Bernanke: economy faces 'numerous difficulties' By JEANNINE AVERSA, AP Economics Writer 20 minutes ago WASHINGTON - Federal Reserve Chairman Ben Bernanke told Congress Tuesday the fragile economy is facing "numerous difficulties" despite the Fed's aggressive interest rate reductions and other fortifying steps. ADVERTISEMENT At the same time, Bernanke, testifying before the Senate Banking... [more]
Bernanke: economy faces 'numerous difficulties' By JEANNINE AVERSA, AP Economics Writer
20 minutes ago
WASHINGTON - Federal Reserve Chairman Ben Bernanke told Congress Tuesday the fragile economy is facing "numerous difficulties" despite the Fed's aggressive interest rate reductions and other fortifying steps.
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At the same time, Bernanke, testifying before the Senate Banking Committee, sounded another warning that rising prices for energy and food are elevating inflation risks. This problem looms even as officials try to cope with persistent strains in financial markets, rising joblessness and housing problems.
The situation, he said, poses "significant challenges" for Fed policymakers as they try to chart the best course for keeping the economy growing, while making sure inflation doesn't dangerously flare up. All the economy's problems — including slumping home values, which threaten to make people feel less wealthy and less inclined to spend in the months ahead — represent "significant downside risks" to economic growth.
Over the rest of this year, the economy will grow "appreciably below its trend rate" mostly because of continued weakness in housing markets, high energy prices and tight credit conditions.
On Wall Street, stocks slumped. The Dow Jones industrials were down around 50 points, after suffering steeper losses earlier in the morning.
Bernanke's testimony comes just two days after the Fed and the Treasury Department came to the rescue of mortgage giants Fannie Mae and Freddie Mac, offering to throw them a financial lifeline.
The Fed chief was later joined by Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Chris Cox, who were summoned to detail the rescue plan.
The two companies hold or guarantee more than $5 trillion in mortgages — almost half of the nation's total. The Bush administration is asking Congress to temporarily increase lines of credit to Fannie and Freddie and to let the government buy their stock. The Fed has offered to let the companies draw emergency loans.
The pledges of aid have raised concerns about the government's role in such financial problems and the risk to taxpayers.
Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, called the plan "unprecedented."
Dodd said the rescue raises serious questions "about the nature of the economic crisis facing our nation, about the ability of these proposals to address this crisis effectively, and about the burden that the American taxpayer potentially is being asked to carry."
Paulson said that if the government extends any financial backing to the two institutions it will be done "under terms and conditions that protect the U.S. taxpayer." He didn't provide details. "This is a backup facility that hopefully it will never be used," Paulson said. The Treasury chief said he hoped that the pledge itself would help to boost eroding investor confidence in the companies.
Sen. Richard C. Shelby of Alabama, the panel's senior Republican, cautioned, "I fear that we're sitting on a financial powder keg." Officials may envision never using the powers, Shelby added, but "this is not an empty gesture.... what if they did?"
On the economic front, inflation has remained high and "seems likely to move temporarily higher in the near term," Bernanke warned.
Indeed, before Bernanke delivered his twice-a-year comprehensive economic assessment to Congress, the Labor Department reported wholesale prices jumped 1.8 percent in June. That left inflation rising over the past year at the fastest pace in more than a quarter-century.
"Given the high degree of uncertainty" about the Fed's economic outlook, Fed policymakers will need to carefully assess incoming information about inflation and economic growth, he said.
The Fed in June signaled an end to its nearly year long rate-cutting campaign because of growing concerns about inflation. Bernanke kept up his tough anti-inflation talk on Tuesday but stressed many other problems that could short circuit economic growth. He seemed to be keeping his options open in terms of rates. Given all the risky cross currents, economists believe the Fed will leave rates alone when they meet on Aug. 5.
Righting wobbly financial markets is key to getting the economy back on track, he said.
"In general, healthy economic growth depends on well-functioning financial markets," Bernanke said. "Consequently, helping the financial markets to return to more normal functioning will continue to be a top priority," he said.
Strengthening regulatory oversight of Fannie and Freddie, Bernanke said, is "job one." Congress is moving ahead on a broad housing rescue package that includes provisions to tighten regulation over the two companies. Bernanke said legislative efforts to help stabilize the housing market — the biggest threat to the economy — are of vital importance.
Bernanke, in the first day of back-to-back appearances on Capitol Hill, said investors are nervous in general because of the cloudy outlook for the economy and credit conditions, feeding a vicious cycle that can be hard to break.
"Many financial markets and institutions remain under considerable stress, in part because the outlook for the economy and thus for credit quality, remains uncertain."
