Bernanke: Fed Has No Plans to Up European Aid
The Federal Reserve has no plans to send additional aid to European banks, Chairman Ben Bernanke told Senate Republicans in a closed-door meeting on Wednesday.
Senator Bob Corker (R-Tenn.) said Bernanke made it “very clear” that the Fed doesn’t intend to rescue European financial institutions in a one-hour session at the Capitol in Washington yesterday. Lindsey Graham (R-S.C.) said Bernanke told lawmakers that “he doesn’t have the intention or the authority” to bail out countries or banks.
“People walk away knowing he has no intentions whatsoever of furthering U.S. involvement in the crisis,” Corker said of Bernanke. But at the same time, Bernanke said that “obviously what happens in Europe could affect our economy,” according to Graham.
Senator Orrin Hatch (R-Utah) said Bernanke is “very concerned” about the European turmoil. “He did say if they can’t get their thing in order it could affect us,” and that “a collapse over there would be detrimental to us,” said Hatch, who added that he has confidence in Bernanke’s handling of the situation.
The Fed chairman also said he doesn’t foresee providing more money to the International Monetary Fund to combat Europe’s debt crisis, Corker told reporters. Corker cited Bernanke as saying that “he doesn’t have the legal authority to loan money to European banks.”
However, while the Fed may not be able to lend directly to banks outside the U.S., it can provide loans to their U.S. branches through the discount window. The Fed’s currency-swap lines also provide indirect funding to overseas banks through the European Central Bank and other central banks who assume all of the credit risk.
Senator Charles Grassley (R-Iowa) expressed his concern that excessive U.S. financial support may enable Europe to avoid enacting necessary austerity measures. “If there’s too much of an effort on the part of the United States to help Europe, it’s going to impede their fiscal changes that must be made,” Grassley said to reporters.