Bailouts to continue: Bernanke

04 March 2009

Federal Reserve chairman Ben Bernanke told Congress an economic recovery depends on the government's ability to stabilise weak financial markets. He said the efforts were needed to avoid 'a prolonged episode of economic stagnation'.

Bernanke's remarks came as the central bank announced it would begin lending up to $200 billion in an initial move to spur consumer and small business borrowing for autos, education, credit cards and other expenses. The Fed first announced the plan late last year.

On Monday, the government injected $30 billion to troubled insurer American International Group Inc, its fourth attempt to stabilise the company since September See: US government injects additional $30 billion in AIG and last Friday, 27 February 2008, Citigroup Inc got more help from the government (See: US government to hike Citi stake; Pandit likely to stay as CEO: reports)

Analysts are wondering whether there is going to be an end to this bailout tunnel.

Billionaire investor Warren Buffett has already warned investors in his annual Berkshire Hathaway report about the recession continuing longer than expected. He disclosed that Berkshire Hathaway's holdings had decreased in value by $11.5 billion in 2008.

Investors are also wary about Buffett's prediction that the economy will be in 'shambles' throughout 2009 and 'probably well beyond'. Analysts have generally predicted an economic recovery will start late this year.