Bernanke Says Downgrade Didn’t Help

November 8, 2011 by · Leave a Comment
Filed under: S&P, The Rating Agencies 

In his speech given at Jackson Hole, Wyoming, Federal Reserve Bank Chairman Ben Bernanke complained that the recent downgrade of the U.S. debt by Standard & Poor’s and congressional budget battles were counterproductive to recovery.

First, he discussed how much had been done to address the root causes of the 2008 financial crisis that sparked the recession including a “substantial program of financial reforms” that had led to a significant improvement in the U.S. banking system and financial markets.

However he believes that “financial stress” continues to negatively impact the recovery, both in the U.S. and abroad. “Bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about both European sovereign debts and developments related to the U.S. fiscal situation, including the recent downgrade of the U.S. long-term credit rating by one of the major rating agencies and the controversy concerning the raising of the U.S. federal debt ceiling.”

He admitted that the impact of these events can’t be judged exactly, however, “there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth.”

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