You are here
WASHINGTON, D.C. – Federal Reserve Bank Chairman Ben S. Bernanke told Congress yesterday the central bank was doing everything it could to unlock credit markets and encourage lending and borrowing. Nevertheless, he predicted a full recovery is still at least a year away -- if the administration, Congress and Fed are successful in restoring "some measure of financial stability."
"Only if that is the case, in my view -- there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery," said Bernanke, according to a report by The New York Times.
Bernanke reassured investors that he would resist any nationalization of the big banks. "We don’t need majority ownership to work with the banks," he said, following reports that Citigroup asked the government to take up to a 40 percent stake in return for more assistance.
The Fed Chairman made his comments to Congress as the job market continued to deteriorate. The unemployment rate, which rose to 7.6 percent in January, will probably reach 8.5 to 8.8 percent by the end of the year, according to Bernanke. The gross domestic product, which fell at an annual rate of 3.8 percent in the last quarter of 2008, will contract 0.5 to 1.25 percent this year.
Two other barometers of the economy brought unwelcome news as the chairman appeared on Capitol Hill.
Home prices in the United States fell at the fastest pace on record in December, according to the Standard & Poor’s Case-Shiller home price index. The value of single-family homes in 20 major metropolitan areas was 18.5 percent lower in December than a year earlier, reported The Times.
Meanwhile, the Conference Board’s Consumer Confidence Index dropped to a new low of 25 in February, from 37.4 a month earlier. That was the lowest since it began tracking consumer sentiment in 1967.
And, Bernanke acknowledged the risk that the economy could become even worse due to the global nature of the economic slowdown and what he called, the "adverse feedback loop" -- essentially meaning that bad economic and financial news becomes mutually reinforcing and results in an even longer recession.