The Fannie and Freddie troubles came on the heels of the failure of IndyMac, a big bank. "Its failure ... was inevitable," Bernanke said because the bank was weighed down by low-quality mortgages. "All banks are being challenged by credit conditions now," he said, adding that the Fed is keeping close tabs on the nation's banking sector.
Earlier this year, a run on investment bank Bear Stearns pushed the company to the edge of bankruptcy and into a takeover by JPMorgan Chase, backed financially by the Fed. That prompted critics to call it a government bailout, putting taxpayers money at risk.
Bernanke defended its decisions in the cases of Bear Stearns as well as Fannie and Freddie, and rebuffed claims that the government is helping Wall Street at the expense of Main Street. If problems aren't contained, they can ripple throughout the economy, hurting everyone, he said. "Financial stability is critical to economic stability."
The Fed, in new projections, now believes inflation will be higher this year than previously thought, with prices rising as high as 4.2 percent under one inflation measure.
Growth for the year will be sluggish — at best 1.6 percent growth — but not as bad as previously forecast, helped by the government's $168 billion stimulus, including rebates. The unemployment rate, which could rise as high as 5.7 percent this year, is the same as earlier projections.
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Response by LICComment
almost 18 years ago
Posts: 3610
Member since: Dec 2007
So it's Bush's fault that food and energy prices are rising? Not the Democrats who have blocked domestic oil drilling and nuclear power for years, not all of Congress (including democrats) who lavish ridiculous farm subsidies and pass stupid ethanol policies? petr save this stuff for your next Communist Party meeting, because people here aren't that stupid.
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
LIC - Bush fault about rising energy prices - absolutely yes. 8 years of no energy policy, unnecessary war in iraq. It is completely his administrations fault that energy costs are rising.
You think that it is a total coincidence that an Oil man supported into office by oil man becomes President and Oil costs increase over 500% during his term?
Hmm yeaah - Republicans had control of the White House and Congress but all this is the democrats fault.
PArtisan moron.
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Response by LICComment
almost 18 years ago
Posts: 3610
Member since: Dec 2007
And what was Clinton's energy policy?
You biased fool.
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Response by manhattanguy
almost 18 years ago
Posts: 152
Member since: Mar 2008
Both parties suck. But I agree with you that this administration didn't do anything useful when it comes to solving the energy crisis. The amount of money they spent in the war in Iraq could have been spent towards finding an energy solution (and a million other things).
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
Clintons Energy Policy
Ensuring the availability of affordable and environmentally responsible energy is central to maintaining our unparalleled economic growth and prosperity. For more than seven years, the Clinton-Gore Administration has consistently pursued a forward-looking and balanced approach to meeting America’s energy needs in the 21st century. This strategy supports continued development of traditional energy sources, and aggressive efforts to improve energy efficiency and promote alternative energy sources.
To ease reliance on imported oil, the Administration has invested in new technologies that have significantly enhanced recovery of domestic oil reserves. To promote clean energy alternatives, the Administration has expanded research and development of solar, wind, biomass and other renewable sources. To save energy and money, the Administration has adopted new energy-efficiency standards for appliances and forged new partnerships with industry. These include Energy Star® and the Partnership for a New Generation of Vehicles (PNGV), which is on track to producing affordable vehicles that get three times the mileage of today’s models. And to demonstrate federal leadership, the President has issued Executive Orders directing federal agencies to dramatically improve the energy efficiency of their buildings and automotive fleets. To save energy and tax dollars, we have taken dramatic steps to reduce the energy use of the federal government, the larger energy user in the world, reducing energy consumption by 30 percent and saving $800 million a year.
He also didnt invade Iraq in an effort to give the IRaqi oil to his TExas oil buddies.
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
2 quick questions
1 - What President instituted a program of conservation and alternative energy research, as well as, promised that America would never be held hostage to suppliers of foreign oil? This same President installed solar panels on the roof of the White House and reduced the amount of oil imported into the US by 50% during his term?
2 - what President then came into office ripped the solar panels off the roof of the white house and increased oil imports into the country by over 3000%?
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Response by LICComment
almost 18 years ago
Posts: 3610
Member since: Dec 2007
So, Clinton wrote a nice sound bite and did nothing regarding energy. You sound more and more like a partisan joke trying to defend one administration and entirely blame another when both of them, along with both the Republican and Democrat Congresses, have done nothing to enhance our energy situation.
You probably love Al Gore talking about global warming as he travels the world in his private jet and has a house that uses more energy than the rest of the state.
