Sept. 13 - Federal Reserve Chairman Ben Bernanke takes an aggressive stance against a slow-moving economy, pledging to purchase $40 billion a month in mortgage-related securities for as long as it takes to get the jobs market back on its feet. Conway G. Gittens reports.
PLEASE NOTE: THIS EDIT CONTAINS CONVERTED 4:3 MATERIAL Federal Reserve Chairman Ben Bernanke is not taking any chances when it comes to rescuing the U.S. economy, specifically when it comes to the labor market. In an aggressive plan, known as quantitative easing 3 or QE3, the Fed will spend $40 billion a month to buy mortgage-related securities until further notice and extend its pledge for near-zero interest rates until mid-2015. The hope is by pushing mortgage rates lower Americans will feel wealthier. SOUNDBITE: FEDERAL RESERVE CHAIRMAN BEN BERNANKE (ENGLISH) SAYING: "One of the main concerns that firms have is that there is not enough demand; not enough people coming and demanding their products, and if people feel that their financial situation is better because their 401K looks better, for whatever reason their house is worth more, they are more willing to go out and spend and that's going to provide the demand that firms need in order to hire and invest." But if you look at the economic impact from QE1 and QE2, Bernanke may be hoping for too much, says Jim Bianco of Bianco Research. SOUNDBITE: JIM BIANCO, PRESIDENT, BIANCO RESEARCH (ENGLISH) SAYING: "We are unsure of how much this is going to impact the economy. If all the Fed is doing is changing the level of interest rates and pushing stock prices higher, but it's not having an in-kind effect on the economy then they are producing distorted markets." QE1 started in November 2008 and a year later the S&P 500 was up 30 percent, QE2 kicked off November 2010 and a year after that the market was up 5 percent. And with the mention of QE3 - stocks are near a five year high. Despite that euphoria, unemployment is stuck above 8 percent and this economy needs more jobs, says Brian Jacobsen of Wells Fargo Advantage Funds. SOUNDBITE: BRIAN JACOBSEN, CHIEF PORTFOLIO STRATEGIST, WELLS FARGO ADVANTAGE FUNDS (ENGLISH) SAYING: "I believe that the new number to look for really is around 100,000 as far as to keep the Fed doing what it is doing. If it dips below 100,000, I think the Fed is going to do more - that is to increase the pace or quantity of assets they purchase." And Bernanke made it clear the Fed has other tools if the latest round of debt purchases fails to kick-start the jobs market. Conway Gittens, Reuters