BEN BERNANAKE’S TESTIMONY BEFORE CONGRESS
Chairman of the Federal Reserve Ben Bernanke testified before congress this week. Feedback from some in Congress to Bernanke’s testimony was that the Federal Reserve is the best hope for economic stimulus. “Given the political realities, particularly in this election year, I’m afraid the Fed’s the only game in town,” said Sen. Charles Schumer (D-NY). “I would urge you to take whatever actions you think would be most helpful in supporting a stronger economic recovery.” However, Bernanke himself urged Congress to handle the looming “fiscal cliff” and avoid the brinksmanship that brought the nation to a standstill during last year’s battle over the debt ceiling. Bernanke took Congress to task over their collective inaction, saying, “The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long run sustainability and the fragility of the recovery.”
NOT MANY POSITIVE ECONOMIC INDICATORS THIS WEEK
It’s tough to find good news about the economy these days. Many economists say the American economy is poised for an anemic second half of the year. “We’ll have very slow growth,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. “The excess supply of homes will weigh on housing for quite some time. Manufacturing is starting to suffer a bit. The labor market remains pretty soggy.” According to a Bloomberg survey, Americans are more pessimistic than any time in the past six months. “A soft labor market and political tensions surrounding potential changes in tax policy are weighing on consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP. American retail sales fell for the third straight month in June, further eroding confidence in a fragile economic recovery. Analysts expected retail sales to rise by 0.2 percent, but data released Monday morning by the Commerce Department show spending slipped by 0.5 percent. Along with the disappointing retail data, the National Association of Realtors reported today that sales of previously occupied homes fell to the lowest point since October.
LIBOR MANIPULATION SCANDAL RAISES MORE QUESTIONS ABOUT ETHICS AT BANKS
Big banks doing bad things are again in the news. The Justice Department is investigating potential criminal charges against big banks and individuals for manipulating key global interest rates. LIBOR is the London interbank rate that is set by a small and select group of major banks. Barclays Bank already has been fined $450 million for fixing LIBOR. Other banks being investigated include Citigroup, JP Morgan Chase, the Royal Bank of Scotland and Deutsche Bank AG. Another question is whether regulators knew about the situation but turned a blind eye.
- Deutsche Bank, HSBC Traders Investigated in Libor Probe – Bloomberg (bloomberg.com)
- Bernanke Predicts Slow Progress on Unemployment (bloomberg.com)
- Bernanke Defends Response to Libor Scandal – Businessweek (businessweek.com)