Fed Chief Bernanke Says Recession Could End in '09
March 16, 2009In a rare television interview Sunday, Federal Reserve Chairman Ben Bernanke told CBS' "60 Minutes" that the prospects for a recovery taking root next year hinge on a difficult task: getting banks to lend more freely and getting the financial markets to work more normally.
In carefully hedged remarks in a taped interview with CBS' "60 Minutes," Bernanke seemed to express a bit more optimism that this could be done.
Still, Bernanke stressed -- as he did to Congress last month -- that the prospects for the recession ending this year and a recovery taking root next year hinge on a difficult task: getting banks to lend more freely again and getting the financial markets to work more normally.
"We've seen some progress in the financial markets, absolutely," Bernanke said. "But until we get that stabilized and working normally, we're not going to 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."
Even if the recession, which began in December 2007, ends this year, the unemployment rate will keep climbing past the current quarter-century high of 8.1 percent, Bernanke said.
A growing number of economists think the jobless rate will hit 10 percent by the end of this year.
Asked about the biggest potential dangers now, Bernanke suggested a lack of "political will" to solve the financial crisis.
He said, though, that the United States has averted the risk of plunging into a depression.
"I think we've gotten past that," he said.
It's rare for a sitting Fed chief to grant an interview, whether for broadcast or print. Bernanke said he chose to do so because it's an "extraordinary time" for the country, and it gave him a chance to speak directly to the American public. (A transcript of the interview was provided in advance of the broadcast.)
Bernanke spoke at a time of rising public anger over financial bailouts using taxpayer money. Battling the worst financial crisis since the 1930s, the government has put hundreds of billions of those dollars at risk to prop up troubled institutions and stabilize the banking system.
Institutions that have been thrown lifelines include American International Group Inc., Citigroup Inc., Bank of America Corp., mortgage giants Fannie Mae and Freddie Mac and others.
Democrats and Republicans on Capitol Hill have questioned the effectiveness of the rescue efforts and have demanded more information about how taxpayers' money is being used.
Bernanke's TV interview seemed to be part of a government public relations offensive. Treasury Secretary Timothy Geithner appeared on PBS' "The Charlie Rose Show" last week, discussing the financial crisis and the Obama's administration's relief efforts.
The Fed chief on Sunday's broadcast repeated his ire over the AIG bailout, saying that over the past 18 months, that was the case that angered him the most. He says he "slammed the phone more than a few times on discussing AIG."
The government's four efforts to save the troubled insurance giant total more than $170 billion. A collapse of AIG would have wreaked havoc on the global economy, the Fed has said.
AIG ignited fresh outrage over the weekend with news that it's making $165 million in bonus payments to executives on Sunday, most of them in the unit that sold risky financial contracts that caused huge losses for AIG.
When the financial crisis intensified last fall, Bernanke and President George W. Bush's Treasury Secretary Henry Paulson rushed to Capitol Hill for help. That led to the swift enactment of a $700 billion bailout package in October. Since then, banks have received billions in capital injections in return for government ownership stakes in them.
Looking back, Bernanke said the world came close to a financial meltdown. Asked how close, Bernanke responded: "It was very close."
Bernanke admitted that the Fed could have done a better job of overseeing banks. Critics say lax regulatory oversight contributed to the crisis.
Bernanke said he believes all the big banks the Fed regulates are solvent. Big banks won't fail under his watch, Bernanke said -- though, if necessary, the government should try to "wind it down in a safe way."
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