Federal Reserve Chairman Ben Bernanke, on Wednesday, disclosed his plans to reverse the trillions of dollars the Fed extended to the US banks to save them from the financial turmoil. However, the plans would come into existence when the economy is good enough, Mr. Bernanke said in his testimony in front of a House Financial Services Committee.
“These programs, which imposed no cost on the taxpayer, were a critical part of the government’s efforts to stabilize the financial system and restart the flow of credit,” Bernanke said.
However, the Fed Chief also warned that the nation’s economy still is in need of an accommodative monetary policy. As per him, going in to the future the regulator would certainly have to tighten the situation by raising short-term interest rates and pulling out the schemes that poured liquidity into the system.
The Wall Street, however, reacted sharply to Ben’s statement as Sow Jones dropped close to one per cent to 9,910 in early trades. It was trading at 10,027 at 12.08 PM.
Bernanke said that he might start a test run for his plans by spring this year.