Bernanke Says Economic Recovery Close to Faltering

Federal Reserve Chairman Ben Bernanke says the economic recovery "is close to faltering" and the central bank is prepared to take further steps to support it.

The economy is growing more slowly than the Federal Reserve had expected, Bernanke said Tuesday before the congressional Joint Economic Committee. He said the biggest factor depressing consumer confidence is poor job growth.

"We need to make sure that the recovery continues and doesn't drop back and that the unemployment rate continues to fall downward," Bernanke said.

Stocks came off their morning lows after Bernanke inferred that the Fed could adopt additional stimulus measures in the coming months. The Dow Jones industrial average had fallen more than 200 points but recovered most of those losses to be down only 64 points at midday.

Bernanke offered his grim assessment after the economy barely grew in the first half of the year and it created no net jobs in August. Consumer confidence fell this summer to the lowest point since the recession. Europe's debt crisis has also intensified.

After their September meeting, Fed policymakers warned of significant downside risks to the economic outlook. As a result, the Fed voted to shift $400 billion of the Fed's investment portfolio from short- to longer-term Treasurys to try to drive down long-term rates.

In August, the Fed said it planned to keep short-term rates at record lows until at least mid-2013, assuming the economy remained weak.

Both decisions drew three dissenting votes on the Fed's policy committee. The three dissents, all from regional Fed bank presidents, were the most dissents in nearly 20 years.

Republican leaders in Congress also urged Bernanke and the Fed against taking action to lower rates. The GOP lawmakers and Bernanke have clashed in recent months over how best to invigorate the economy.

On Tuesday, Bernanke wasn't shy in offering Congress more advice: He reiterated his warning that lawmakers should not cut spending sharply while the economy is weak.

In a speech in Cleveland last week, Bernanke called long-term unemployment a "national crisis" and said Congress should take further steps to address it. Bernanke noted that about 45 percent of the unemployed have been out of work for at least six months - a level previously unseen in the six decades since World War II.

In that speech, Bernanke said there was only so much the Fed's interest rate policies could achieve. He said that long-term unemployment, budget deficits and the depressed housing market were three priority areas that Congress should address.

Tuesday is the first time Bernanke is discussing his economic outlook with lawmakers since he delivered the Fed's twice-a-year economic report to Congress in July. In that testimony, Bernanke laid out steps the central bank could take to support economic growth.

One of the remaining options is a third round of bond buying that would expand the Fed's holdings of securities, already at record levels. Another is reducing the interest the Fed pays banks for their excess reserves. That step would be intended to reduce the incentive for banks to keep their money at the Fed. So they might lend more.

The central bank's next policy meeting is scheduled for Nov. 1-2. Because the economy is still struggling to grow, many private economists think the Fed will take some further step to try to reduce the risk of another recession.

The economy slowed to an annual growth rate of just 0.9 percent in the first six months of this year. Forecasters think growth will rebound only slightly in the final half of this year - to an annual rate of 2 percent to 2.5 percent.

Growth at that pace would be far too weak to significantly lower the unemployment rate. The rate remained stuck at 9.1 percent in August, a month when employers didn't add any jobs at all.

On Friday, the government will issue the jobs report for September.

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cray542464

So we continue the SAME policies to address this??

October 06 2011 at 2:26 PM Report abuse rate up rate down Reply
Big John

When oh when are you silly people out there going to quit blaming Obama for the financial meltdown of 2008 and the recession it brought on. If you want to get the country going you have to first learn from the past and be able to admit how the problem started and how it went out of control. Then you have to work together to try and correct past mistakes and all work for the betterment of the country. You can keep playing politics and keep doing the same things and expecting different results and nothing will be accomplished.

October 06 2011 at 1:10 PM Report abuse rate up rate down Reply
1 reply to Big John's comment
savemycountry911

We can keep blaming him because most of it is his fault.

October 06 2011 at 9:05 PM Report abuse rate up rate down Reply
Lorraine

why not think positive.

October 06 2011 at 10:40 AM Report abuse rate up rate down Reply
jcrvac

YOU SHOULD KEEP YOUR MOUTH SHUT, JUSY DO YOUR JOB,STOP MAKING ALL THESE INTERVEIW YOUR NOT A CELEBRITY,YOUR JUST A GOVT WOKER.

October 05 2011 at 5:54 PM Report abuse rate up rate down Reply
Family Palermo

There had better not be any more QEs, illicit insider enrichment, 0% free unlimited FED interest money given to the banksters, unlimited 0% interest free loans given to the banksters, bailouts for banksters, TARPs, insider trading for the privileged insiders only, and the like given to the banksters-insurers. The FED had better stop destroying, and had better begin rebuilding what can once again be a free market economy. And this FED had better stop its unabashed enrichment of this insider, politically connected aristocracy.

Wall Street rejoices on the FED's news? Meaning that Wall Street anticipates more gifts for the banksters-insurers, via the FED pipeline, paid-for by we taxpayers?

We think not. We demand not. You elected & appointed had better end this wanton looting of America now & forever. ELIMINATE the FED RESERVE if necessary, but end this looting of America right now.

October 05 2011 at 5:37 PM Report abuse rate up rate down Reply
szigtema

This global economy is killing us, when TU elec, Trane , aetna ins , ect ect send our customer service jobs to third world countries where they can get someone to work for 16 bucks a day while they lay off more and more people here then we have a problem, as long as our polititions are owned, bought , and paid for by special interests we will continue to spiral downward....re elect no one...it is our only hope...

October 05 2011 at 4:48 PM Report abuse rate up rate down Reply
kolblh

Wall Street runs this country!

October 05 2011 at 4:27 PM Report abuse rate up rate down Reply
Barbara

America is and will fall one day. No questions, no alibies, no excuses, it will happen. People are out of work, money and time. This is no longer the good country that our forefathers created. America is now a BIG JOKE!!! Everyone wants to blame the President, congress, Wall street, Banks, etc... Maybe we should blame ourselves for letting it happen. The people protesting at Wall Street aren't going to change the system, but at least they are trying. If more Americans would protest ( peacefully) maybe there would be change.

October 05 2011 at 4:25 PM Report abuse rate up rate down Reply
Larry

Uncle Ben is now saying the economy is not growing. Didn't we already know that. I mean after how many months did it take for him to see what was going on? What little Ben needs to do is, only give lending instutions low interest money for certian types of loans, examples small businesses and home buyers. Instead he offers money to the big banks and Wall street. That has not created jobs, nor has it influenced the public confidence. Putting 100's millions of dollars in the stock market does what? Giving Bank of America 100' millions does what? Nothing for the small guy, just the big bankers and brokers. And Obama says he is for the middle class, show me something Mr. President, please. You are taking care of the super rich and it is apparent you will continue to do so.

October 05 2011 at 3:57 PM Report abuse +1 rate up rate down Reply
marine1942

Ben & Berry aught to know--they put us in this hole

October 05 2011 at 11:58 AM Report abuse +3 rate up rate down Reply