The Fed Road Show : Bernanke talks Theory and Philosophy while Main Street Sees Inflation and Mortgage Crisis

From Forbes Magazine by Maurna Desmond May13, 2008 :Bernanke Talks Big Picture As Inflation Looms
Also go to end of post to see slides selected from San Francisco Fed President and CEO, Dr. Janet Yellen's presentation on Credit, Housing, Commodities and The Economy (also on May 13, 08 at a Conference on Monetary Policy in Voncouver).

"Speaking at an Atlanta Fed conference at Sea Island, Ga., the Federal Reserve chairman voiced his theoretical concerns about the potential moral hazard that could be posed if the U.S. central bank bailed out financial companies that made mistakes. While Bernanke waxed about the Fed's rich philosophical history, other Fed officials chirped about more Main Street issues like rising inflation and the mortgage crisis.

Investors seemed to take the risk of inflation to heart. The yield on the 10-year Treasury note, a bellwether for the world's credit markets, shot up to 3.91% from 3.78% late on Monday. As inflation rises, investors demand higher returns on bonds since the purchasing power of the money invested will be eroded. The 10-year yield ended the first quarter of this year at 3.43%."

"The Federal Reserve is governed by ideas, and there is a need to look at the underlying principles guiding its actions," said Michael Feroli, an analyst at JPMorgan. "When it comes to monetary policy, you need to have a philosophy. It is important to say, 'what does it mean to be the lender of last resort?"
According to TradeTheNews.com, Janet Yellen, the San Francisco Fed president, said at a conference in Vancouver that financial stability is the core responsibility of the central bank. She added that the Fed "cannot be complacent about inflation."

CallMeASeeker May12, 2008: Also see a Presentation(PDF) by Dr Janet Yellen, CEO and President of the San Fransico Federal Reserve Bank - Credit, Housing, Commodities, and the Economy. Here are some Key slides.

The Housing Bubble - A pattern of hidden risk , high leverage and poor credit rating quality. Loan Underwriting deteriorated - loans without full documentation

Price of Commodites Rise Sharply, Oil at all time High
US Net Exports are a source of Strength