Federal Reserve Chairman Ben Bernanke said in testimony in front of U.S. Congress today that there could be some bank failures because of the ongoing credit crisis. The AP
reports that Bernanke did says that the "large U.S. banks will likely recover" but it is disturbing to hear he
expects some small bank failures.
Bernanke, testifying before Congress, said that while the large U.S. banks will likely recover from the recent credit crisis, others could fail.
"Implying that some banks may fail stirs concerns for any investor who's familiar with financial and economic history," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "Investors have been very edgy about credit market conditions and banks' financial conditions. Very edgy. And this doesn't remove that edginess."
Earlier, stocks had fallen in response to a Labor Department report that first-time unemployment claims rose last week by 19,000 to 373,000, the highest level since late January.
Scott Wren, equity strategist for A.G. Edwards & Sons, said he still believes there's less than a 50 percent chance of a recession, but that it's clear employers are cautious about hiring.
"To consistently see claims up near 400,000, that's pretty telling often-times of a recession," he said.
On the positive side Bernanke
doesn't anticipate a return to the stagflation periods of the 1970s - although with gas forecast to exceed $4 a gallon not everyone is convinced. Marketwatch
reports that stocks are lower today following Bernanke's words and news that last year's GDP growth was just 0.6%
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