WATCH LIVE: Bernanke & Sheila Bair Testify Before Financial Crisis Commission (Links, Reaction, Video)

• Watch LIVE on C-Span

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• C-Span Video of yesterday's hearings

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B-52 has finished testifying.  Sheila Bair is now in the hot seat.  I will post a link to Bernanke's taped testimony as soon as it becomes available.

• Bernanke's opening statement
  

Summary and reaction:

• Bernanke Says He Wasn't Straightforward About `Myth' of Fed Saving Lehman (Bloomberg)

• Bernanke: Shut down banks if they threaten system (AP)

• Bernanke says Fed had to let Lehman fail (LA Times)

As a scholar of the Great Depression, Federal Reserve Chairman Ben S. Bernanke said Thursday he knew the failure of Lehman Bros. in 2008 would be an economic disaster. But he believed there was no way to save the investment bank without a huge loss of taxpayer money.

"This is my bread and butter, and I believed deeply that if Lehman was allowed to fail or did fail, the consequences on the U.S. financial system and the U.S. economy would be catastrophic," Bernanke told the federal panel investigating the financial crisis.

But he said Lehman lacked the collateral to back up a loan from the Fed and such a move would not have stopped a run on the bank by customers.

"If we lent the money to Lehman … we would have saddled the taxpayers with tens of billions of dollars in losses," Bernanke said.

Bernanke said he wanted to help Lehman to avoid the damaging consequences that would come from its bankruptcy. The Fed was able to rescue AIG because its huge insurance assets provided adequate collateral.

"It was with great reluctance and sadness that I conceded that there was no other option" than to let Lehman fail, he told the commission. "If I could have done anything to save it, I would have saved it."

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• From the WSJ

WASHINGTON—The need to eliminate firms that are effectively "too big to fail" was the top lesson from the recent financial crisis, Federal Reserve Chairman Ben Bernanke told an investigative panel Thursday.

Regulators "now have the tools to do that" under the recently passed Dodd-Frank law, he said, and will force firms to divest or restructure if they pose an untenable risk to the broader economy.

"My projection is that even without direct intervention...that over time we will see some breakups and some reduction in size and complexity of some of these firms," Mr. Bernanke told the Financial Crisis Inquiry Commission, which is tasked with investigating the causes and fallout from the credit-market collapse.

Comments

[DailyBail]

Bernanke Says He Wasn't Straightforward About `Myth' of Fed Saving Lehman

http://www.bloomberg.com/news/2010-09-02/bernanke-regrets-not-being-straightforward-on-myth-of-fed-saving-lehman.html

[DailyBail]

With Alaska Sen. Lisa Murkowski's concession late Tuesday, more than a half-dozen tea party outsiders have won GOP Senate primaries, in part on promises to transform the way a Senate designed for collegiality operates.

That has raised the prospect that the Senate could grind to a halt as an alliance of outsiders forms to change the deal-making culture of the upper body.

"What I'm encouraged about most is that I don't have to be the contentious person all by myself any longer," said Sen. Jim DeMint (R., S.C.), who has clashed with Republican leaders over his use of procedural tactics to block legislation he opposes.

Alaska's Joe Miller, a U.S. magistrate judge who has questioned the constitutionality of unemployment insurance, joined anti-establishment conservatives who have won GOP primaries in Utah, Colorado, Nevada, Pennsylvania, Wisconsin, Kentucky and Florida. Kentucky ophthalmologist Rand Paul has said that, if elected, he would use the powers the Senate confers on individual members to block any spending measure that fails to help balance the budget.

http://online.wsj.com/article/SB10001424052748704791004575466071537499914.html?mod=WSJ_newsreel_us

Great story...read this one...

[DailyBail]

Ending too-big-to-fail top crisis lesson: Bernanke

http://www.marketwatch.com/story/ending-too-big-to-fail-top-crisis-lesson-bernake-2010-09-02

[DailyBail]

Bernanke Meets Buffett in Role Conceived to Protect Markets

http://www.bloomberg.com/news/2010-09-02/bernanke-meets-buffett-in-new-role-conceived-to-protect-markets.html

[DailyBail]

Gang Members: Meeting With Weis Was Harassment

Supt. Weis Has Threatened To Go After Gangs With Federal Law

http://cbs2chicago.com/local/gang.members.weis.2.1892495.html

[DailyBail]

Stephen Hawking: God was not needed to create the Universe

The Big Bang was the result of the inevitable laws of physics and did not need God to spark the creation of the Universe, Stephen Hawking has concluded.

http://www.telegraph.co.uk/science/science-news/7976594/Stephen-Hawking-God-was-not-needed-to-create-the-Universe.html

[DailyBail]

The federal government has posted signs along a major interstate highway in Arizona, more than 100 miles north of the U.S.-Mexico border, warning travelers the area is unsafe because of drug and alien smugglers, and a local sheriff says Mexican drug cartels now control some parts of the state.

The signs were posted by the Bureau of Land Management (BLM) along a 60-mile stretch of Interstate 8 between Casa Grande and Gila Bend, a major east-west corridor linking Tucson and Phoenix with San Diego.

http://www.washingtontimes.com/news/2010/aug/31/signs-in-arizona-warn-of-smuggler-dangers/

[DailyBail]

Gulf oil rig explodes off La. coast

http://news.yahoo.com/s/ap/20100902/ap_on_re_us/us_gulf_rig_explosion

[DailyBail]

Mayor Bloomberg Is Apparently Being Floated As Tim Geithner's Replacement

http://www.nypost.com/p/pagesix/white_house_flirts_with_mike_vhSHkgJStfQyIXZTdV6RYK