Bernanke and Bush

Mr Bernanke, speaking at the Fed's annual symposium, gave with one hand and took with the other. There were more - many more - soothing words about his awareness of market turmoil. Quite why anyone, at this stage, would doubt Mr Bernanke reads the newspapers is a puzzle, but it did no harm to repeat the message. At the same time, though, he emphasised that it was not his job to protect rash investors from their own folly.

Given financial markets' wild swings on any scrap of news, Mr Bernanke had no incentive to do anything other than leave his options open and wait for the next Fed meeting on September 18. In elaborating on the potential threat to Main Street from financial market turmoil, he has left himself room for a small rate cut then if he wants to. But the near certainty of 75 basis points worth of cuts by the end of the year being discounted in Fed funds futures still looks aggressive.

Mr Bush, meanwhile, was under political pressure to help subprime borrowers hang on to their homes. His plan to extend federal guarantees to the small minority of borrowers already seriously in arrears, however, looks like a drop in the ocean. It could be an attempt to blunt the fallout from a coming wave of adjustable rate mortgage resets that will prompt further defaults, adding more homes to already high inventories. Mr Bush may hope that, after the deluge, designing a wider role for the Federal Housing Administration might enable a new generation of buyers to step in and stabilise prices - albeit at lower levels than today.