Bernanke May Need `Massive' Asset Purchases to Counter Deeper Contraction

[Purveyor]

Source: Bloomberg

March 17 (Bloomberg) -- Chairman Ben S. Bernanke and Federal Reserve policy makers may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met.

The Federal Open Market Committee, gathering today and tomorrow in Washington, needs to redouble its efforts after the central bank’s balance sheet shrank 17 percent from a $2.3 trillion December peak, Fed watchers said. The retreat came even as Bernanke acknowledged the chance that the unemployment rate will exceed 10 percent for the first time in a quarter century.

“It takes massive balance-sheet expansion to generate significant easing in financial conditions,” said Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York who used to work at the Treasury. “More needs to be done.”

This week’s FOMC meeting could mark a shift toward more aggressive monetary expansion to fight deflation after demand waned for many of the Fed’s existing programs. One top consideration is an increase in the pace and size of a $600 billion program to buy bonds issued and backed by U.S. housing agencies such as Fannie Mae, analysts said.

Other measures could include everything from purchases of Treasuries to corporate bonds, Tilton said. The Fed has already agreed to work with the Treasury on implementing a program to revive consumer and business loans, which the Obama administration has said could reach $1 trillion.

Read more: http://www.bloomberg.com/apps/news?pid=20601103&refer=us&sid=awl.LOiyL.3I

[bemildred]

1. Crank up the presses, AIG is about to founder again!!! nt

[acmavm]

2. Will SOMEBODY please explain to me why this SOB is still in

the mix running the show???? He's done enough damage.

[Gin]

3. but..by end of the year..recession will be over...because...the taxpayers will have

purchased every bad asset and the banks will have clear balance sheets and be ready to roll....right over the ones who bailed them out. (IMO)

[terisan]

4. It is a wise opinion you have. nt

[Guy Whitey Corngood]

6. I think the douche bag can only be replaced when his term ends in January 31, 2010. nt

[AndyTiedye]

5. Warming Up the Helicopter Again?

[Hawkeye-X]

7. Do us a favor and resign.

You're not helping matters any, Bernake.

Hawkeye-X