Bernanke will offer testimony today before the House Budget Committee for insights into what can be done to help minimize the negative effects caused by the nation’s credit crunch and housing market decline. The major concern is that, in a domino-like effect, those problems may cause consumers to reduce spending, which in turn would force businesses to cut jobs and/or reduce hiring, resulting in a recession.
An economy in peril is a major worry on Wall Street, and has voters worried as well. How to remedy the situation is a central message of every politician in the race for the presidency.
Bernanke, who assumed leadership at the Fed almost two years ago, says he is “generally supportive" of lawmakers and Bush passing a stimulus bill, according to Joint Economic Committee Chairman Sen. Charles Schumer (D-NY). According to Schumer, Bernanke said that “While he wasn't going to endorse a specific plan, if an economic stimulus package was properly designed and enacted so that it enters the economy quickly, it could have a very positive effect on the economy.”
With the economy in turmoil, topping President Bush's to-do list immediately after his return from the Middle East is a conference call today with congressional leaders in both parties to discuss a possible short-term stimulus package. A solution can’t come too soon, considering the recent string of dismal economic reports, declining retail sales, spiraling unemployment, waning manufacturing activity, billions in bank losses, and rollercoaster results on Wall Street.
Bernanke pledged last week to aggressively cut a key interest rate as needed to shore up the economy. Many economists believe the Fed will lower its key rate, now at 4.25 percent, by a bold half-percentage point at its next meeting on Jan. 30. Although the Fed reduced rates three times last year, beginning in September, critics on Wall Street and elsewhere call the action too little, too late.