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Response by ba294
almost 18 years ago
Posts: 636
Member since: Nov 2007
petrfitz,
Clinton voted "yes" to war along with many other democrats. so why blame bush now? The result of the war was disaster but it was unavoidable. No one forsees the future and it was the right move at the time.
It was Clinton's administration who started all this health care mess in the US. Who introduced HMO, and belly up the insurance companies and lawyers? I believe in capital gain taxes, etc...but democrats do nothing but spend on nothing but garbage, non productive, ass dragging lowlife.
By the way, Clinton gave the North Koreans the Nuclear reactor to build the nukes. North Koreans helped the Iranians to build their nukes, and Bush has to deal with all this nonsense.
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
ba so if you say that Clinton gave North Koreans a reactor then you also agree that Reagan and HW Bush gave Saddam WOMD, the IRans Nuclear Reactors, and trained bin Ladento fight the Soviets?
Or do you only point fingers at Clinton?
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Response by LICComment
almost 18 years ago
Posts: 3610
Member since: Dec 2007
petr only points fingers at one party, which tells you all you need to know.
Didn't Clinton have Bin Laden dead to rights and let him go? Didn't Clinton screw up Somalia in 93? Didn't Clinton do nothing and embolden the terrorists after the first WTC bombing, the Cole bombing and the destruction of our embassies? There is plenty of blame to go around to both parties.
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
hmm interesting just came across the wire:
"WASHINGTON (July 15) - Soaring costs for gasoline and food pushed inflation at the wholesale level up by a larger-than-expected amount in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.
The Labor Department reported that wholesale prices jumped by 1.8 percent last month, the biggest one-month rise since last November. Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains. "
the largest inflation in 27 years since 1981. Hmm a republican in the White House now, and a Republican was in the White House in 1981.
I guess Facts lie!
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
LIC whom was HW Bush meeting with on the morning of 9/11?
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
"McCain has received more than $1.3 million from the oil & gas industry according to a Campaign Money Watch analysis of data from the nonpartisan Center for Responsive Politics Center.
Like Bush, McCain is surrounded by Big Oil lobbyists. At least 22 staffers or fundraisers for McCain's campaign have lobbied for Big Oil. They have represented 5 of the 9 oil companies in the 2008 Fortune 200.
It shouldn't be a surprise that McCain is buddy-buddy with Big Oil. According to the Center for American Progress Action Fund, McCain's tax plan gives nearly $4 billion in tax breaks to the top five American oil companies."
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Response by LICComment
almost 18 years ago
Posts: 3610
Member since: Dec 2007
So it was Reagan's fault the economy was a mess before he took office. Good one, Petr,
Please tell me you are one of the lunatics who believe Bush was behind the 9/11 attacks. Just say that you believe the conspiracy theory, because if you do, everyone here can see what a deranged idiot you are.
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
oh sorry LIC i forgot that everything bad that happens when a Republican is actually in charge should be blamed on someone else preferably Clinton, gays, or Mexicans.
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Response by bjw2103
almost 18 years ago
Posts: 6236
Member since: Jul 2007
petrfitz, drawing questionably direct cause-and-effect lines is not the same thing as stating facts. Please stop polluting this board with your attitude and proselytizing.
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Response by ba294
almost 18 years ago
Posts: 636
Member since: Nov 2007
petr,
Everyone makes mistake. Not saying the republicans did the right thing.
Clinton and Bush administration both made terrible mistakes but you can't point fingers at one party. My point was you can't pick a party or blame this recession solely on republicans. I AGREE 100% with LIC that with Obama in the white house, things will ONLY get worse. Someone needs to step in and control this bleeding deficit, inflation, etc (due to war, which IMO unavoidable) and that someone is McCain (republican)
Democrats policy doesn't work, PERIOD (not for us).
If you are piss poor, in public housing, food stamps, medicaid health...GO FOR DEMOCRATS.
I just feel sick thinking that my hard earned dollars are going to these bottom feeders and illegal aliens.
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
bjw - you are right - I will leave the board to the toe the line RNC spitting partisan morons.
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Response by mbz
almost 18 years ago
Posts: 238
Member since: Feb 2008
The President has so little bearing on the economy - this discussion is pointless. Policy (good or bad) often impacts the economy with a 5-15 year lag. Policy that is designed to impact things more quickly (tax rebates) is typically insignificant. I'm not saying some aren't better than others but comparing the state of the economy with the incumbent president makes no sense.
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
apologist
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Response by ba294
almost 18 years ago
Posts: 636
Member since: Nov 2007
Petre,
if you had a software development company up in Montreal, there is no way you are supporting obama. You should be thanking Bush for all the wonders he had done for you. In return, your employees should be thanking you for the jobs you've created.
