The Fed chairman Ben Bernanke said Tuesday that the worst recession since the great depression is probably over.
In responding to questions at the Brookings Institution, where he gave a speech marking the first anniversary of the market crisis, Mr. Bernanke said “The recession is very likely over at this point.” The Fed boss also said that the economy is probably growing now, but cautioned a recovery will be moderate at best and that it would be many months before we see a significant drop in unemployment rates.
“I’ve seen some agreement among the forecasting community that we are in a recovery,” Mr. Bernanke said, “But the general view of most forecasters is that the pace of growth in 2010 will be moderate.”
During his speech at Brookings, which was identical to the one Mr. Bernanke delivered last month at Jackson Hole, the Fed chief repeated his broad defense of the extraordinary rescue efforts by the central bank over the last year.
“Without these speedy and forceful actions, last October’s panic would likely have continued to intensify, or major financial firms would have failed, and the entire global financial system would have been at serious risk,” Bernanke said. “We cannot know for sure what the economic effects of these events would have been, but what we know about the effects of financial crises suggests that the resulting global downturn could have been extraordinarily deep and protracted.”
Bernanke during his speech also touched on the subject of the “shadow banking system,” which allows banks to package loans into securities. He said the system will likely be smaller and simpler when the current crisis eases.
“I imagine that the shadow banking system at least in the medium-term, will not return to the size it was before,” Bernanke said. “The changes in accounting standards, the regulatory standards, will reduce the benefits to off-balance sheet type of lending by banks.”