Ben Bernanke Offers No Hope To Savers

Chairman Ben Bernanke says the Federal Reserve still has ways to rescue our flagging economic recovery.

Regrettably, it seems most of those options involve pushing interest rates even lower than they are right now.

Good grief. Does Mr. Bernanke really think the economicrecovery is faltering because interest rates just aren’t low enough?

We know everyone was upset last week when existing home sales fell 27% in July.

But does he really think we’re not buying houses because mortgage rates are too high, when the average 30-year fixed-rate loan is going for 4.59%?

How cheap does he think mortgages need to be?

Would bringing the average rate down to 4.39% send buyers rushing to open houses?

Or is that not enough?

Does he think there are millions of potential buyers just waiting to pounce if the average mortgage would just fall to 3.99%?

Of course there aren’t, because mortgage rates aren’t the problem.

Home prices that just won’t stop falling. Depleted savings. Too much debt. The fear of losing a job – and being unable to find another. That’s what keeping people out of the housing market.

Yet in his speech to the Fed’s annual symposium at Jackson Hole, Wyo., on Friday, Bernanke indicated that the best option to boost the economy would be for the Fed to resume buying long-term securities again, in an effort to drive long-term interest rates even lower.

Another idea was to promise to keep short-term interest rates at record low levels for longer than the market currently expects?

Since the Fed is already pledging to maintain that policy for an “extended period,” a growing number of investment advisors and economists have concluded he won’t move to let short-term rates rise this year. And probably not next year.

Is promising to hold rates at today’s artificial lows until 2013 the next step? Why not change the wording in the statements released after each rate-setting committee meeting to “forever?”

This is the policy that has made it impossible for savers to earn a reasonable return on their money through certificates of deposits, savings and money market accounts.

What did he have to say to us about that?

Nothing.

At one point he acknowledged that the Fed’s market-distorting policies have forced “investors” to move their money around in a futile search for higher yields.

But the word “savers” never appears in the speech. Indeed, Bernanke only uttered the word “savings” one time.

“Consumers are reducing their debt and building savings, returning household wealth-to-income ratios near to longer-term historical norms,” he said. “Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more-rapid growth in household spending next year.”

That’s it?

He’s glad we’re saving more so that we can go on another spending binge next year?

He seems oblivious to what savers desperately need: A fair return that rewards financial responsibility.