THE FED: Bernanke Will Try To Repeat His Mojo

THE FED: Bernanke Will Try To Repeat His Mojo

By Greg Robb

WASHINGTON (Dow Jones) - Whatever he did yesterday, Federal Reserve Board Chairman Ben Bernanke is likely to try to repeat it on Wednesday.

Bernanke's assurance Tuesday to the Senate Banking Committee that the federal government doesn't want to nationalize the nation's largest banks was cited as a major factor in the stock market's rebound. Bernanke said regulators would ensure than banks did not turn into zombie banks.

The Dow Jones Industrial Average snapped three days of losses after Bernanke's testimony, rising more than 3%.

Today, Bernanke is on the House side of the Capitol, testifying to the House Financial Services panel. Members may press Bernanke on the price-tag of the latest plan to fix the banks.

Bernanke said that the government was prepared to inject capital to fix holes in the banks caused to the sudden sharp drop in their assets. But the size of the holes remains an open question.

On Tuesday, President Barack Obama told the nation for the first time that the cost was going to be higher than the $700 billion allocated by Congress.

Rep. Barney Frank, the Massachusetts Democrat and chairman of the House panel, told members to curb their anger for the cost of the bailout.

He said that it was impossible to send all culprits in the crisis to the gallows.

Bernanke told Congress Tuesday that the key to ending the recession was fixing the financial system.

"If there is one message that I'd like to leave you with, if we're going to have a strong recovery, it has got to be on the back of a stabilization of the financial system. It is black and white," Bernanke said.

"If we don't stabilize the financial system, we're going to flounder for some time."

Another interesting point from the first day of the hearing was that the idea that the Fed was planning to buy long-term Treasurys has moved to the back-burner.

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(END) Dow Jones Newswires

February 25, 2009 11:05 ET (16:05 GMT)


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