Early Bernanke comment...important German comment on Greece...

Overall: In line with expectations – indicating we need higher unemployment & stock down before QE3 – or something similar comes into play, but….  He is concerned about EMPLOYMENT – indicating that his /FED's focus changed slightly from deflation to EMPLOYMENT.. .which could mean some policy adjustments.

 

Here our Operation Twist could play role and likewise changes to deposit rules come to mind – in order to force banks to lend….

 

Most interesting thing being that Bernanke failed to say the magic words:  A strong US dollar policy – he talked extensively about the US dollar but failed to mention the normal mantra – this is MAJOR news in my opinion and could have some impact past tonight (weaker US dollar)

 

Also Jamie Dimon, CEO, of JPM Chase was very "rude" asking how BB saw regulation trade off to survival of banks… desperate Mr. DImon?

 

The biggest story though being this from Germany:

 

It will have two impacts:

 

1-      It will make rating agency DEFAULT Greece

2-      It will make Trichet  very hawkish on Thursday – pay back and no longer wanting to do "fiscal policies" for EU.

 

Schaeuble Seeks 7-Year Maturity Extension for Greek Bondholders

2011-06-07 20:49:12.946 GMT

 

 

By Brian Parkin and Alan Crawford

     June 7 (Bloomberg) -- German Finance Minister Wolfgang Schaeuble said bondholders must contribute a "substantial"

share of a second aid package for Greece, proposing a swap that credit-rating companies may term a default.

     Schaeuble told European Central Bank President Jean-Claude Trichet and fellow euro finance ministers in a letter yesterday that maturities on Greek bonds should be extended seven years to give the debt-wracked nation time to overhaul its economy.

     Any agreement on aid at a ministers' meeting on June 20 "has to include a clear mandate -- given to Greece possibly together with the IMF -- to initiate the process of involving holders of Greek bonds," Schaeuble wrote in the letter, which was provided to Bloomberg and reported earlier by Die Welt newspaper.

     The German position clashes with the position of European Commission officials and the ECB opposing anything beyond a voluntary rollover of debt. A swap offering investors terms that are "worse" than those of existing securities would constitute a coercive or distressed exchange, and be considered a default, Fitch Ratings said yesterday.

     With a return to capital markets in 2012 "more than unrealistic," Greece is likely to need additional aid to avert "the real risk of the first unorderly default within the eurozone," Schaeuble wrote.

     While the size of the package can't be assessed until the so-called troika of officials from the International Monetary Fund, ECB and European Commission give a progress report on Greece, it is likely to be "substantial" and must "involve a fair burden sharing between taxpayers and private investors,"

Schaeuble said.

 

                   'Substantial' Contribution

 

     "This process has to lead to a quantified and substantial contribution of bondholders to the support effort, beyond a pure Vienna Initiative approach," whereby western banks active in eastern Europe in 2009 during the financial crisis were encouraged to roll over funding to subsidiaries and inject fresh capital if needed.

     "Such a result can best be reached through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years, at the same time giving Greece the necessary time to fully implement the necessary reforms and regain market confidence," Schaeuble said.

 

 

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