Fed Chairman Bernanke in Semiannual Monetary Policy testimony to Congress July 15,2008:
…” as events in recent weeks have demonstrated, many financial markets and institutions remain under considerable stress, in part because the outlook for the economy, and thus for credit quality, remains uncertain.… Consequently, helping the financial markets to return to more normal functioning will continue to be a top priority of the Federal Reserve….Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth…”

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Fed April 2008 Senior Bank Loan Officer Survey: In the Fed survey, domestic and foreign institutions reported having further tightened their lending standards and terms on a broad range of loan categories over the previous three months. The net fractions of domestic banks reporting tighter lending standards were close to, or above, historical highs for nearly all loan categories in the survey. Compared with the January survey, the net fractions of banks that tightened lending standards increased significantly for consumer and commercial and industrial (C&I) loans. Demand for bank loans from both businesses and households reportedly weakened further, on net, over the past three months, although by less than had been the case over the previous survey period.

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BIS Working Paper 251- The financial turmoil of 2007-? :  C. Borio indicates “The unfolding financial turmoil in mature economies has prompted the official and private sectors to reconsider policies, business models and risk management practices. Regardless of its future evolution, it already threatens to become one of the defining economic moments of the 21st century”.

IMF World Economic Outlook Report-April 2008: The World Economic Outlook presents the IMF staff view that “…Global growth is projected to slow to 3.7 percent in 2008, ½ percentage point lower than that projected at the January World Economic Outlook Update and 1¼ percentage points lower than th growth recorded in 2007. Moreover, growth is projected to remain broadly unchanged in 2009. …The overall balance of risks to the short-term global growth outlook remains tilted to the downside. The IMF staff now sees a 25 percent chance that global growth will drop to 3 percent or less in 2008 and 2009—equivalent to a global recession. The greatest risk comes from the still-unfolding events in financial markets, particularly the potential for deep losses on structured credits related to the U.S. subprime mortgage market and other sectors to seriously impair financial system balance sheets and cause the current credit squeeze to mutate into a full-blown credit crunch…”

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