New York (HedgeCo.Net) – President Obama met with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner on Friday, after which he told reporters there are “glimmers of hope across the economy.”

The meeting, which was also attended by Sheila Bair from the Federal Deposit Insurance Corp. and Mary Schapiro, head of the Securities and Exchange Commission, focused on topics like home-owner refinancing, stabilizing the banks, increasing jobs, and the new “stress tests” being administered to companies by the government.   

The test are being conducted on the 19 largest U.S. banks to see whether they would hold up or crumble amidst worsening economic conditions.  The results are expected to be released the end of this month.  Banks that do not fare so well may get additional taxpayer funded assistance.

“We have always been very cautious about prognosticating, and that’s not going to change,” the President told reporters after the meeting.

Obama pointed to several reasons why he felt the economy is showing signs of hope, mainly the nearly $800 billion stimulus package plus an increase in loans to small business owners and more options of homeowner refinancing.  He added that the administration will be unveiling additional programs over the next several weeks, though he didn’t get into details.

“We’re starting to see progress, and if we stick with it, if we don’t flinch in the face of difficulties, then I feel absolutely convinced that we’re going to get this economy back on track.”

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. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com  

Tags: accredited-investors, economic conditions, federal deposit insurance, federal reserve chairman ben bernanke, federal-deposit-insurance-corp, federal-reserve-chairman, glimmers, hedgeco, mary schapiro, securities-and-exchange-commission, sheila bair, signs of hope, small business owners, stimulus package, stress tests, timothy geithner, treasury-secretary

New York (HedgeCo.Net) -   After handing AIG another $30 billion in taxpayer-funded, government bailout funds, U.S. Federal Reserve Chairman Ben Bernanke defended the decision, with the worn-out argument that the insurer’s failure may trigger an economic domino effect.

“We know that failure of major financial firms in a financial crisis can be disastrous for the economy,” Bernanke said in a testimony to the senate Budget Committee on Tuesday.  “We really had no choice.”

So far, the government has come to AIG’s rescue four different times, pumping over $160 billion into the insurance giant.  In an attempt to appease furious lawmakers who disagree with the latest handout, Bernanke said, "If there’s a single episode in this entire 18 months that has made me more angry, I can’t think of one (other than) AIG."

AIG reported an industry wide record $61.7 billion quarterly loss this week, attributing that to losses on their credit default swaps; worthless pieces of paper that “guarantee” mortgage-backed securities.    AIG sold these credit default swaps, which supposedly insured about $440 billion in bonds.  In reality, AIG did not have the funds to cover these investments.  When the securities inevitably plummeted in value, AIG couldn’t cover what they promised.  Unfortunately, credit default swaps, which were invented in the late 90’s by several employees at J.P. Morgan Chase as a means to make quick cash, are not regulated by the U.S. government. 

Many feel AIG has acted irresponsible, and that no amount of government funds will turn the poorly run business around.  AIG even “cleverly attached a hedge fund to their insurance company, taking advantage of a gap in federal and state oversight,” Bernanke added.

In exchange for the funds, the government will receive $26 billion in preferred stock in two AIG subsidiaries – American Life Insurance Co. and American International Assurance Co.  AIG will not have to pay interest on the outstanding loan.

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. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com  

Tags: aig, bailout, cambria, different times, domino-effect, federal reserve chairman ben bernanke, federal-reserve, federal-reserve-chairman, financial crisis, font definitions, insurer, orphan, panose, paper source, quot quot, sans serif, senate budget committee, style definitions, style type, times new roman