WASHINGTON – Faced with mounting home foreclosures and job losses, Federal Reserve Chairman Ben Bernanke is under immense political and public pressure to provide relief and help turn around a faltering economy.
Bernanke was to visit Capitol Hill on Wednesday to give members of Congress' Joint Economic Committee an update on the country's economic situation. The Fed chief was expected to assure lawmakers that the central bank was prepared to keep on lowering a key interest rate and take any other actions that may be necessary to keep problems from spreading even more.
A trio of crises — housing, credit and financial — are threatening to push the country into a deep recession. The situation has emerged as a top concern for presidential contenders and a hot-button issue for Congress. It has thrust the White House and the Fed in crisis-management mode.
To try to limit the damage, the Federal Reserve has aggressively cut a key interest rate, now at 2.25 percent, to spur buying and investing by individuals and businesses. Many economists predict the Fed will drop that rate again when it next meets April 29-30.
The Fed also has taken a series of extraordinary steps in recent weeks and months to prop up the nation's financial system, which has been in danger of seizing up.
In a controversial move, the Fed has backed a $29 billion lifeline as part of JP Morgan's deal to take over the troubled Bear Stearns, the nation's fifth largest investment house, which was on the brink of bankruptcy. Bear Stearns had invested heavily in risky mortgage-backed securities that eventually soured with the collapse of the housing market.
In addition, the Fed — in the broadest use of its credit authority since the 1930s — agreed to temporarily let big investment firms obtain emergency financing from the Fed, a privilege that previously had only been granted to commercial banks. Those actions have prompted protests from Democrats and other critics who contend that the Fed is bailing out Wall Street and putting billions of taxpayers' dollars at potential risk. Fed officials and the Bush administration say the actions were warranted to avert a potential meltdown in the entire financial system, something that would have devastating consequences for the overall economy.
Many analysts believe the economy contracted in the first three months of this year, signaling the start of a recession. The government releases first-quarter results later this month. The economy lost jobs in January and February, with many economists bracing for more losses when the report for March is released on Friday.
On Tuesday Bernanke met privately with House Republicans, and participants said he steered clear of saying the country is in a recession.
House Minority Leader John Boehner, R-Ohio, told reporters beforehand that the meeting was called because of "great concern about where our economy is headed."