US economic recession could end in 2009
February 25th 2009 07:16
The recession, which started in December 2007, already has killed a net total of 3.6 million jobs. Housing, credit and financial crises — the worst since the 1930s — plunged the economy into its worst slide in a quarter-century at the end of last year.
Federal Reserve Chairman Ben Bernanke told Congress that the economy is suffering through a “severe contraction” and pledged to use all available tools to lift the country out of the recession that already has cost millions of Americans their jobs.In testimony to the Senate Banking Committee, Bernanke said the economy is likely to keep shrinking in the first six months of this year. Bernanke hoped that the current recession will end this year, but said there were significant risks to that forecast. Any economic turnaround will hinge on the success of the Fed and the Obama administration in getting credit and financial markets to operate more normally again.
Bernanke said that 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,” Among the risks to any recovery are if economic and financial troubles in other countries turn out to be worse than anticipated, which would hurt U.S. exports and further aggravate already shaky financial conditions in the United States.
“Nevertheless, despite these favorable developments, significant stresses persist in many markets,” he added that Notably most securitization markets remain shut and some financial institutions remain under pressure, although Bernanke didn’t mention any financial institutions by name, Citigroup Inc. — the industry’s troubled titan — apparently is in line for additional government help.
When pressed about how much more money the government might need to shore up the nation’s troubled banks, Bernanke didn’t give a figure and said it would depend on the health of banks, how the economy evolves and the margin of safety that regulators believe is needed.Critics worry the Fed’s actions have the potential to put ever-more taxpayers’ dollars at risk and encourage “moral hazard,” where companies feel more comfortable making high-stakes gambles because the government will rescue them.
The public’s anger over the government’s bailout efforts is understandable, the Fed chief said.A lot of this goes against American values of self reliance and responsibility.
Sen. Jim Bunning, R-Ky., criticized the Fed for not releasing the names of banks that borrow from it. But Bernanke said that could create a “stigma” on the banks, possibly putting them in further jeopardy and defeat the purpose of the Fed’s help.
To brace the economy, many analysts predict the Fed will leave its key rate at record lows through the rest of this year. The Fed has said repeatedly that it will explore expanding existing programs to provide loans or buy debt, or come up with new tools to fight the crises.
Bernanke told lawmakers The Fed is “committed to using all available tools to stimulate economic activity and to improve financial market functioning.
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Federal Reserve Chairman Ben Bernanke told Congress that the economy is suffering through a “severe contraction” and pledged to use all available tools to lift the country out of the recession that already has cost millions of Americans their jobs.In testimony to the Senate Banking Committee, Bernanke said the economy is likely to keep shrinking in the first six months of this year. Bernanke hoped that the current recession will end this year, but said there were significant risks to that forecast. Any economic turnaround will hinge on the success of the Fed and the Obama administration in getting credit and financial markets to operate more normally again.
“Nevertheless, despite these favorable developments, significant stresses persist in many markets,” he added that Notably most securitization markets remain shut and some financial institutions remain under pressure, although Bernanke didn’t mention any financial institutions by name, Citigroup Inc. — the industry’s troubled titan — apparently is in line for additional government help.
When pressed about how much more money the government might need to shore up the nation’s troubled banks, Bernanke didn’t give a figure and said it would depend on the health of banks, how the economy evolves and the margin of safety that regulators believe is needed.Critics worry the Fed’s actions have the potential to put ever-more taxpayers’ dollars at risk and encourage “moral hazard,” where companies feel more comfortable making high-stakes gambles because the government will rescue them.
Sen. Jim Bunning, R-Ky., criticized the Fed for not releasing the names of banks that borrow from it. But Bernanke said that could create a “stigma” on the banks, possibly putting them in further jeopardy and defeat the purpose of the Fed’s help.
To brace the economy, many analysts predict the Fed will leave its key rate at record lows through the rest of this year. The Fed has said repeatedly that it will explore expanding existing programs to provide loans or buy debt, or come up with new tools to fight the crises.
Bernanke told lawmakers The Fed is “committed to using all available tools to stimulate economic activity and to improve financial market functioning.
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