Fed Chief Endorses Stimulus
Updated from 11:07 a.m. EST
Federal Reserve Chairman Ben Bernanke supported the case for both easy monetary policy and fiscal stimulus in his comments on Capitol Hill Thursday morning.
After outlining the string of events that led the Fed to forecast a weak growth environment for the U.S. economy in 2008 and perhaps into 2009, Bernanke, in a question-and-answer session after his speech, said a stimulus package "would be significant, not just window dressing." As he did in
"The baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced," said Bernanke in his testimony. The chairman noted the continuing recession in the residential real estate market and made mention of "disappointing" labor market conditions that threaten consumer spending trends, which have helped support growth through the third quarter of 2007.Bernanke also highlighted "sluggish" corporate spending at the end of the year. Stronger export activity was really the one strong point the chairman could identify as a possible offset to the weak growth forecast. Bernanke's testimony capped an already tumultuous morning for the markets. The S&P 500 Index was down 23 points, or 1.7% by midday, and the Dow Jones Industrial Average was down over 150 points, or 1.2%. Merrill Lynch (MER) began the day by reporting a nearly
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