anyone with a pulse, inflated values, qualification for the loan at some absurd three month teaser-rate, etc.) In other words, the value of their collateral aka mbs, if applicable, was far less than they thought.
    So then back to the thread including Joann and Anonymous; how is a note ‘owned’ by one party but the right to payments made owned by another enforceable by only one of those parties? Is it that the depositor
    or otherwise the last guy on the note may enforce, leaving the
    sec’n investor messed totally? Or has the note been destroyed? Is it that
    Wall Street still does not want to shine a light on one of their really big sins – that the sec’n investors have zero recourse?

  8. the borrower’s debt is extinguished
    case law
    In this case too, [ ENDICO POTATOES, INC., and others vs. CIT GROUP/FACTORING, INC., SECOND CIRCUIT Nos. 1751, 1961 Decided: October 2, 1995] dealing with a factoring transaction, the Court had occasion to consider whether the agreement amounted to financing or true sale. The case relied, among others, upon Major’ Furniture and Evergreen Valley. The decision between financing and true sale, in the court’s opinion, hinges on the assumption of risk. See excerpts below:
    “Resolution of whether the “contemporaneous transfer,” as CIT describes Merberg’s assignment of accounts receivable to CIT and CIT’s loan advances to Merberg, constitutes a purchase for value or whether the exchange provides CIT with no more than a security interest, depends on the substance of the relationship between CIT and Merberg, and not simply the label attached to the transaction. In determining the substance of the transaction, the Court may look to a number of factors, including the right of the creditor to recover from the debtor any deficiency if the assets assigned are not sufficient to satisfy the debt, the effect on the creditor’s right to the assets assigned if the debtor were to pay the debt from independent funds, whether the debtor has a right to any funds recovered from the sale of assets above that necessary to satisfy the debt, and whether the assignment itself reduces the debt. Major’s Furniture Mart, Inc. v. Castle Credit Corp. , 602 F.2d 538, 543-46 (3d Cir. 1979); Levin v. City Trust Co. , 482 F.2d 937, 940 (2d Cir. 1973); Hassett v. Sprague Electric Co. , 30 B.R. 642, 647-48 (Bankr. S.D.N.Y. 1983); In re Evergreen Valley Resort, Inc. , 23 B.R. 659, 660-61 (Bankr. D. Me. 1982). The root of all of these factors is the transfer of risk. Where the lender has purchased the accounts receivable, the borrower’s debt is extinguished and the lender’s risk with regard to the performance of the accounts is direct, that is, the lender and not the borrower bears the risk of non-performance by the account debtor. If the lender holds only a security interest, however, the lender’s risk is derivative or secondary, that is, the borrower remains liable for the debt and bears the risk of non-payment by the account debtor, while the lender only bears the risk that the account debtor’s non-payment will leave the borrower unable to satisfy the loan.
    “The first sentence of the financing agreement belies the contention that CIT purchased the accounts receivable. As the agreement states, CIT is “pleased to confirm the terms and conditions under which we shall make loans and advances to you upon the security of your accounts receivable.” Just as important, the terms of the agreement make clear that what CIT held was no more than a security interest. Merberg’s assignment of accounts receivable had no effect on the outstanding balance of Merberg’s indebtedness. Instead, Merberg’s loan balance was reduced only upon receipt of payment, whether such payments arose from the accounts receivable or from any other source. Moreover, CIT could demand payment directly from Merberg at any time for the entire outstanding loan balance notwithstanding that CIT held what it termed an assignment of Merberg’s accounts receivable. Finally, in the event that Merberg paid all outstanding obligations to CIT, CIT would no longer hold an interest in Merberg’s outstanding accounts receivable. Each of these provisions indicates that the primary risk of a customer’s non-payment remained at all times with Merberg and that the assignment alone did not reduce Merberg’s obligations to CIT. CIT also asserts that even if it does not hold the accounts receivable as a bona fide purchaser, it should benefit from the protections of Section 304(2)(c) of the Restatement. Section 304 provides three limited exceptions to the general rule that a transfer of trust property to satisfy an antecedent debt does not constitute a transfer for value. Restatement (Second) of Trusts § 304(2). CIT, however, did not receive the accounts receivable “in consideration of the extinguishment in whole or in part of a pre-existing debt.” Id. § 304(2). To the contrary, the loan agreement provides expressly that Merberg’s outstanding loan balance is decreased only upon receipt of funds from Merberg or Merberg’s customers. “

  9. Hiding but inherent in his message is imo that the gov needs to back off
    investigations and charges against the tbtf’s, as always at the expense of Main Street. He seems to think Main Street cannot survive without Wall
    Street. Is it that Wall Street has in fact grabbed our government, our policy-making, our rights, by the fact of having most of the pie?
    How do we get the pie back? Really, how do we do that? In the form
    of civil and criminal actions with real financial penalties? Call them all
    criminal enterprises, close the doors, seize assets?
    Wall Street absconded with the American money and Lord knows who else’s. Among other things, it got spent on obscene salaries and bonuses and other perks. WS created a false wealth, which in my unlearned opinion is also at the heart of what ails us. There wouldnt’ be so many houses on the market, for instance, if builders hadn’t bought into this and then sold it to us. Oversupply was induced as to a lot of things. But of the real money, by some accounts, yet more of that moolah is offshore or otherwise out of circulation and hidden where not just gone, gone, gone.
    Bernake may think it’s going to stay that way unless the government
    “backs off”, and he may be right. If so, it’s time for Plan B, which is seizure of criminal enterprises.
    The only money the criminals may be willing to circulate is that received from the sale of our homes, in which case bernake’s message also says get out of the way of those actions, actions many of us here call thefts in most cases.
    And it is most certainly theft if our notes were essentially paid for and the people on that end don’t even benefit when our homes are taken.


  11. Bernake, so what is your roll and authority bedsides allow the banksters
    to continue to give themselves a bonus with stolen money and watch the innocent suffer ?

  12. Next BERNANKE will lower interest rates for the banks and provide more bail out money for the theives who created the mess. BERNAKE the world is ashmed of your name.

  13. only receivables were “securitized”—NOT mortgages…no “mortgage-backed” securities…this is the heart of the cover-up.


  15. What Fed needs is Forensic Securitization Analysts! He makes sure that whatever he is buying are really un-secured debts from banks. Tax payers are in the hooks on this deal. Banks need to take a hit of their own.

  16. Ben is just assisting banks to hide all the securitization liabilities under the FED’s book.
    Operation Twist is just a tool to help those TBTF SDI banks to hide all the problematic assets (even not securely collaterized right? if I am reading from this websites)?

  17. Well, how ’bout collecting the taxes the rich don’t pay anymore, putting a cap on obscene salaries and bonuses banks give their CEOs, investing that into jobs (infrastructure) and research (environment), revamping the real estate regulations, clearing all the clouded titles, etc.

    Then, Benny Boy, we may want to listen to you…


    Really Bernanke, you just cam up with that you genius?

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