Federal Reserve Chairman Ben S. Bernanke said that financial stresses appear to have eased after the U.S. central bank cut the rate on swap lines with its counterparts in other countries.
“The swap lines seem to have been very successful,” Bernanke said in response to questions during testimony today to the House Financial Services Committee. “It looks at this point like the demand for those swaps is starting to go down.”
Bernanke said that if Europe had a “major financial accident,” the U.S. may be affected through “general contagion, flight from risk-taking, loss of faith in the financial system, economic stress and so on” rather than direct losses at U.S. banks from holdings of European sovereign debt.
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