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WORLD> America
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Bernanke says more steps needed to stabilize banks
(Agencies)
Updated: 2009-01-13 23:44 LONDON – Federal Reserve Chairman Ben Bernanke said on Tuesday fiscal stimulus alone would not be enough to promote a lasting US economic recovery and that further steps to backstop banks may be needed.
"Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system," Bernanke said at the London School of Economics.
He also said a large quantity of distressed assets on bank balance sheets made it difficult for banks to raise capital and lend. Bernanke said the government could consider buying troubled assets, providing asset guarantees or setting up a so-called bad bank to buy assets from banks in exchange for cash and equity. "With the worsening of the economy's growth prospects, continued credit losses and asset markdowns may maintain for a time the pressure on the capital and balance sheet capacities of financial institutions," he said. Global economy takes a hit Bernanke said the way in which governments respond to the financial crisis racking the global economy would determine the timing and strength of recovery. "For almost a year and a half the global financial system has been under extraordinary stress -- stress that has now decisively spilled over to the global economy more broadly," he said. "The damage, in terms of lost output, lost jobs, and lost wealth, is already substantial." Bernanke said the Fed still has "powerful tools" that could be expanded to spur a rebound even though it has cut benchmark interest rates to near zero. |
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