WASHINGTON – Senate Banking Committee Chairman Christopher Dodd urged Federal Reserve Chairman Ben Bernanke on Tuesday to use "all the tools available" so that a spreading credit crisis doesn't undermine the national economy.
Dodd, a Connecticut Democrat who is seeking his party's presidential nomination, met with Bernanke and Treasury Secretary Henry Paulson — two men playing key roles in trying to ensure that problems plaguing the financial markets don't get worse.
While urging policymakers do all they can to ease the credit crunch, the senator told reporters after the closed-door meeting that he did not specifically ask Bernanke to lower a key interest rate called the federal funds rate, which has stood at 5.25 percent for more than a year.
So far the Fed has been reluctant to reduce the funds rate which is the interest rate that banks charge each other on overnight loans and is the central bank's main lever to influence economic activity. A cut in the funds rate would cause commercial banks to lower their prime lending rate charged to many consumers and businesses.
While a lower funds rate could have positive implications, Dodd stressed that he did not want to appear to be putting "political pressure on the Fed."
Dodd said he welcomed the Fed's steps thus far to deal with the credit problems. The Fed last week sliced its discount rate to banks and has been pumping billions of dollars into the financial system. Dodd said he was impressed with these actions.
The meeting with Bernanke and Paulson went well and was positive, Dodd said.