Federal Reserve Chairman Ben Bernanke says that if Congress passes a second fiscal package they should improve access to credit for consumers, homeowners, and businesses (0:15).
Representative Rosa L. DeLauro (D-Conn.) asked Federal Reserve Chairman Ben Bernanke if the U.S. is in a recession. Bernanke was reluctant to answer, but said the economy is in a serious slowdown regardless of what it is called (0:30)
In a heated exchange with Representative Rosa L. DeLauro (D-Conn.), Federal Reserve Chairman Ben Bernanke said that he would not comment on how much he believed a second fiscal package should be, but said it should be significant (0:20).
Federal Reserve Chairman Ben Bernanke raised the possibility of a second package of fiscal measures during a House Budget Committee hearing.
Bernanke believes that in the context of a threatened economy it would be appropriate, and suggested steps congress could take to make the package most beneficial.
“Any fiscal package should be well-targeted, in the sense of attempting to maximize the beneficial effects on spending and activity per dollar of increased federal expenditure or lost revenue,” said Bernanke.
Bernanke also said that properly timing its release would be a factor so that it would take maximum effect when the economy is expected to be otherwise weak, and that Congress should take care to limit the package’s long term effects on the government’s structural budget deficit.
“If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit consumers, homebuyers, businesses, and other borrowers.”
When prompted, Bernanke declined to state how much Congress should allocate for the package, but said that it should be significant.
Bernanke attributes the recent crisis to the erratic housing market, in which the increase in house prices was followed by a steady decline, coupled with a pattern of irresponsible lending practices.
To mitigate the crisis’s impact, the Treasury Department and the Federal Reserve, along with foreign governments and their central banks, have expanded currency swap lines with central banks and established temporary programs to aid problems in in the market for commercial paper.
“The Treasury implemented a temporary grantee program for balances in money market mutual funds…the Federal Reserve put in place a temporary lending facility that provides financing for banks to purchase high-quality asset-backed commercial paper for money market funds,” said Bernanke.
According to Bernanke, the bailout bill also offered resources to improve the current situation. These include providing capital to financial institutions, purchasing or guaranteeing troubled mortgages, and increasing the limits of how much the Federal Deposit Insurance Corporation and the National Credit Union Administration covers, raising it to a quarter of a million dollars.
Despite the attempts by the Federal Reserve and Treasury Department, it is apparent that the economy will not be mended overnight. Bernanke said that since the low demand for housing continues to be put up against the glut of unsold homes, residential construction is predicted to contract into next year and that the general downturn in international trade will continue to affect the U.S. Still, Bernanke contends that inflation should meet levels consistent with price stability due to the de-acceleration on the prices of imports.
“Because the time that will be needed for financial normalization and the effects of ongoing credit problems on the broader economy are difficult to judge, the uncertainty currently surrounding the economic outlook is unusually large,” said Bernanke.
Following the hearing Representative Rosa L. DeLauro (D-Conn.) heatedly asked Bernanke if the U.S. was in a recession.
“I don’t think it’s a fair question for the following reason. Recession is a technical term that was created by academics for studying a certain pattern,” said Bernanke.
Bernanke then went on to clarify his answer by responding,
“We are in a serious slowdown in the economy which has very significant consequences for the public and whether it is called a recession or not is of no consequence.”
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Ben Bernanke, Chairman of the Federal Reserve, testified before the House Financial
Services Committee on monetary policy and the state of the US economy. He stated that
despite rising oil and commodity prices and a mortgage crisis facing the United States,
our economy continues to grow, though at a subdued pace. These issues all require action from the US congress. (more…)
Chairman of the Board of Governors of the United States Federal Reserve Ben Bernanke discusses housing foreclosure problems at House Financial Services Committee hearing on monetary policy and the state of the American economy. (0:25)
Chairman of the Board of Governers of the U.S. Federal Reserve Ben Bernanke, discusses the Stimulus Package at House Financial Services Committee hearing on monetary policy and the state of the economy. (0:30)
Federal Reserve Chairman Ben Bernanke testified before members of Congress this afternoon at a House Financial Services Committee hearing regarding monetary policy and the state of the American economy.
The Committee questioned Bernanke about a wide variety of factors that account for the financial successes and failures of our nation. As one of the most important decision makers in US economic policy, Bernanke was most critically interrogated about the fast increasing rate of housing foreclosures facing homeowners unable to pay back “risky” loans they are unable to afford.
In response to such criticisms, Bernanke discussed the need for American consumers to better understand where the money they spend goes. Regarding housing foreclosures and credit debt problems, Bernanke explained the need for American’s purchasing goods and real estate to understand the interest rates they are committing themselves to, as well as the additional fees many purchases are accompanied by.
Also emphasized by Bernanke was his hope that the economic stimulus package recently signed by President Bush would remain temporary. Bernanke discussed his desire to construct a thriving economy, yet at the same time cautioned that the only way for such success to become permanent would be for the American people to learn how to successfully maintain one.
