Bernanke Drops the D-Bomb

Were we really on the precipice of a second Great Depression? Fed Chairman Ben Bernanke thinks we were, explaining on Sunday why the federal government marshaled unprecedented aid for some of Wall Street's biggest firms last year, a move still deeply unpopular with the folks on Main Street. In a "town hall" talk with PBS's Jim Lehrer that will be aired later this week, Bernanke told the audience that "he engineered the central bank's controversial actions over the past year because 'I was not going to be the Federal Reserve chairman who presided over the second Great Depression,' " the Wall Street Journal writes. The audience at times grew impatient with his reasoning. A local mom challenged him, "Why don't we just let the behemoths lay down and then make room for the small businesses?" Bernanke reassured her he and the federal government were looking out of for everyone's best interests, with Bernanke adding he was "disgusted" with the events that led up to the massive taxpayer-funded intervention, the Washington Post reports.

Bernanke's recent road show is meant to send a message to the American public: "[T]he central bank is here to help, and it is not as mysterious or menacing as people might think," the New York Times writes. The business press is quick to point out that Bernanke's term expires in January and that there is no guarantee he'll be renominated for the post. This tenuous job security, the NYT reasons, is why we're seeing this "evolution from Fed chairman to Fed showman."

The WSJ leads off its business coverage today with fresh concerns about the still anemic flow of credit that is weighing down the economy. The paper puts it bluntly, writing, "[B]ankers and borrowers refrain from taking risks, in a bearish sign for the economy." The newspaper's research indicates that loan reserves held by 15 large banks shrank last quarter by 2.8 percent, "and more than half of the loan volume in April and May came from refinancing mortgages and renewing credit to businesses, not new loans." The findings suggest that borrowers are putting off expansion and reinvesting in the operation while lenders are hoarding capital as insurance against still more dubious loans on their books.

The International Monetary Fund, meanwhile, sees the credit problem as something personal—ballooning credit card debt. Citing the latest IMF figures, the Financial Times reports that roughly one in seven U.S. consumers will default on his personal debt obligations while about one in 14 will default in Europe. The consumer debt load in the United States is estimated to be $1.9 trillion; in Europe, it is nearly $2.5 trillion.

The FT, meanwhile, reports that Apple (AAPL) is "racing to offer a portable tablet-sized computer in time for the Christmas shopping season, in what the entertainment industry hopes will be a new revolution." Less a computing resource and more a new platform for online entertainment, the touch-sensitive device has industry folk excited about a whole new dimension in watching movies and reading books online. iPhone prototypes can be deadly business, says the NYT in a piece looking at the suicide of a young employee at a Chinese iPhone factory who was accused of stealing one such prototype. Sun Danyong jumped to his death after complaining that "he had been beaten and humiliated by the factory’s security team," the NYT writes. Apple and Foxconn, a major Apple supplier, issued statements expressing sorrow for the death. Also, Foxconn said it "suspended one security officer, pending a police investigation, and that the company was now considering counseling services for its employees."

These are nervous times for top execs at Citigroup Inc. (C), Bank of America Corp. (BAC), American International Group Inc. (AIG), General Motors Co. (GMGMQ), Chrysler Corp., Chrysler Financial, and GMAC Financial Services Inc. (GKM). The WSJ reports that President Obama's pay czar, Treasury Department official Kenneth Feinberg, is ready to vet the compensation at those businesses, receiving major federal aid, and will push to renegotiate contracts that he views as excessive. The way Citigroup handles one high-priced employee will be an indication of how far Feinberg feels he needs to intervene. Andrew Hall, an oil trader for subsidiary Phibro and "an art-loving eccentric" to boot, is in line for a $100 million payout this year from Citi, writes the Guardian and WSJ.

And, finally, perhaps it's an elaborate metaphor that the former Merrill Lynch investment-banking operation is being stripped of its iconic bull logo now that it's part of the Bank of America family. It's a decision that irks some Merrill suits. "Merrill without the bull is like Superman without a cape," a Bank of America Merrill Lynch banker (say that 10 times fast) grumbled to the WSJ over lunch.