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Bernanke Says U.S. May Need to Expand Bank Rescue (Update1)
By Craig Torres and Scott Lanman
March 3 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said policy makers may need to expand aid to the banking system beyond the $700 billion already approved and take other aggressive measures even at the cost of soaring fiscal deficits.
“Without a reasonable degree of financial stability, a sustainable recovery will not occur,” the Fed chairman said today in testimony prepared for the Senate Budget Committee. “Although progress has been made on the financial front since last fall, more needs to be done.”
Bernanke’s comments suggest he sees a role for bigger federal outlays as the Obama administration seeks congressional approval for a budget of $3.55 trillion for the fiscal year beginning in October. President Barack Obama has already signed into a law a $787 billion economic stimulus package of tax cuts and government spending.
Obama’s first budget seeks standby authority for as much as $750 billion in new aid to the financial industry. Whether those funds will be needed “depends on the results of the current supervisory assessment of banks” and the evolution of the economy, Bernanke said.
Bernanke said policy makers would have “preferred to avoid” what is likely to be the largest ratio of federal debt compared with gross domestic product since the end of World War II, and he urged lawmakers not to lose sight of fiscal discipline....
Fed officials don’t see labor markets improving until 2011, when growth forecast at 3.8 percent to 5 percent reduces the unemployment rate to a range of 6.7 percent to 7.5 percent.
“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.
“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”
Originally posted by Tentickles
STOP BAILING BANKS OUT!
I've had it! They make huge mistakes and someone else pays for them. EI Taxpayers.
Let them fail. I'm tired of this. We DO NOT have a moral obligation to help these businesses out. They screwed up. They deserve to fail.
I say that in full knowledge of the economic possibilities and outcome.
Let's let them fail and start over with a system that is regulated and made sure not to fail.
Boy I am just livid about this!