Ben Bernanke continued his “please let’s not have another Great Depression on my watch” refrain today in a speech in Chicago. Bernanke again urged banks to raise more capital, insisting that lending institutions should “…remain proactive in their capital-raising efforts,” because “doing so not only helps the broader economy but positions firms to take advantage of new profit opportunities as conditions in the financial markets and the economy improve.” Bloomberg:
Bernanke said that the central bank is considering strengthening its guidance on risk management in the aftermath of the crisis and that senior bank executives need to take a leadership role. The strongest banks didn’t rely on credit ratings companies and accounted for the danger of a slump in access to funds, he said.
Banks and securities companies have raised about $244 billion of capital since July, after writedowns and credit losses in excess of $333 billion. Bernanke and Treasury Secretary Henry Paulson have repeatedly said firms should keep increasing their funds, seeking to alleviate the impact of the credit crunch.
“I have been encouraged by the recently demonstrated ability of many financial institutions, large and small, to raise capital,” Bernanke said at a Chicago Fed conference on credit markets. Raising capital allows for more lending, “which supports economic expansion,” he said.