WORLD> America
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WORLD> America
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Fed: Worst of US recession is over
(Agencies)
Updated: 2009-04-19 19:02 Kohn stressed that the current recession is "global, and will require a global response." He said the era of relying on the free-spending US consumer was over and that the phenomenon was "never sustainable." Now, "US consumers are pulling back, obviously, and are going to be amassing savings by not spending," he said. But even with the United States now in its sixth quarter of recession, Kohn said the central bank's attempts to heal ailing credit markets and spur an economic recovery have been working gradually. "The situation in financial markets and the economy would have been far worse if the Federal Reserve hadn't taken the actions we did," he said. In another sign that the economy may be on the mend, Frank Nothaft, the chief economist of Freddie Mac, the No. 2 US provider of home finance, said housing sales are near a bottom. A recovery in the housing market is seen as crucial to a turnaround in the economy. Nothaft, speaking on a panel at the conference, said a third of sales are now of foreclosed properties. But while the worst may be almost over for residential home sales, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, warned problems in the commercial real estate market pose a real risk to the economy.
Volcker, meanwhile, said troubles in the financial system continue to work against the economy, and vice versa: "The lack of a good strong recovery works against a strong financial system." The financial system, he said, "is not quite comatose, but it's on life support." Dudley, president of the most important regional Fed bank, said that while the emergency programs were in general working to stabilize markets, some are being undermined by a perceived stigma attached to their use. Political outrage over lavish bonuses at banks has made some investors wary about taking part in the Fed's ambitious new program to spur consumer and business lending. Some investors have worried that they could become the focus of political outrage if they were seen as profiting from the program, or that there would be hidden strings attached. "It is worth emphasizing (that) actions that lead investors to shun taking risk, especially in this environment, are ultimately detrimental to the ability of households and businesses to secure credit at reasonable borrowing rates," Dudley said.
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