Mixed Messages on Economy

May 5, 2009 12:00:00 AM PDT
There are mixed messages coming from Washington Tuesday regarding the economy. Ben Bernanke is cautiously optimistic. "We're hopeful that the very sharp decline we saw last fall thru early this year will moderate considerably in the near term and we'll see positive growth by the end of the year."

The Chairman of the Federal Reserve told congress Tuesday morning that the key for economic recovery is a healthy financial system. "Financial markets and financial institutions remain under considerable stress."

Tuesday, 19 major banks begin learning how they rate in government "stress tests," gauging their financial health. Ten of the 19 banks reportedly will be told they need to raise more capital to stay solvent, and the Obama administration doesn't want taxpayers to be on the hook. "There have been banks in the last few weeks that have sought more capital. And I think we believe and banks believe that the first and best place to get that is through the private sector," said White House Press Secretary Robert Gibbs.

Stress test results will be made public Thursday and Wall Street will be watching closely for signs the financial industry is stable.

That, combined with recent market rallies and positive news in the housing and construction sectors is breeding some optimism.

"The market is building on all these little indicators that are coming in, all these little signals showing that maybe, just maybe, the recession, the worst part, is behind us," said NYSE trader Alan Valdes.

One more signal on the health of the economy comes Friday with the latest unemployment report. Analysts predict it will show that last month another 620,000 people lost their jobs.

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