BBC – In much of continental Europe, there’s a widespread belief that hedge funds and private equity firms caused the global economic crisis.

Which is presumably one reason why the European Commission wants much tighter regulation of both the hedgies and the buyout boys.

I’ve had personal experience of this, in a recent interview for French telly on how to prevent a repetition of the disaster: more-or-less all my interlocutor wanted to discuss was the alleged imperative of constraining the activities of hedge funds; there wasn’t even a nod at the reality that far more of the real culprits were in the banks, including French banks.

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New York (HedgeCo.Net) – Federal Reserve Chairman Ben Bernanke joined Treasury Secretary Henry Paulson yesterday in an attempt to sway lawmakers to pass a $700 billion rescue plan that would purchase illiquid mortgage-backed assets in an attempt to restore the U.S. financial system.   Reaffirming that his interest lies solely in the recovery of the U.S. economy and not in Wall Street, Bernanke proceeded to outline a plan that would attack the root cause of our current credit crisis while bring stability back to the markets.

“I believe if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover,” Bernanke pleaded to the Senate Banking Committee. “My interest is solely for the strength and recovery of the U.S. economy.” 

Bernanke explained that the Treasury should buy the illiquid assets at their hold-to-maturity date, instead of at their discounted rates. 

“I believe that under the Treasury program, auctions and other mechanisms could be designed that will give the market good information on what the hold-to-maturity price is for a large class of mortgage-related assets,” he explained.  The reverse auction system would entail firms bidding to the Treasury to sell their assets.  By removing these assets from our system, Bernanke believes that we can get to the root of the current financial crisis.    

Reaffirming that taxpayers will get “good value,” Bernanke is hoping that the bipartisan rescue plan will be approved swiftly and not be slowed down with “other provisions that are unrelated or don’t have broad support."  However, the Treasury’s plan has met resistance from both parties, who feel that taxpayers are going to bear the burden while there are no repercussions for Wall Street execs.  

Republican Senator Richard Shelby of Alaska scoffed at the plan, saying that it “codifies the Treasury’s ad-hoc approach.”  Democratic Representative Barney Frank of Massachusetts agreed, saying that “CEO’s put their ability to get unrestricted excessive compensation, including rewards for failure, over and above trying to cooperate in helping the economy.” 

Christopher Dodd, who heads the Senate Banking Committee, opened the hearing by saying that “we must address the root cause by putting an end to the rising number of foreclosures sweeping across our nation,” while also expressing concerns about the taxpayers well-being.

As Paulson and Bernanke were making their case, Dick Cheney and other top White House advisors were sent to lobby House Republicans amidst growing discontent.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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TMCnet – Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.

The problem with that approach is that the value of the dollar plunged against foreign currencies, causing crude oil prices to skyrocket because oil is pegged to the dollar. It affected food prices, gasoline and family budgets.

"Ben, you are playing a very unique role in world economic history," Hale recalled telling Bernanke, an expert in the Great Depression. "You are the first central bank governor of the United States to preside over a recession with no decline in commodity prices."

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New York (HedgeCo.Net) – In an effort to stabilize U.S financial markets and prevent further turmoil in the economy, Federal Reserve Chairman Ben Bernanke suggested expanding its control and authority over our country’s financial firms.

Bernanke spoke at a Federal Deposit Insurance Corp. conference regarding the improvement of mortgage lending yesterday, where he explained they were “currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end, should the current unusual and exigent circumstances continue to prevail in dealer funding markets."

Citing strains on short term funding markets, Bernanke said that the Federal Reserve will continue to improve the clearing and settling of default swaps and other derivatives.  The economy took a blow last summer when borrowers started defaulted on subprime mortgages, causing the values of many securities to plummet in value.

“We aim not only to make the financial system better able to withstand future shocks, but also — by reducing the range of circumstances in which systemic stability concerns might prompt government intervention — to mitigate moral hazard and the problem of ‘too big to fail’," he explained.

Too big to fail of course referring to the Bear Stearns collapse and the subsequent rescue by JPMorgan that was backed by the Fed and $30 billion.  Bernanke added that they may extend its emergency credit facility program into 2009, which provides financing to large investment banks and other financial institutions. 

Amidst much criticism, Bernanke defended his stance on the Bear rescue in March when he explained how a default by Bear could’ve been “severe and extremely difficult to contain,” alluding to a domino effort.   

Touching on the topic of mortgage lending, Bernanke says the Fed plans to launch a crucial rule on mortgage lending that will apply to all lenders.  It will be voted on at the Fed’s board meeting on Monday.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com

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