Federal Reserve Chairperson Ben Bernanke said in an interview aired on CBS’ television newsmagazine “60 Minutes” that government officials have been working to set the framework for economic recovery and to prevent another depression. He admitted though that there are many obstacles to overcome, such as the millions of foreclosed homes, and that complete recovery from the crisis will take time.
But Bernanke was hopeful. When he was asked about the possibility of another depression, he said he thinks the federal government has averted the risks of another depression. He asserted again that the major factor for a complete economic recovery is the stabilization of the financial sector. Obama’s foreclosure program is one of the major strategies to stabilize it as mitigation of foreclosed homes reduces the losses by mortgage banks.
The chairman also defended the decisions and programs of the Obama government, such as the program to avert the rising number of foreclosed homes. Obama’s Home Affordable initiatives offer loan refinancing for Fannie Mae and Freddie Mac mortgages and loan modification for borrowers whose homes have significantly deteriorated in value and are at high risk of becoming foreclosed homes.
In response to critics of the decision to bail out American International Group instead of bailing out more foreclosed homes, he said AIG needed to be bailed out because of large numbers of banks and individuals that would suffer if AIG collapsed. When AIG was near collapse, Bernanke said, global financial collapse was imminent. He explained further that the $160 billion funding received by AIG was spent partially to cover claims by banks which took AIG insurance policies against bond defaults.
When asked why AIG was bailed out but Lehman Brothers was not, Bernanke said Lehman did not have adequate assets to present as collateral. AIG, in contrast, has huge insurance operations in the U.S. and in other countries which it can sell to repay the bailout money.
Additionally, Bernanke also said there could still be bailout decisions to be made with other large financial corporations, as the number of foreclosed homes continue to rise. He made assurances though that the Fed only seeks to prevent huge bank failures that affect the entire economy and that he would not support banks indefinitely. He said some of the federal government’s efforts are already showing positive results, such as reduced mortgage rates, increased business lending and stronger money market funds.
John Cutts has been educated in the finer points of the foreclosures market over 5 years. Read articles about foreclosures information at ForeclosureDeals.com - Your online source for foreclosure homes.
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