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Compass Point Federal Reserve Update: Fiscal Cliff, LIBOR Scandal & Housing Market

July 17, 2012 4:36 PM EDT Send to a Friend
Compass Point Federal Reserve Update by Isaac Boltansky

Boltansky commented after Federal Reserve Chairman Ben Bernanke delivered his semiannual monetary policy testimony:

Fiscal Cliff: Bernanke will continue to focus on the Fiscal Cliff. Still, we believe that there is little political incentive for either side to act in advance of the election. We simply are not in a season where politicians act beyond their own self-interest.

LIBOR Scandal: LIBOR was a major focus of today's hearing and likely will be tomorrow as well. While Bernanke did avoid certain questions, we were surprised with his frankness on two subjects. First, he stated clearly that the "LIBOR system is structurally flawed." Second, in response to a question from Sen. Jeff Merkley (D-OR), Bernanke stated that the LIBOR accusations as currently described would constitute fraud.

Housing Market: Bernanke once again delivered tough commentary regarding the housing recovery. Bernanke noted that despite certain modest improvement in housing metrics, the "factors that have restrained demand for owner-occupied housing in recent years have yet to dissipate." We were particularly interested by his references to existing inventory as well as the foreclosure pipeline.




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