By Rich Miller –
Federal Reserve Chairman Ben S. Bernanke minimized concerns that the central bank’s easy monetary policy has spawned
economically-risky asset bubbles in comments at a meeting with dealers and investors this month, according to three people with knowledge of the discussions.
The people, who asked not to be identified because the talks were private, said Bernanke made the remarks at a meeting in early February with the Treasury Borrowing Advisory Committee. Fed spokeswoman Michelle Smith declined to comment.
The Fed chairman brushed off the risks of asset bubbles in response to a presentation on the subject from the group, one person said. Among the concerns raised, according to this person, were rising farmland prices and the growth of mortgage real estate investment trusts. Falling yields on speculative- grade bonds also were mentioned as a potential concern, two people said.
Stocks climbed on better-than-anticipated corporate earnings, with the Standard & Poor’s 500 Index rising 0.4 percent to 1,508.24 at 10:07 a.m. in New York. The gauge fell 1.9 percent in the previous two days on speculation that the Fed may slow the pace of its purchases of Treasury debt and mortgage-backed securities, in part because of concerns about asset bubbles.
Speculation about scaled-back asset purchases by the Fed was fanned by the Feb. 20 release of minutes of the central bank’s last policy making meeting in January.
Many participants at the Jan. 29-30 Federal Open Market Committee meeting “expressed some concerns about potential costs and risks arising from further asset purchases,” with some noting that added buying “could foster market behavior that could undermine financial stability,” according to the minutes.
The 15-member Treasury Advisory Borrowing Committee is made up of representatives of companies including JPMorgan Chase & Co., Goldman Sachs Group Inc., Pacific Investment Management Co., and Bank of America Corp.
The committee advises the Treasury Department on how to raise money to finance the government. The panel met Treasury officials in Washington on Feb. 5 ahead of the government’s quarterly debt refunding. While in the nation’s capital, members of the group also met Bernanke, the three people familiar with the gathering said.
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