The top architects of the fiscal bailout package are again issuing stern warnings about the future of the economy and calling for broad new regulations that would equip the Federal Reserve with even more tools to combat the slowdown.
Speaking in Austin, Texas on Dec. 1, Ben Bernanke, chairman of Federal Reserve, defended the central bank’s approach to the crisis so far, warned of a tough road ahead and advocated for more intervention.
Speaking in Washington the same day, Treasury Secretary Henry M. Paulson Jr. concurred, acknowledging “the journey ahead will continue to be a difficult one,” according to a Dec. 2 story in The New York Times.
Fiscal-policy officials are looking for more regulatory ammunition particularly in areas they feel are critical to the economy.
Bernanke, making his first major policy speech since the end of October, the Times said, acknowledged the limitations of interest rate cuts and suggested more attention would be paid to backstopping credit markets. Yet at the same time, Bernake indicated his preparedness for a December rate cut.
His view of the country’s immediate financial future was somber.
“The likely duration of the financial turmoil is difficult to judge,” he said. “But even if the functioning of financial markets continues to improve, economic conditions will probably remain weak for a time,” citing job losses, weak consumer confidence and a lack of credit, all significant drags on consumer spending.
Bernanke also acknowledged the limits of the Fed’s actions from the last few months, the Times said.
“Judging the effectiveness of the Federal Reserve’s liquidity programs is difficult,” he said, making note of the fact credit markets were still under lockdown. “But I am confident that market functioning would have been more seriously impaired in the absence of our actions.”
This article was submitted by Kathleen O’Connor, a contributing writer for Biz2Credit. Biz2Credit is a small business marketplace that provides entrepreneurs with the latest industry news and financial advice. Send all questions to firstname.lastname@example.org.