Sunday, March 29, 2009

Dallas Fed Governor, Richard Fisher, Calls Economic Challenge 'Monstrous' at RISE Forum

The president of the Fed's Dallas bank, Richard Fisher, talked to the students at the RISE investment forum at the University of Dayton.

Turning around the economy, which likely continued to shrink during the first quarter, presents a "monstrous" challenge for central bankers, policymakers and those in business, a Federal Reserve Board official said Thursday, March 26.

But the nation's central bank has acted aggressively to reverse the downturn and, if necessary, it will take further actions to get the economy on solid footing, said Richard Fisher, president and chief executive of the Federal Reserve Bank of Dallas.

Fisher made his remarks during RISE IX, a three-day global investment forum that kicked off with a day of panel discussions at the University of Dayton Arena. "We might call this the Godzilla economy: It presents a monstrous challenge," Fisher said.

He said the Fed has responded to the crisis by taking several steps, including buying commercial paper, paying interest on bank reserves and establishing programs to increase small business and consumer loans.

Despite the downturn, Fisher urged the audience to remain optimistic and look for opportunities as the market recovers. Further, Fisher, who has worked as a trade negotiator, said the United States and foreign governments should avoid adopting protectionist trade policies in response to the current financial crisis.

Also Thursday, Edward Kerschner, chief investment strategist for Citi Global Wealth Management, said he wants to see more of the government's fiscal stimulus money channeled into infrastructure projects. Kerschner also called for such changes as basing deposit insurance premiums on a bank's health and the creation of a single regulatory agency for the financial system.

Jeffrey Kleintop, chief market strategist for LPL Financial Services, said bubbles have cropped up in financial markets since at least the 1970s, when gold prices inflated, followed by big appetites for Japanese stocks in the 1980s, dot-com shares in the 1990s and Chinese stocks, oil and housing in the current decade. With people seeking safe refuge in Treasury bills and cash, those instruments stand the greatest chance of growing into the next bubble, according to Kleintop.