Why is Bernanke in Jackson, Wyoming (or is it Jackson Hole)?

I hear Jackson is lovely this time of year. Today, the small town near the Idaho border boasted a sunny 56° with humidity near 15%. In addition to pleasant weather, there’s much to see in this Rocky Mountain playground.

Located near the National Elk refuge and just south of Grand Teton National Park, Jackson is famous for both the largest ball of barbed wire and the largest arches of shed elk antlers in the world. It’s a relaxing summer retreat if you happen upon this town, or the nearby valley called Jackson Hole.

That may be why the Federal Reserve Bank of Kansas City holds its annual Economic Symposium in Jackson Hole, Wyoming. Away from the bustle of Kansas City, Jackson offers attendees a more-reflective environment than would be afforded in a larger city.

Fed Chairman Ben Bernanke had his work cut out for him at the conference. Two banks with nearly $6 trillion exposure to mortgage problems are hovering near worthless. Fannie Mae and Freddie Mac stand in dire need for additional funding or they will collapse. In addition, another investment bank, Lehman Brothers appears to be heading the way of Bear Stearns. This morning, the fourth largest U.S. securities firm pleasantly surprised the market by announcing a Korean bank’s offer to purchase Lehman. But this offer just underscores continued problems in financials.

So how did Bernanke respond today?

Bernanke was candid about the weak economy. Speaking to attendees, Bernanke said: “Although we have seen improved functioning in some markets, the financial storm that reached gale force…has not yet subsided, and its effects…are becoming apparent in the form of softening economic activity and rising unemployment.”

Bernanke also defended the Fed’s decision to bailout Bear Stearns. “The economy could hardly have remained immune from such severe financial disruptions.” These comments suggest that another bailout is imminent for Fannie Mae and Freddie Mac. If a little Bear on Wall Street can’t go bankrupt, how much more does the corner of the mortgage market need a help from the Fed? Bernanke’s implied answer to the question: “we’re here to help.”

The market seemed to like Bernanke’s comments. As of this post, the Dow is up 181 points, and the S&P is up nearly 1%. By most accounts, we’re not in the best of times. But more working vacations for the Fed in Jackson could be just what the Bulls ordered.

Have a pleasant weekend.