Former Federal Reserve Chairman Paul Volcker says the economy is close to a bottom and thus probably won’t need more fiscal stimulus.
“I’m not here to tell you the economy is going to recover very strongly in the short run,” Volcker, who is chairman of President Obama’s Economic Recovery Advisory Board, tells Bloomberg TV.
But, he says, “There is reason to believe that it should be leveling off, at a low level.”
As a result, “I don’t know if we’re going to need a second stimulus package,” Volcker says.
Still, he couches those words with caution.
“I don’t think there are grounds for great optimism that we’re going to spring back from this great recession with a very vigorous recovery over the next couple of years.”
The positives: declines in housing, business spending and inventories have slowed, Volcker says.
And the economy is just starting to benefit from the $787 billion fiscal stimulus package.
Government assistance will prevent any major bank failures, he says.
“There’s a visible commitment by the government to support these so-called systemically important institutions,” Volcker explains.
“So they’re not going to go under.”
The Federal Reserve is due to release "stress tests" results for the nation's biggest banks on Thursday. The tests will reveal the health of the country’s 19 largest banks and provide details on individual banks, according to published reports.
In the results, the Fed will detail what banks will need to deal with potentially adverse economic conditions ahead. Investors await the tests with bated breath, since it will be taken as a measure of the value of specific bank stocks.
Bank stocks have risen dramatically since the recent March 6 low. One popular exchange-traded fund that tracks the sector, Financial Select Sector Spider (XLF), is up nearly 74 percent since that date.
Of course, banks could end up nationalized, says superstar bank analyst Mike Mayo.
“New government actions might not help as much as expected, especially given that loans have been marked down to only 98 cents on the dollar, on average,” he said in a recent conference call.
© 2017 Newsmax. All rights reserved.