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Bernanke Warns of Danger of Credit Crisis Relapse

Interest-Rates / Credit Crisis 2009 May 06, 2009 - 03:40 AM GMT

By: Mike_Shedlock

Interest-Rates While Fed Chairman Ben Bernanke Warns of a Credit Market 'Relapse', Congress is increasingly willing to stand up to the Fed Chairman.


Please consider Bernanke Warns of Danger of Credit Market 'Relapse'.

Federal Reserve Chairman Ben S. Bernanke warned that another shock to the financial system would undercut the central bank’s forecast that the U.S. recession will give way this year to a slow recovery.

“A relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall,” Bernanke said today in testimony to the congressional Joint Economic Committee. He highlighted that the economic contraction may be slowing and that the housing market has “shown some signs of bottoming” after a three-year slump.

The Fed’s effort at greater transparency in its emergency lending programs is a response to an April 2 nonbinding budget amendment sponsored by Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and the panel’s ranking Republican, Alabama Senator Richard Shelby, Bernanke said. That proposal passed 96-2.

The Fed chief did not mention a tougher measure, also nonbinding, sponsored by Vermont Senator Bernard Sanders, an independent, that called on the Fed to identify borrowers. The measure passed 59-39 on the same day.

Sanders, in a statement after the hearing, threatened to pass the measure again “in a stronger form” if Bernanke failed to accept it. Bernanke told Sanders in February that identifying borrowers would be “counterproductive” and result in “severe adverse consequences for the economy.”

“Mr. Bernanke should not pick and choose which amendments he wants to respond to,” Sanders said. “My bipartisan amendment passed the Senate by 20 votes, and we expect him to respect it.”

Pick and Choose

Whether Bernanke is supposed to "pick and choose" is irrelevant. Bernanke and the Fed are going to attempt attempt to "pick and choose" . Meanwhile, as time goes on, the actions of the Fed are in complete alignment with the Fed Uncertainty Principle.

 

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

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