Bernanke, Bush, Paulson speaking today
"At present, accurately assessing and appropriately balancing the risks to the outlook for growth and inflation is a significant challenge for monetary policy makers. The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth. At the same time, upside risks to the inflation outlook have intensified lately, as the rising prices of energy and some other commodities have led to a sharp pickup in inflation and some measures of inflation expectations have moved higher. Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth. In light of the increase in upside inflation risk, we must be particularly alert to any indications, such as an erosion of longer-term inflation expectations, that the inflationary impulses from commodity prices are becoming embedded in the domestic wage- and price-setting process."
President Bush is also speaking right now, urging Congress to move the housing support legislation as quickly as possible and emphasizing steps to boost confidence in Fannie Mae and Freddie Mac.
UPDATE: Here is Treasury Secretary Henry Paulson's testimony. It contains some more details and language about the Fannie and Freddie support/bailout plan:
"First, as a liquidity backstop, the plan includes an 18-month temporary increase in Treasury's existing authority to make credit available for the GSEs. Given the difficulty in determining the appropriate size of the credit line we are not proposing a particular dollar amount. Flexibility is the best means of increasing market confidence in the GSEs, and also the best means of minimizing taxpayer risk.
"Second, to ensure the GSEs have access to sufficient capital to continue to fulfill their mission, the plan gives Treasury an 18-month temporary authority to purchase – only if necessary – equity in either of the two GSEs.
"Let me stress that there are no immediate plans to access either the proposed liquidity or the proposed capital backstop. If either of these authorities is used, it would be done so only at Treasury's discretion, under terms and conditions that protect the U.S. taxpayer and are agreed to by both Treasury and the GSE. I have for some time urged a broad range of financial institutions to raise capital and at Treasury we have constantly encouraged the GSEs to do just that. In March, at my request, both the Chairman and Ranking Member of this Committee hosted a meeting with me and the CEOs of the two GSEs where they agreed to raise capital and you began the effort to move your GSE reform bill, which is now hopefully about to be enacted with the modifications we are recommending today.
"Third, to help protect the financial system from future systemic risk, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by providing the Federal Reserve authority to access information and perform a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards. Let me be clear, the Federal Reserve would not be the primary regulator. As I have said for some time, the Fed already plays the role of de-facto market stability regulator and we must give it the authorities to carry out that role. This role for the Federal Reserve with respect to the GSEs is consistent with the recommendation made in Treasury's Blueprint for a Modernized Financial Regulatory Structure. Clearly, given the scope of the GSEs' operations in world financial markets, a market stability regulator must have some line of sight into their operations."
Bottom line: Today could be a very important day. Does the recent "no confidence" trend in the currency and stock markets continue? Or do we reverse, with the dollar rising, gold falling, stocks rising, and so on. Lots of markets are at key levels, as I noted earlier.
UPDATE2: Wachovia is weighing in just now with a statement about its own financial strength, similar to what we saw from National City and Washington Mutual yesterday. It reads:
"Wachovia is a fundamentally strong and stable company on solid footing. Wachovia has $150 billion in liquidity funding capability and is well capitalized, with more than $50 billion of Tier 1 regulatory capital at June 30, 2008.
"Many of our businesses continue to experience strong underlying performance, and we remain focused on serving our customers well. Our teams are prepared to help customers navigate this difficult environment.
"We are intensely focused on maintaining excellent service to customers, and we are winning new business every day. In fact, Wachovia opened 17,000 new checking accounts and generated $800 million in new deposits on Monday, July 14."