I think you are just upset about the deficit, recession, war, etc and pointing fingers at the current govt. Start supporting McCain...can't be as bad as Bush.
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Response by totallyanonymous
almost 18 years ago
Posts: 661
Member since: Jul 2007
"LIC - Bush fault about rising energy prices - absolutely yes. 8 years of no energy policy, unnecessary war in iraq. It is completely his administrations fault that energy costs are rising.
You think that it is a total coincidence that an Oil man supported into office by oil man becomes President and Oil costs increase over 500% during his term?"
But wait, I thought Iraq was a "war for oil"? First, Bush is evil and lied so we could invade Iraq for oil, now you say he has no energy policy? Which is it? Do you liberals just knee jerk blame this guy when you're dicks dont get hard too?
If these pussies started drilling tomorrow gas would drop 50 cents in a day. Moreover, we should in fact take over the Iraqi oil fields. Lord knows we earned it.
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Response by surdy
almost 18 years ago
Posts: 121
Member since: May 2008
I don't know what you guys are fighting about. Obama is another Bush waiting to happen. After all Obama is just another consummate politician.
So it's Bush's fault that food and energy prices are rising? Not the Democrats who have blocked domestic oil drilling and nuclear power for years, not all of Congress (including democrats) who lavish ridiculous farm subsidies and pass stupid ethanol policies? petr save this stuff for your next Communist Party meeting, because people here aren't that stupid.
LIC - Bush fault about rising energy prices - absolutely yes. 8 years of no energy policy, unnecessary war in iraq. It is completely his administrations fault that energy costs are rising.
You think that it is a total coincidence that an Oil man supported into office by oil man becomes President and Oil costs increase over 500% during his term?
Hmm yeaah - Republicans had control of the White House and Congress but all this is the democrats fault.
PArtisan moron.
And what was Clinton's energy policy?
You biased fool.
Both parties suck. But I agree with you that this administration didn't do anything useful when it comes to solving the energy crisis. The amount of money they spent in the war in Iraq could have been spent towards finding an energy solution (and a million other things).
Clintons Energy Policy
Ensuring the availability of affordable and environmentally responsible energy is central to maintaining our unparalleled economic growth and prosperity. For more than seven years, the Clinton-Gore Administration has consistently pursued a forward-looking and balanced approach to meeting America’s energy needs in the 21st century. This strategy supports continued development of traditional energy sources, and aggressive efforts to improve energy efficiency and promote alternative energy sources.
To ease reliance on imported oil, the Administration has invested in new technologies that have significantly enhanced recovery of domestic oil reserves. To promote clean energy alternatives, the Administration has expanded research and development of solar, wind, biomass and other renewable sources. To save energy and money, the Administration has adopted new energy-efficiency standards for appliances and forged new partnerships with industry. These include Energy Star® and the Partnership for a New Generation of Vehicles (PNGV), which is on track to producing affordable vehicles that get three times the mileage of today’s models. And to demonstrate federal leadership, the President has issued Executive Orders directing federal agencies to dramatically improve the energy efficiency of their buildings and automotive fleets. To save energy and tax dollars, we have taken dramatic steps to reduce the energy use of the federal government, the larger energy user in the world, reducing energy consumption by 30 percent and saving $800 million a year.
He also didnt invade Iraq in an effort to give the IRaqi oil to his TExas oil buddies.
2 quick questions
1 - What President instituted a program of conservation and alternative energy research, as well as, promised that America would never be held hostage to suppliers of foreign oil? This same President installed solar panels on the roof of the White House and reduced the amount of oil imported into the US by 50% during his term?
2 - what President then came into office ripped the solar panels off the roof of the white house and increased oil imports into the country by over 3000%?
So, Clinton wrote a nice sound bite and did nothing regarding energy. You sound more and more like a partisan joke trying to defend one administration and entirely blame another when both of them, along with both the Republican and Democrat Congresses, have done nothing to enhance our energy situation.
You probably love Al Gore talking about global warming as he travels the world in his private jet and has a house that uses more energy than the rest of the state.
petrfitz,
Clinton voted "yes" to war along with many other democrats. so why blame bush now? The result of the war was disaster but it was unavoidable. No one forsees the future and it was the right move at the time.
It was Clinton's administration who started all this health care mess in the US. Who introduced HMO, and belly up the insurance companies and lawyers? I believe in capital gain taxes, etc...but democrats do nothing but spend on nothing but garbage, non productive, ass dragging lowlife.
