While he was able to give the banking business a little lift on Tuesday, Federal Reserve Chairman Ben Bernanke also delivered the sobering news that the economy as a whole isn’t likely to make big gains in terms of recovery before 2010 or later.
The New York Times:
Mr. Bernanke told the Senate Banking Committee that the Federal Reserve was doing everything it could to unlock credit markets and ease the financial crisis. But a full recovery, he said, is months, if not years away.
“If actions taken by the administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability — and only if that is the case, in my view — there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,” Mr. Bernanke said.
Major what-ifs included the ramifications of an increasingly global financial crisis, as well as a negative feedback loop as lower confidence translates to worsening market conditions, and vice versa.
Investors seemed to interpret some of Mr. Bernanke’s remarks as hopeful. In particular, stock prices picked up when Mr. Bernanke played down fears that the government would “nationalize” American financial institutions.