Filed under: Market matters, Economic data, Headline news, Federal Reserve, Recession

Federal Reserve Chairman Ben Bernanke testified before Congress today on the economy, the credit crisis and the Fed’s involvement in the sale of Bear Stearns to J.P. Morgan Chase. While much of the testimony summarized the Fed’s recent actions and positions, there were several high points in the testimony.

First, the Fed Chairman discussed the possibility that the U.S. economy may contract in the first half of 2008. The market temporarily reacted negatively to this announcement and then rebounded. This was probably due to the realization that this also means that the Fed will continue to maintain a loose monetary and credit policy for the near future.

The Fed also showed how close to a global financial meltdown we came. The testimony detailed the reasoning behind the Fed’s action to prevent the bankruptcy of Bear Stearns and facilitate its sale. It made clear that because of the interconnectivity of the world financial community, a bankruptcy could have resulted in a meltdown on a global basis, not merely one in U.S. markets.

The Chairman made it very clear that the Fed will use all the tools at its disposal to deal with these situations as they arise. However, Dr. Bernanke implied that this is now a global problem, which cannot be solved by the Fed alone.

Both the legislative and the executive branches of government will need to become involved. They can no longer pass the buck to the Fed as the solution to all economic problems. In the interim, though, Dr. Bernanke and the Fed will have to continue to use new creative solutions to deal with the situation. Despite the complaints about the Fed’s actions, the Fed may still be the best insurance against a global meltdown, given the speed of action of the other branches of government.

Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.

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Filed under: Engagements, Private equity industry, Investments

Wells Fargo & Co. (NYSE: WFC) has announced that it has opened a new office in Boston for their investment banking unit, Barrington Associates. It appears that despite the malaise in credit markets and despite the major slowdown in M&A, some firms are continuing to build. The current environment never lasts forever.

Barrington Associates focuses on advising middle-market companies on mergers and acquisitions, restructuring, and private capital arrangements. The new and fifth office will be managed by Gregory Benning and will enable Barrington to access its private equity network in New England.

Interestingly enough, Wells Fargo is the bank that I have noted as one of the few survivors in a sea of red as the banking and financial giant didn’t do all of the crazy and reckless activities that have squeezed many other financial institutions. In another piece about financial mergers might be mandated rather than preferred, Wells Fargo was one of the believed survivors and buyers listed there as well.

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