By the way, Clinton gave the North Koreans the Nuclear reactor to build the nukes. North Koreans helped the Iranians to build their nukes, and Bush has to deal with all this nonsense.
ba so if you say that Clinton gave North Koreans a reactor then you also agree that Reagan and HW Bush gave Saddam WOMD, the IRans Nuclear Reactors, and trained bin Ladento fight the Soviets?
Or do you only point fingers at Clinton?
petr only points fingers at one party, which tells you all you need to know.
Didn't Clinton have Bin Laden dead to rights and let him go? Didn't Clinton screw up Somalia in 93? Didn't Clinton do nothing and embolden the terrorists after the first WTC bombing, the Cole bombing and the destruction of our embassies? There is plenty of blame to go around to both parties.
hmm interesting just came across the wire:
"WASHINGTON (July 15) - Soaring costs for gasoline and food pushed inflation at the wholesale level up by a larger-than-expected amount in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.
The Labor Department reported that wholesale prices jumped by 1.8 percent last month, the biggest one-month rise since last November. Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains. "
the largest inflation in 27 years since 1981. Hmm a republican in the White House now, and a Republican was in the White House in 1981.
I guess Facts lie!
LIC whom was HW Bush meeting with on the morning of 9/11?
"McCain has received more than $1.3 million from the oil & gas industry according to a Campaign Money Watch analysis of data from the nonpartisan Center for Responsive Politics Center.
Like Bush, McCain is surrounded by Big Oil lobbyists. At least 22 staffers or fundraisers for McCain's campaign have lobbied for Big Oil. They have represented 5 of the 9 oil companies in the 2008 Fortune 200.
It shouldn't be a surprise that McCain is buddy-buddy with Big Oil. According to the Center for American Progress Action Fund, McCain's tax plan gives nearly $4 billion in tax breaks to the top five American oil companies."
So it was Reagan's fault the economy was a mess before he took office. Good one, Petr,
Please tell me you are one of the lunatics who believe Bush was behind the 9/11 attacks. Just say that you believe the conspiracy theory, because if you do, everyone here can see what a deranged idiot you are.
oh sorry LIC i forgot that everything bad that happens when a Republican is actually in charge should be blamed on someone else preferably Clinton, gays, or Mexicans.
petrfitz, drawing questionably direct cause-and-effect lines is not the same thing as stating facts. Please stop polluting this board with your attitude and proselytizing.
petr,
Everyone makes mistake. Not saying the republicans did the right thing.
Clinton and Bush administration both made terrible mistakes but you can't point fingers at one party. My point was you can't pick a party or blame this recession solely on republicans. I AGREE 100% with LIC that with Obama in the white house, things will ONLY get worse. Someone needs to step in and control this bleeding deficit, inflation, etc (due to war, which IMO unavoidable) and that someone is McCain (republican)
Democrats policy doesn't work, PERIOD (not for us).
If you are piss poor, in public housing, food stamps, medicaid health...GO FOR DEMOCRATS.
I just feel sick thinking that my hard earned dollars are going to these bottom feeders and illegal aliens.
bjw - you are right - I will leave the board to the toe the line RNC spitting partisan morons.
The President has so little bearing on the economy - this discussion is pointless. Policy (good or bad) often impacts the economy with a 5-15 year lag. Policy that is designed to impact things more quickly (tax rebates) is typically insignificant. I'm not saying some aren't better than others but comparing the state of the economy with the incumbent president makes no sense.
apologist
Petre,
if you had a software development company up in Montreal, there is no way you are supporting obama. You should be thanking Bush for all the wonders he had done for you. In return, your employees should be thanking you for the jobs you've created.
I think you are just upset about the deficit, recession, war, etc and pointing fingers at the current govt. Start supporting McCain...can't be as bad as Bush.
"LIC - Bush fault about rising energy prices - absolutely yes. 8 years of no energy policy, unnecessary war in iraq. It is completely his administrations fault that energy costs are rising.
You think that it is a total coincidence that an Oil man supported into office by oil man becomes President and Oil costs increase over 500% during his term?"
But wait, I thought Iraq was a "war for oil"? First, Bush is evil and lied so we could invade Iraq for oil, now you say he has no energy policy? Which is it? Do you liberals just knee jerk blame this guy when you're dicks dont get hard too?
If these pussies started drilling tomorrow gas would drop 50 cents in a day. Moreover, we should in fact take over the Iraqi oil fields. Lord knows we earned it.
I don't know what you guys are fighting about. Obama is another Bush waiting to happen. After all Obama is just another consummate politician.