Roundup: Jackson Hole, Biden, Greece and Irene

by CC August 26, 2011 11:12 am • Commentary


Fed Chairman Ben Bernanke’s main message in his much-awaited Jackson Hole speech is essentially, “Stay Tuned.”

In light of the slow economy, investors have been clamoring for the Fed to renew its quantitative easing program, in which it buys government bonds to give markets a lift. Mr. Bernanke doesn’t even discuss it, or any of his other easing options, in the Jackson Hole speech, the text of which was released to reporters before he read it.(Sometimes what you don’t say matters more than what you do say.)

He does note that Fed policy makers will be discussing their options at a September policy meeting which has been expanded to two days instead of one to explore whether the Fed should do more. “The committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability,” he says.

Mr. Bernanke doesn’t want to get ahead of his colleagues, and he doesn’t want to make promises on what the Fed will do next. He has other options besides renewing the securities purchase program – including altering the composition of securities held by the central bank and lowering the interest rate it pays to banks that leave cash with it. Still, it is worth remember, when the Fed has said it is prepared to act during this long-running economic crisis, it generally has acted.

The Fed chairman also pointedly observes that there are government policies besides monetary policy that could help. He calls for “good, proactive housing policy.” He calls for putting U.S. fiscal policy “on a sustainable path” that results in debt relative to GDP that is “at least stable, or preferably, declining over time” But he couples that with a a warning not to “disregard the fragility of the currency economy recovery” and to avoid the “creation of fiscal headwinds for the current recovery.”

He pleads for “a better process for making fiscal decisions.” The summer-time squabble over the debt ceiling, he says, “disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses.”

And, with several Europeans in his audience, he pointedly observes: “I have confidence that our European colleagues fully appreciate what is at stake in the difficult issues they are now confronting and that, over time, they will take all necessary and appropriate steps to address those issues effectively and comprehensively.”


Federal Reserve Chairman Ben Bernanke’s speech at the Kansas City Federal Reserve Bank’s annual Jackson Hole, Wyo., conference ran more than 3,500 words. Here are some of the most important.

The recovery is lousy

“It is clear that the recovery from the crisis has been much less robust than we had hoped….Unfortunately, the recession, besides being extraordinarily severe as well as global in scope, was also unusual in being associated with both a very deep slump in the housing market and a historic financial crisis. These two features…have acted to slow the natural recovery process.”

Financial stress is a “significant drag”

“Financial stress has been and continues to be a significant drag on the recovery, both here and abroad. Bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about both European sovereign debts and developments related to the U.S. fiscal situation…. It is difficult to judge by how much these developments have affected economic activity thus far, but there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth.”

What the Fed will do

“The Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September…. The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability.”

Long-run prospects for the U.S. are undiminished, if…

“I do not expect the long-run growth potential of the U.S. economy to be materially affected by the crisis and the recession if–and I stress if–our country takes the necessary steps to secure that outcome.”


U.S. Vice President Joe Biden said Friday the U.S. economy needed more stimulus to get it moving, putting in a plug for government measures shortly before the White House unveils new proposals to boost job growth.


Finland is standing by its demand for collateral as an “absolute precondition” for new loans to Greece, an official said on Friday, while others said the government was open to tweaking its deal with Athens for security on its loans.

An EU news website earlier reported that Finland had abandoned its demands for collateral under pressure from Germany. A Finnish government official, speaking on condition of anonymity, said that was not the case.

“There seems to have been some misunderstanding. Our demand is still very valid. Collateral is an absolute precondition for Finland to take part in the package,” the official told Reuters.

“Discussions are continuing to find a way that makes it possible to have that collateral.”

An aide to Finance Minister Jutta Urpilainen, however, said Finland was open to tweaking its agreement if other euro zone members object.

“If the deal between Finland and Greece does not suit other countries, we have to find some alternative models,” said Matti Hirvola, Urpilainen’s aide said. “The talks are ongoing. We hope we can find a model that suits everybody.”


(Irene) Insured losses from wind, storm surge, and flooding would total approximately $40 billion to $55 billion, including losses to both the private insurance market and those policies covered under the National Flood Insurance Program (NFIP).