Meredith Whitney isn’t buying Fed Chair Ben Bernanke’s argument that the recession is technically over.
Whitney said this morning that the economy is still weak and that it will “face a big test next month when the government starts winding down its massive support programs,” according to CNBC.
Whitney offers a bleak view of the near future, saying that jobs are still not being created, real estate sales are still suffering, and the liquidity to the consumer and small business is still contracting.
And it’s very difficult to get the engine moving without a lot of government support within that. So when you slowly wean government support, that’s going to be the test that I think everyone’s going to be watching starting in October.
Tim Geithner and Obama both recently said that the government will unwind its investments in financial companies as quickly as possible. Last week, Geitner told Congress that the economy was healthy enough for the scaling down of the bailout programs and the amount of money needed to keep the financial system working.
One year after the federal government began the biggest financial bailout in history, President Obama’s top economic advisers say the banking system has regained enough health to begin removing the government’s backstops.
Some of the programs that are already being phased out include the loan program for money market mutual funds that will come to an end on Sept. 18. The FDIC’s program to guarantee bonds sold by financial institutions will also either stop making new guarantees at the end of October or reduce the volume. The much talked-about PPIP will also be smaller than originally envisioned.