Dear Reader,
The Financial Crisis Inquiry Commission — the body Congress created to determine the causes of the crisis and to recommend corrections — heard testimony from several regulators. Federal Reserve Board Chairman Ben Bernanke delivered his extensive analysis of the events surrounding the crisis — including a claim that the Fed’s monetary policy did not actually cause the housing bubble, as some critics have suggested. In any event, he declared, it would be bad policy to modify monetary policy, which by definition affects the whole economy, in order to control excesses in a single economic segment.
Pratt's Letter Today
Bernanke: Don’t Blame Monetary Policy for the Housing Bubble
Did the Fed’s monetary policy lead to the disastrous bubble in the housing markets and so magnify the effects of the financial crisis? No, it did not, in the strongly held opinion of Fed Chairman Ben Bernanke. The chairman made his views known as one part of his extensive testimony before the commission named to pry into the causes and effects of the crisis.
“The Federal Open Market Committee brought short-term interest rates to a very low level during and following the 2001 recession,” Bernanke testified, “in response to persistent sluggishness in the labor market and what ... Read More
This Week
Last Word ...
“I think everyone feels overworked — and we are — but people feel a lot of pride in their work.” — FDIC Chairman Sheila Bair, commenting on the fact that a survey rated the FDIC the third best place to work among 290 federal agencies.
In the News
What Others Are Saying
- August 31: NCUA Extends Guaranty Program
- August 30: MSRB to Change Membership
- August 27: Fed Sponsors Neighborhood Stabilization Forum
- August 27: OCC Alerts Banks to S.A.F.E. Requirements
- August 27: Justice, FTC Agree on Anti-Trust Practices
- August 25: New Home Sales Decline
- August 24: Home Sales Fall in July, Prices Rise
- August 19: Bankruptcies Up 14% in First Half
Hot Town, Summer in the City
The summer doldrums have hit Washington, the nation’s capitol, big time this summer. President Obama has taken the politically mandatory swim at one of the lovely Gulf of Mexico beaches and then retreated to Martha’s Vineyard. Congress is long gone, leaving the Washington heat and humidity behind. The FOMC has met and there it is evident that its latest policy decision has made the stock market and public confidence in the economy worse — at least over the short run.
On Friday, the FDIC announced the failure of only one community bank with the grim FDIC press release reading “First Midwest Bank’s acquisition was the least costly resolution for the FDIC’s DIF. Palos Bank and Trust Company is the 110th FDIC-insured institution to fail in the nation this year and the 14 in Illinois.” De Palos was a good-sized community bank with $493 million in total assets and $ 467.8 million in total deposits. Fortunately, it was a purchase assumption transaction that ... Read More
Questions & Answers
Michael Menzies, past chairman of the Independent Community Bankers of America, is president and CEO of the $150 million asset Easton Bank and Trust on Maryland’s Eastern Shore where unemployment is high, real estate values depressed, and loan demand soft.
He disagrees with those who ... Read More
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