Fed Chief Bernanke On 60 Minutes

Chairman Bernanke appeared on “60 Minutes” tonight. I live in the West so it hasn’t aired out here yet but MarketWatch has the early take.

The chairman of the Federal Reserve said in a rare interview televised Sunday that the U.S. recession will come to an end “probably this year,” but he also warned that the nation’s 8.1% unemployment rate will continue to rise.

Appearing on the CBS network’s “60 Minutes,” Fed Chairman Ben Bernanke told correspondent Scott Pelley that concerted efforts by the government likely averted a depression similar to the 1930s. He also said the nation’s largest banks are solvent and that he doesn’t expect any of them to fail.
At the same time, Bernanke expressed concern the U.S. might lack the political will to take further measures to shore up the financial system. Although he said he believes the largest banks are solvent and that “they are not going to fail,” Bernanke said a full recovery won’t take place until the system is stabilized.
“The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis,” he said. Bernanke noted that banks are unable to raise cash from private investors as is normally the case because of fears about their solvency.
He also said that letting Lehman fail was a mistake and that once the recovery is underway the Fed will have to raise rates and withdraw the money it has pumped into the economy.
If you want to read between the lines, it would seem that he was trying to send a couple of messages.
The first, I think, would be that no big bank is going to be nationalized and they will be nursed along as long as is necessary and to the extent necessary to get them back to health. In other words the plan is to wait and hope.
Second, he appears to be stumping for overhauling financial regulation.
Third, he’s sending the message that low interest rates aren’t going to last. The last is interesting. I wonder if it might not be directed more at the political class than at the population in general. I suspect he knows the fine line he’s walking and may be more concerned about inflation than he lets on. He’s also been around long enough to know that the howls from Congress are going to be intense if interest rates start going up before the 2010 election cycle and slow any recovery. 
I hope to get a chance to see the interview and I’ll add any thoughts in an update to this post. I’ll also update it if I see any further reports or analysis of use on the Web.
Update: Here’s the video.

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