Inquiring minds are asking "To what extent is the Fed is in the dark?"



Amazingly Bernanke answered that question today in Congress with complete candor. All you need to know is how to translate his statements. Please consider Bernanke tells Congress Fed knows what it is doing.



Federal Reserve Board chairman Ben Bernanke tried to assure Congress and investors that federal regulators are not grasping at straws in the response to the financial crisis.



"We're not making it up," Bernanke told the House Financial Services panel.

"We're working along a program that has been applied in various contexts."

"We're not completely in the dark."

My Translation

Bernanke is trying to reinforce his message to Congress that the Fed and the Obama administration now have at least the outlines of a bank rescue plan in place that will show results over time and that banks are not on an out-of-control course to nationalization.

My Comment

Bernanke 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.

My Comment

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.

My Comment

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.



My Comment

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.