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Bernanke: Recession May End This Year

In a rare television interview with _CBS'_ "60 Minutes this weekend, Federal Reserve Chairman "Ben Bernanke told the American public that the U.S. recession will come to an end "probably this year." However, Bernanke also warned that before we see the light at the end of the tunnel, the nation's unemployment rate, already at 8.1 percent, could reach beyond 10 percent - a level unseen since 1983.
The head of the United States' central bank said there are already signs that the economy will expand in 2010. He said "green shoots" are beginning to appear in some markets aided by the Fed, and there has been "some improvement" in banks. Bernanke said in the interview that the nation's major financial institutions are solvent and "they are not going to fail."
Bernanke said the key to a full economic recovery is stabilization within the banking sector. "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis," he said, noting that one of the government's biggest mistakes during the Great Depression was to let thousands of banks go under.
And he said a sure sign of this stabilization will come when banks are able to raise private capital in place of government bailouts. Bernanke did concede, though, that a colossal hurdle to reaching that point is a lack of investor confidence and consumer fear.
Bernanke told "60 Minutes," "Right now, all the private money is sitting on the sidelines saying, 'We don't know what these banks are worth. We don't know that they're stable.' And they're not willing to put their money into the banks."
Bernanke's remarks come as the Obama administration plans another offensive - this one aimed at partnering government funding with private investors to buy up the toxic mortgages still weighing heavy on banks' balance sheets. Details of the $1 trillion program could come as early as this week.
Bernanke also said in the interview Sunday that executive pay and bonuses should be limited for those companies and financial institutions receiving government aid, while just one day before the 60 Minutes interview aired, the New York Times reported that AIG plans to shell out $100 million in bonuses to executives within the same business unit that brought the company to the brink of collapse last year. President Obama has instructed the Treasury secretary to block the AIG bonus payments. AIG has received more than $170 billion in federal bailout money.
According to Bernanke, the federal government's concerted efforts averted an economic situation comparable to the 1930s. Bernanke pointed to steps taken to strengthen the GSEs and secondary mortgage market, as well as the central bank's purchases of mortgage-backed securities (MBS), which he said have been instrumental in lowering mortgage rates and allowing struggling homeowners to refinance into lower monthly house payments.
Bernanke's optimistic outlook, in what was the first television interview with a Fed chairman in 20 years, helped fuel a rally in financial stocks on Monday, initially ignited by announcements last week from some of the nation's largest banks - Citigroup, Bank of America, and JP Morgan Chase - that they actually made money during the first part of 2009 and expected a profitable year ahead.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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