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Bernanke Warns Us Consumers Cannot Pay For Global Recovery

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Wednesday, 22 July 2009

The head of the U.S. central bank warned other countries should not depend on American consumers to pay for a global economic recovery.

Federal Reserve Chairman Ben Bernanke told a Senate hearing Wednesday there are some signs the United States economy is starting to pull out of recession. But he also said the recovery will be slow and that he does not expect U.S. consumers to come "roaring back."

The Fed chief said the U.S. has been telling trading partners, especially in Asia, to find ways to encourage their own consumers to buy more goods. He said there is evidence that is happening in countries like China.

Lawmakers in the world's largest economy have been expressing frustration in recent days about what some of them see as a lack of progress on the economy.

During Wednesday's hearing, the Fed chairman was repeatedly questioned about the central bank's role in economic crisis.

Senate Banking Committee Chair Sen. Christopher Dodd (L); Sen. Richard Shelby, committee's ranking Republican, listen to Fed Chair Ben Bernanke (not seen), 22 Jul 2009Republican Senator Richard Shelby of the southern U.S. state of Alabama criticized the Fed's handling of its regulatory responsibilities. He said the financial crisis would not have been as severe if the Federal Reserve had done a better job overseeing risky behavior by banks.

Many senators are worried about proposals by the Obama administration to overhaul the country's financial regulations and give most of the responsibility to the Federal Reserve.

Senators also criticized the central bank's response to the financial crisis, complaining that many small businesses and consumers are still having a very difficult time accessing credit.

Bernanke said the Fed has been directing banks to make loans and noted there have been some improvements in the U.S. housing market.

A report by the U.S. government Wednesday found home prices rose almost one percent in May. And officials said while the market remains volatile, home prices appear to be stabilizing.

A separate report showed applications for home loans were also up, increasing almost three percent in the past week.

Some economists blame the collapse of the U.S. housing market for helping to spark the global financial crisis.  

Still, the Fed chairman told lawmakers the country's rising unemployment rate remains the biggest threat.  

Unemployment in the U.S. is at a 26-year-high of 9.5 percent.

Some information for this report was provided by AP and Reuters. 


Wednesday, 22 July 2009

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