Fed Chief Downplays Recession Talk
STEVE INSKEEP, host:
Even though the economy is facing some big problems, the chairman of the Federal Reserve says he's optimistic.
Ben Bernanke answered some questions yesterday on Capitol Hill. Lawmakers wanted to know about the likelihood of a recession and a threat posed by all those questionable home loans. But Bernanke told senators that despite those concerns, he believes the economy will continue to grow.
Here's NPR's Jack Speer.
JACK SPEER: Bernanke's assessment of the economy was carefully balanced. He told members of the Joint Economic Committee he didn't see any evidence that problems in the subprime mortgage market were spilling over to affect the rest of the economy. But he says it's getting more difficult to be sure about that.
Mr. BEN BERNANKE (Chairman, Federal Reserve): The correction in the housing market could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector. Moreover, we could see yet greater spillover from the weakness in housing to employment and consumer spending that has occurred thus far.
SPEER: But Democratic Senator Charles Schumer wanted to know why the Fed didn't do more to prevent abusive lending from happening, and he raised questions about the Fed's ability to regulate mortgage lending when so much of it occurs outside the Fed's reach.
Senator CHARLES SCHUMER (Democrat, New York): It seems to me it makes no sense to say we're regulating the bank subprime area when it'll just shift over to the non-bank. Don't you agree with that?
Mr. BERNANKE: I agree with that and I think that looking at alternative ways of enforcing the rules is worthwhile.
SPEER: The New York senator says he plans to introduce legislation calling for national regulation of all mortgage brokers. On the prospects for recession, a subject broached by former Fed chairman Allan Greenspan recently, Bernanke aid he doesn't think that's in the cards - at least not over the next several months.
Mr. BERNANKE: There seems to be a sense that expansions die of old age, that after they reach a certain point, then they naturally begin to end. I don't think the evidence really supports that.
SPEER: Bernanke said inflation remains a bigger concern than recession for the time being.
Jack Speer, NPR News, Washington. Transcript provided by NPR, Copyright NPR.