Bernanke: Recession may end in '09; Stocks climb

150 points off a 12 year low (and 1000 points below where were were just 2 weeks ago).
If thats climbing, we're screwed.

Its called a "dead cat bounce."

My opinion: Benanke has come to the conclusion that giving people some reason for hope is more important than telling the truth at this particular time. And I don't blame him for it.

I agree. That would be a good approach at this time. They're doing all they can to turn back the tide, and they already have the budget to do so, so there isn't much more need to make things sound bad.

Its confidence we need, imagined or not.

Obama, Geithner, etc. need to start talking like things are fixed... whether they are or not.

I read what Bernanke said, and unless I was missing something, not much positive came out. No we're likely to have a turn-around the second half speech like usual. Instead, unless I'm horribly mistaken, I read his comments as 1) if we do everything absolutely right here, and 2) if the rest of the world doesn't implode, then 3) we may end the recession this year and see improvement in 2010. Well, this is direction of a sort, but as it is less hopeful than the last time he spoke, I'd say his speech wasn't really all that hopeful.

Well, he can't just lie.

it would be beyond irrational for the president and treasury secretary to claim 'things are fixed' when it is obvious to anyone with a pulse that they are not fixed and that there is, in fact, no easy fix. what kind of credibility would the president have after making shit up like that? no one would believe it anyway, and he would lose any ability to talk to the country in the future.

the way to calm people down is to project calm and competence, not to make up lies. bernanke was completely responsible--he said the government is doing everything he can and he said we MAY see an end to the recession in 2009. fine. that's reasonable. he certainly did not start claiming that everything has been fixed.

malthus - lol!

> what kind of credibility would the president have after making shit up like that?

About 10x as much as the rest of the democratic party has...

Still, a loss of credibility is still preferable to a loss of country.

> the way to calm people down is to project calm and competence

Yeah, Geithner sorta blew that one. Obama did good on competence, but he botched calm.

so you think the president should start lying about the state of the economy and that is going to solve things? that's really your solution?

Bernake made some great comments during today's testimony. My favorite was that "buying a house is sort of like a forced savings plan".

LOL, Obama should lie to us and tell us his administration fixed the economy?

Terrible.

"so you think the president should start lying about the state of the economy and that is going to solve things? that's really your solution?"

Thats called a strawman argument. If you actually had something to say, you should try and argue with points that were made, not points that were not.

nyc10022, that is the exact point you made:

Obama, Geithner, etc. need to start talking like things are fixed... whether they are or not.

in other words, lie about the state of the economy. am i missing something?

Economics is psychology, but psychology is complicated. If you are clearly in "bush-cheney" optimistic delusion, no one puts any stock in what you say. However, if you remove hope, some things can be self-fulfilling.

HR...ditto

type3secretion, I absolutely agree with you. it is extraordinarily difficult to find the right voice, one of competence, reason, hope and honesty, particularly after people have been told repeatedly the last two or so years that everything is contained, and that recovery is always 6-9 months away. People are losing their jobs, or their neighbors, relatives and co-workers are losing their jobs, and they won't buy a simple declaration of relief is on its way.

The key is to keep hope alive, without losing credibility, during a period when time and hope may be the only cure (and perhaps a bank nationalization or two, although I've read stuff that makes me doubt even that now). That's a hard one.

Bernanke= only adult in Washington...with one on the sidelines waiting to tag in.

absolutely aboutready. it's an incredibly difficult line. i have to say i think obama is doing a pretty good job so far. false hope isn't going to cut it because people just won't believe it.

Berneke is a clueless asshole....remember he told us the sub-prime crisis was contained. All he knows is to print money. His whole intellectual career has been spent studying the printing of money. America's now given him the printing presses and all he knows to do it to run them. He doesn't know about markets,he doesn't know about foreign currencies. We know now he doesn't even know about economics. The jackass has been wrong for two fucking years now and has catapulted us down the road of financial ruin and stagflation.So the man doesn't even understand economics. He's going to print money. He's going to throw money out the window.Remember this is the same fucking schuster who lent 2 trillion dollars out the FED back window with no tranparency after the Lehman collapse. The dollar's going to go down further and further and further. Inflation's going to get worse and worse and worse throughout the world not just America - and we're going to have a worse recession in the end. mean, he's got a PhD in economics and he was a professor of economics, but he doesn't have a clue about economics. Between Greenspan and Bernanke, we may see the Federal Reserve fail and they should instead of meddling in free market enterprise.They created these bubbles and the CDO market and now they are sucking wind and are clueless. Sorry for the rant but these motherfuckers are clueless.

Bernanke is a man of infinite intellect compared to Geithner.

The majority of people probably aren't ready for the truth.

easy McHale...I don't like the clowns in charge either but try to keep the discussion civil.

Sorry Patriot.....it's my European ancestry that boils my blood...........

I guess none of you get it. The whole plan has been to pass the buck for 2-3 years. They are succeeding in that. That was the plan dating back to August of 2007. The system would not have been able to handle reality back. It would have failed and every bank account would have been worth zero. Think about all the losses that the banking sector has posted since then. The reality is that most of those losses were on the books back then. The idea was to earn the way out over 2-3 years and slowly writedown along the way. It actually is kinda working compared to what reality was. The whole plan is for Paulson, Bernanke, and Geithner to drag this problem as long as possible. McHale, while I love your passion, you are missing the point. We were so far beyond fucked in 2007, this was the only solution, if you chose not to let it all fail.

