UPDATE: Fisher: Succeeded In Pulling Economy Back From Brink
02 Juni 2009 - 9:11PM
Dow Jones News
A massive effort by the Federal Reserve system to save the U.S.
economy from a deep depression has succeeded in softening the
impact of the current recession, said Richard Fisher, president of
the Dallas Federal Reserve Bank, Tuesday.
"We have succeeded in pulling the economy back from the brink,"
Fisher told local bankers and officials in Lubbock, Texas, during a
speech. "We've come back from the abyss."
Economic indicators, including rallying stock markets and rising
consumer confidence, are showing early signs of improvement. Fisher
said there are more corporate bond issuances, and the banking
system seems healthier as well, he added.
"The bankers are depending less on us for term lending," said
Fisher. "The banking community has been somewhat repaired."
Fisher said he forecasts not a "v-shaped" or "u-shaped"
recovery, but "very slow" natural growth.
Many uncertainties remain: the bankruptcy filing of General
Motors (GM) could have a "dampening effect" on the recovery, he
told reporters after the speech. "It's going to slow us down, but
it's not a fatal blow."
Energy prices, which have acted as a sort of stimulus to
consumers since they fell from record heights months ago, are
beginning to rise again, prompting questions on whether they could
also harm economic recovery. Fisher said the situation is still
unclear, as prices were rising, but natural gas prices, which have
a big impact on consumers, remain low.
Rising treasury yields have resulted in increasing mortgage
rates, prompting fears the élan toward recovery in the housing
market could stall. But Fisher said it was not clear whether the
rising yields reflected mostly the current reactivation of the
borrowing markets, or whether they were a sign of the U.S.
government's borrowing needs.
Fisher said now that the banking system seems to be coming back
from the edge of catastrophe, the U.S. should design a new
regulatory system for banks that would "better define what the
parameters are."
"We have to define a new fence line," he said. "More clearly
defined, and I hope, simplified. We can't create a system where we
reward losers."
-By Angel Gonzalez, Dow Jones Newswires; 281-536-3064;
angel.gonzalez@dowjones.com