Banks Will Need More Capital, Says Bernanke in London

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FURTHER massive injections of capital may be necessary to save the global banking system from collapse, US Federal Reserve chairman Ben Bernanke warned today.

Nicknamed Helicopter Ben for his belief that dropping huge amounts of public money into the economy is the best way to fight deflation, Bernanke told the London School of Economics that lower interest rates wont be enough to stave off a depression.

Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilise and strengthen the financial system, he said. More capital injections and guarantees may become necessary to ensure stability and the normalisation of credit markets.

He also discussed the idea of creating a so-called bad bank a government-controlled entity that would hold all of the toxic debts Wall Street banks and other lenders have sitting on their balance sheets.

In London to deliver the Stamp memorial lecture, Bernanke said that these hard-to-value assets are one reason why a lack of confidence permeates the global economy, inhibiting new lending. …


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