I'm really not sure of the point you're trying to make but I really do get it. They are plugging holes and slowly trying to de-leverage and write down toxic waste like sub-prime, Alt-A, Arms, commercial RE, credit cards, student loans, car loans etc... and the derivatives tied to it.

It was a bailout of the financial derivatives industry, which was faced with a $1.4 trillion “event of default” that could have bankrupted Wall Street and much of the rest of the financial world. To explain the enormous risk involved, Amerman posits a scenario in which the mortgage giants are not bailed out by the government. When they default on the $5 trillion in bonds and mortgage-backed securities they own or guarantee, settlements are immediately triggered on $1.4 trillion in credit default swaps entered into by major financial firms, which have promised to make good on Fannie/Freddie defaulted bonds in return for very lucrative fee income and multi-million dollar bonuses. The value of the vulnerable bonds plummets by 70%, causing $1 trillion (70% of $1.4 trillion) to be due to the “protection buyers.” This is more money, however, than the already-strapped financial institutions have to spare. The CDS sellers are highly leveraged themselves, which means they depend on huge day-to-day lines of credit just to stay afloat. When their creditors see the trillion dollar hit coming, they pull their financing, leaving the strapped institutions with massive portfolios of illiquid assets. The dreaded cascade of cross-defaults begins, until nearly every major investment bank and commercial bank is unable to meet its obligations. This triggers another massive round of CDS events, going to $10 trillion, then $20 trillion. The financial centers become insolvent, the markets have to be shut down, and when they open months later, the stock market has been crushed. The federal government and the financiers pulling its strings naturally feel compelled to step in to prevent such a disaster, even though this rewards the profligate speculators at the expense of the Fannie/Freddie shareholders who will get wiped out.

McHale: that doesn't answer your previous post. i get it, am in it. recent post is reasonable, but has nothing to do with bernanke. Of course he lied, we know that , he was supposed to, he did the right thing. The only legitimate question about his actions are related to free markets or not. Should he have let them fail or not. Once the decision was made to save it, by (Paulson, Geithner, Bernanke, Bush, Frank and whoever the hell else you want to throw in the mix) then he has done a perfectly fine job to delay it, lie about it, drag it on ...that was the plan.

Agreed I think the Jury is out on this, if we end up with Zombie banks and Zombie industries like automobile like Japan in the 90's and the collapse of the dollar because of our national debt and deficit spending then in hindsight we should have let them fail. But then again the sudden collapse of our financial system would have had us rioting in the streets by now.I understand Bernanke, working closely with Paulson, the was determined to keep the financial sector operating long enough so that it could repair itself—a policy that he and his Fed colleagues referred to as the “finger-in-the-dike” strategy.

McHale, If the banks failed and the FDIC and SIPC stepped in and made good on their promises maybe 95% of depositors would be OK. I don't know if we'd see rioting in the streets by the other 5%. First Paulson and Bernake and now Geithner are simply dragging this process out long enough for the rich to cash out (*cough* Thain *cough* Blankfein *cough*) and for Obama to make big speeches to build up the public support he's gonna need to make it through the year. The whole thing is becoming more farcical everyday.

80sMan - FDIC does not have enough in it's reserves to actually insure the deposits of several major bank failures.

patient09, please elaborate & explain: The plan is to drag it out? What do you mean?

I like McHale :)...
partriot.. just read past the expletives... it totally makes sense....

dwell.... if all the friends and relatives died at once... you may commit suicide.... but if one falls off every year... then you can hang on... so it is with our financial system at the moment.... if all the banks fail in one month... it would be well... financial suicide... you know... growing carrots and potatoes in Central Park kind of stuff :)

Yo! mchale/p09!

Thanks W67, but, what happens after everyone dies? Will there ever be a 'recovery' & what would it look like?

nycjunior1, the gov't could backstop the FDIC and the SIPC (they raised FDIC from $100K to $250K). No, they couldn't cover a "run" but if they could keep the ATMs open. As long as the lights in your house turn on, the subways run and your ATM card is working I wouldn't expect to see rioting in the streets.

Bigger issue is that the boldholders, shareholders and counterparties of the failed banks would be wiped out. Many big names on that list. No so many big names on the deposit holders list.

nycjunior1

80sMan - FDIC does not have enough in it's reserves to actually insure the deposits of several major bank failures.

You are an idiot spreading false rumors. The FDIC program has an unlimited line of credit with the Treasury. The full faith and credit of the US Treasury stands behind the FDIC bank deposit program.

dwell: what do I (we) mean by letting it drag on.? The financial system produces a tremendous amount of free cashflow and positive net earnings everyday on a wide variety of its operations. However, within the investment bank component and to some degree the banks core lending portfolio sat massive (and continue to) losses. The idea is to "earn" your way out. example...you have 50bln of nknown losses in the investment bank and lending portfolio. But other banking activities produce 7bln positive every year. You mismark the 50bln. Each year you make 7bln, you write down the book by 7bln to reduce the 50bln hidden loss. That effectively earning your way out and let it drag on.

Yo W67 how's it hanging slick..........

w67thstreet has been celebrating his parents homeland victory in the Oscars, Slumdog Millionaire: The Untold story of w67thstreet's rise from Hell's Kitchen to being a renter of a studio apartment.

Congrats, punjab.

well, today should take of that little bit of optimism left ....