Arab Today, arab today bernanke fed has no plans to aid eu banks
Last Updated : GMT 13:24:28
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Bernanke: Fed Has No Plans to Aid EU Banks

Arab Today, arab today

Arab Today, arab today Bernanke: Fed Has No Plans to Aid EU Banks

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Federal Reserve Chairman Ben S. Bernanke told Republican senators the Fed plans no additional aid to European banks amid the region’s sovereign debt crisis, according to two lawmakers who attended the meeting.Senator Bob Corker, a Republican from Tennessee, said Bernanke made it “very clear” in closed-door comments today the central bank doesn’t intend to rescue European financial institutions. Lindsey Graham, a South Carolina Republican, said Bernanke told lawmakers that “he doesn’t have the intention or the authority” to bail out countries or banks. Both senators spoke to reporters after leaving the one-hour session at the Capitol in Washington.In setting boundaries to Fed aid, Bernanke referred to steps beyond the currency-swap lines that were revived in May 2010 to help Europe alleviate its crisis, Corker said. Last month, the Fed led six central banks in announcing a half percentage-point cut in the cost of emergency dollar funding for financial companies overseas through the Fed’s swap lines.“People walk away knowing he has no intentions whatsoever of furthering U.S. involvement in the crisis,” Corker said.At the same time, Bernanke said that “obviously what happens in Europe could affect our economy,” Graham said.Senator Orrin Hatch, a Utah Republican, said Bernanke is “very concerned” about the European turmoil.“He did say if they can’t get their thing in order it could affect us,” Hatch said. “He said a collapse over there would be detrimental to us.” Hatch said he has confidence in Bernanke’s handling of the situation. Contain CrisisThe euro fell below $1.30 today for the first time since January as growing funding stress in Europe fueled concern the region is struggling to contain the debt crisis. The Standard & Poor’s 500 Index fell 1.1 percent to close at 1,211.82 at 4 p.m. in New York.The interest-rate cut on the swap lines triggered a stock and bond rally on Nov. 30, and the following week, the European Central Bank’s three-month dollar lending through the swap lines surged to $50.7 billion from $400 million.The Fed chairman also said he doesn’t foresee the U.S. providing any more money to the International Monetary Fund to combat Europe’s debt turmoil, Corker told reporters. “People were very glad to hear that,” said Corker, who sits on the Banking Committee.Corker cited Bernanke as saying that “he doesn’t have the legal authority to loan money to European banks.” Indirect FundingWhile the Fed may not be able to lend directly to banks outside the U.S., it can provide loans to their U.S. branches through the discount window. The Fed’s currency-swap lines also provide indirect dollar funding to overseas banks through the ECB and other central banks who assume the credit risk.Lending through the swap lines peaked at $586 billion in December 2008. The swaps are separate from Fed emergency loans to banks and other businesses that peaked at $1.2 trillion the same month, including about $538 billion that European financial companies borrowed directly, according to a Bloomberg News examination of available data.Senator Charles Grassley, speaking after leaving the meeting with Bernanke, said excessive U.S. financial support may enable Europe to avoid enacting necessary measures in fiscal austerityFiscal Challenges“If there’s too much of an effort on the part of the United States to help Europe, it’s going to impede their fiscal changes that must be made,” Grassley, a Republican from Iowa, said to reporters.Bernanke, 58, talked with lawmakers a day after Fed officials in a regular policy meeting reiterated that interest rates are likely to stay “exceptionally low” through at least mid-2013. Central bankers are considering further ways to ease policy after two rounds of large-scale asset purchases and three years of near-zero rates.The Fed lowered its target overnight interest rate to a range of zero to 0.25 percent in December 2008.Bernanke, appointed Fed chairman in 2006 by Republican President George W. Bush, has fallen out of favor with some members of the party, including those seeking the nomination to challenge President Barack Obama in 2012. Former House Speaker Newt Gingrich said during a debate last month that Bernanke is a “large part of the problem” for the economy and “ought to be fired as rapidly as possible.”Bernanke won a second four-year term in 2010 over a record number of opposing Senate votes for a Fed chief.

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