Fed Chairman Bernanke speaks to Charlotte bankers
Federal Reserve Chairman Ben Bernanke spoke to bankers and investors in Charlotte today. The audience had high hopes of hearing new insight into the future of the troubled financial industry. On that point, they were disappointed.
Right from the start, Bernanke seemed to know his speech wouldn't offer the juicy stuff his audience might be looking for."I'm gonna talk today about the Fed's balance sheet, which normally would not be a real "grabber" I understand," said Bernanke. "But these are far from ordinary times."What followed was a 30-minute explanation of the steps the Federal Reserve has taken since September to shore up the financial system and failing banks. It was partly a defense of the Fed's actions, and partly an effort to convince Charlotte's banking community that the Fed hasn't taken on more than it can handle. But Bernanke did show a flicker of angst on the risks of bailing out AIG and other big financial players."These operations have been extremely uncomfortable for the Federal Reserve to undertake and were carried out only because no reasonable alternative was available," said Bernanke.He followed that statement with quick reassurance that the Fed expects that money to be fully re-paid. And he says he's working with the Administration and Congress to avoid such bailouts in the future.All in all, the audience response was tepid."I was really looking forward to having a question and answer session, because unfortunately all he did was read the same speech he always give to Congress and the various house banking committees and such, so it really wasn't that enlightening," said Jim Claire, a bond trader recently laid off from Bank of America. What Claire really wanted to hear from Bernanke was how the Fed plans to rebuild trust in the markets."Liquidity comes from trust that what you have in your documents, in your contracts, in your transactions - the trust is what breeds the liquidity that allows you to have free flow of money," said Claire. "The trust is completely gone. Even on an overnight basis people are afraid to loan money to each other on an unsecured basis."Bernanke did outline the Fed's efforts to shore up the credit markets and give people the confidence to start lending again. But Claire says so far it's not working that well. He would like to have pressed the Chairman further. But Bernanke blew in and blew out of the event without any direct interaction with the audience. Cumberland Advisors money manager David Kotok was also disappointed, but he says the fact that Bernanke even made his nuts-and-bolts speech is a good sign."The Fed has learned they better talk to the world, the country, the Congress, because there's a lot of angry people out there," said Kotok. "That's a good thing. So explanations of how the fed works, in my view, are a positive contribution."While many in the audience for Bernanke's speech Uptown came from their high rise offices a short walk away, some were from outside Charlotte's inner banking circle. Take Jim Graham for example. He came from Whiteville in southeastern North Carolina, where he's president and CEO of a Waccamaw Bank. What he got from Bernanke's speech was a level of detail he hadn't heard before. And that was reassuring:"They're really pulling out all the stops. Some people've called it policy du jour, but nevertheless they're trying to do everything that they can to relieve the financial burden on America and provide a strong base for recovery." Graham says Bernanke's explanation of the bank bailouts and the risk on the Fed's balance sheet was helpful. But his primary concern lies closer to Main Street:"As a community banker, the primary concern is the housing market. We're starting to see some relief in that area - very minor at this point. In my area southeastern North Carolina, starting to see a slight turn. I believe we're on our way to recovery, but a very slow recovery."Bernanke did say the current low interest rates for mortgages is a sign the White House initiative is working to help homeowners refinance and avoid foreclosure.Ultimately, Bernanke's speech wasn't "news-making." Nor was it clearly tailored to Charlotte's banking community. But it did have that hallmark phrase we've also grown used to hearing from the White House."These are extraordinarily challenging times for our financial system and our economy," said Bernanke. "I am confident that we can meet these challenges, not least because I have great confidence in the underlying strengths of the American economy."And then Bernanke added that his long-term goal is to see that we never end up in this same mess again.