Ben Bernanke made headlines and moved markets Tuesday when he said the economic recovery was lagging the Federal Reserve's expectations. He did, however, say he expects things to pick up in the second half of the year.
Speaking at a banking conference in Atlanta, Bernanke was also taken to task by JPMorgan Chase CEO Jamie Dimon, who told the Fed chairman he fears new financial regulations are harming the banking industry and the economy.
"Has anyone bothered to study the cumulative effect of all these things?" Dimon asked of the new rules. Addressing Bernanke, he asked, "Do you have a fear, like I do, that when we look back and look at them all, that they will be a reason it took so long that our banks, our credit, our businesses and, most importantly, job creation started going again?"
Bernanke told Dimon the regulatory changes made him feel "pretty good" and asserted they are intended to prevent another financial crisis.
As Aaron Task and Henry Blodget discuss in the accompanying video, each side has legitimacy. On the one hand, as Dimon points out, bank capital is critical to economic growth and job creation. On the other, the actions of banks have consequences and the financial crisis and recession was (in large part) due to the excessive risk taken by our nation's largest banking institutions. Plus, Dimon can't have it both ways; regulations may be adding to bank expenses but government involvement, especially by the Fed, allowed JPMorgan Chase to buy Bear Stearns on the cheap and with little risk.
Whose side are you on? Let us know.
- Ben Bernanke
- JPMorgan Chase CEO Jamie Dimon
- Bear Stearns
- Henry Blodget