WASHINGTON - Washington is again focused on the economy for a second day in an effort to avoid a recession and guard against rising prices
Federal Reserve Chairman Ben Bernanke was back on Capitol Hill Wednesday. This time he appeared before the House Financial Services Committee, but offered the same frank assessment he gave Tuesday to a Senate committee.
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"The economy continues to face numerous difficulties, including ongoing strains in financial markets, declining house prices, a softening labor market, and rising prices of oil food and some other commodities," Bernanke said.
Bernanke said the Fed faces "significant challenges" as it tries to resuscitate the economy - and that's seen playing out across the board, from fear on Wall Street to Americans on Main Street paying more for food and fuel.
"Families are facing hardships. this is clearly a rough time," Bernanke said. "It is clear growth has been slow and the labor market is weak. So conditions are tough on average families."
Fannie Mae & Freddie Mac
Concerns about the economy and the financial system intensified after last week's collapse of IndyMac Bank - where nervous depositors have been lining up trying to get their money.
Worries also abound regarding the government's rescue of mortgage giants Fannie Mae and Freddie Mac, which together own or guarantee nearly half of the nation's mortgage debt.
Bernanke told the House committee that the mortgage lenders are in "no danger of failing."
Bernanke said the "best solution" is to keep Fannie and Freddie "in their current form" instead of the government taking over the operations of the two financial institutions.
Democrats: A Second Stimulus Package?
With deep American doubts about the economy, Democrats are now considering a second economic stimulus package to bring relief to consumers.
"We will be working on another stimulus package and we hope that we will once again be able to work in a strong bipartisan way," House Speaker Nancy Pelosi said.
The initial rebates had a positive impact, but Democrats say not enough to offset rising costs.
"I think conditions clearly call for a second stimulus," said Rep. Barney Frank, D-Mass., chairman of the Financial Services panel.
The Bush administration says it's too early to start on another package while the first one has yet to fully work its way through the economy.
Bernanke echoed President Bush's statements when he said it was a "bit premature" to go that route just yet, but he didn't rule the idea out. Bernanke said that he believes that the most important action lawmakers could take is to shore up the faltering housing market.
Economic Forecast for Remainder of 08'
When asked about his forecast for the economy for the rest of the year, Bernake said that it's difficult to map out a course when uncertainty abounds.
He predicted that for the remainder of the year, the economy will grow "appreciably below its trend rate." This is mostly due to continued weakness in housing markets, high energy prices and tight credit conditions.
At the same time, Bernanke had a warning for Congress. He said inflation has remained high and "seems likely to move temporarily higher in the near term."
Sources: CBN News, The Associated Press