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WASHINGTON (Feb. 19) - Federal Reserve Chairman Ben Bernanke pledged anew Wednesday to do everything in his power to lift the country out of recession, while defending the extraordinary steps the Fed has taken to fight the worst credit and financial crisis since the 1930s.

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The central bank has slashed a key interest rate to record lows and has launched a series of radical programs in hopes of getting credit - the economy's oxygen - to flow more freely again to American consumers and businesses, and stabilize Wall Street. Such relief would help revive the U.S. economy, which has been mired in recession since December 2007.

"Recent economic statistics have been dismal, with many economies, including ours, having fallen into recession," Bernanke said in remarks to the National Press Club. "In the United States, the Federal Reserve has done, and will continue to do, everything possible within the limits of its authority to assist in restoring our nation to financial stability and economic prosperity as quickly as possible."

In a separate report Wednesday, the Fed sharply downgraded its projections for the U.S. economy this year. Unemployment will rise to between 8.5 and 8.8 percent, the central bank said, from its current level of 7.6 percent.

The Fed also forecast that the economy will shrink between 0.5 and 1.3 percent this year, down from its mid-November estimate that the economy might decline 0.2 percent or grow 1.1 percent.

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Unemployment will "go above 8 (percent) for sure" this year, Bernanke said, adding that the prospects for recovery depend on government policy.

Bernanke said the administration's efforts to rescue the financial sector to get credit flowing again are as important as the $787 billion stimulus package signed into law by President Barack Obama on Tuesday.

"If we can take strong and aggressive action ... we can break the back of this thing and we can begin to see improvements in 2009," Bernanke said. "If we fail ... then the situation will continue to deteriorate."

The Fed has been exploring new tools - as well as expanding existing programs - to provide further economic and financial relief, although Bernanke didn't provide any new details on Wednesday.

With all the Fed's programs to provide loans or buy debt, its balance sheet has mushroomed to just under $2 trillion, from around $900 billion in September.

Critics worry the Fed's actions have the potential to put ever-more taxpayers' dollars at risk, spur inflationary pressure in the future and encourage "moral hazard," where companies feel more comfortable making high-stakes gambles because the government will rescue them.

Bernanke, however, sought to downplay some of those concerns.

"The credit risk with our nontraditional policies is exceptionally low," he said, adding that when the economy is on the mend, the Fed's programs can be quickly reversed "to avoid risks of future inflation."

The great bulk of the Fed's lending is generally short term and backed by more than ample assets, Bernanke said.

In other controversial moves, the Fed last year provided financial backing for JPMorgan Chase's take over of Bear Stearns, and bailed out insurer American International Group. Although this carries "more risk than our traditional activities," Bernanke said the Fed intends over time to sell the assets it holds from those bailouts in a way that maximizes the return to taxpayers.

Elsewhere Wednesday, another Fed official said the U.S. economy likely will show signs of recovery this year, but warned that unemployment rates will probably rise further and the economic outlook will be similar to 2008.

Sandra Pianalto, president of the Federal Reserve Bank in Cleveland, projected real gross domestic product to decline sharply in the first half of 2009, followed by a modest upturn in the second half.

"Unfortunately, I don't expect this to get better until we see stability returning into housing and financial markets," Pianalto said in a speech to commercial developers in Columbus, Ohio.

Bernanke repeated a pledge - made last week - to keep Americans better informed about its efforts to ease credit and financial problems.

On that front, the central bank is developing a new Web site that will provide detailed information on its efforts. The Fed hopes to have the site operational in the coming days.

The Fed's No. 2 official, vice chairman Donald Kohn, also is leading a committee to review the central bank's disclosure policies related to its lending programs and its balance sheet, which outlines its efforts to ease credit problems by providing loans and buying debt.

"The presumption of the committee will be that the public has a right to know," Bernanke said.

In another move to provide Wall Street and Main Street with better insights into the Fed's thinking about the economy, Bernanke said the central bank will start publishing longer-term projections on economic activity, unemployment and inflation beyond the three years now provided.

Rising foreclosures, meanwhile, resonate in many ways.

Bernanke said he recently found out the property that had once been his family home in Dillon, S.C., was sold at a foreclosure sale.

AP Economics Writer Christopher S. Rugaber contributed to this report.

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Copyright 2009 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

2009-02-18 15:51:40

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242 comments

PDB LIZ 07:32:20 PM Feb 19 2009

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THE GOVERMENT IS DOING A SNOW JOB ON YOU.....THE GOVERMENT DOES NOT WANT THE ECON TO GET BETTER,,THIS WAY,,THEY CAN EASILY TAKE YOU OVER....... OR,SHOULD I SAY,,,OBAMA AND HIS CRONNIES ARE BRINGING AMERICA DOWN TO CIVIL WAR STANDARDS.........TAKEING FROM THOSE WHO WORKS AND GIVEING TO OTHER PEOPLE,,,, BUT,,HE SAID BEFORE HE WAS ELECTED,,,,,,SPREAD THE WEALTH AROUND,,AND,,YOU STUPID PEOPLE WOULD NOT LISTEN,!!!! NOW,,,IT HAS JUST STARTED,,,,,,YOU HAVE NOT SEEN THE WORSE,,,,MIDDLE CLASS WILL NOT HAVE A POT TO P IN,,,,, THE GOVERMENT IS TAKING OVER YOUR LIFE MORE SO THAN EVER...AND,,,YOU HAVE NOT SEEN THE BEGINNING YET.....

pixiestickcutie 05:19:26 PM Feb 19 2009

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Everything and pretty much everyone is hurtting from this bad economy. Suicide rates have grown...I am just hoping that this all ends real soon!!! And we learn from our mistakes again because this is going in the history books and we don't want it to have a whole chapter dedicated to the fall of our economy.

KNSlots294 04:48:41 PM Feb 19 2009

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One thing for sure we cant keep bailing everyone out of their stupid mistakes.Just like GM and Crysler, now they want more money, because the big guys mismanaged their previous money.What about the little man that is completely out of Business now, who has or will help them?We the Taxpayers wont be able to afford all these loans given out to these people.I see nothing wrong with letting them fold.Homes were way out of price long ago, Cars and Trucks are way over priced also.There has to be an end to all of this somewhere.And the Stimulas money we are going to get wont amount to enough for anyone to spend more money to get the Economy going.It doesnt take a Genius to figure this out.To me Obama is trying, give the man a chance. He has a big job.And the last administration really screwed up the deficit.

RBHAR46 02:39:48 PM Feb 19 2009

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"Only in America can a man or women with 14 kids drive a $22,000.00 SUV to the welfare office to get a check to buy those kids $150.00 Tennis shoes."

ILKEE 12:20:02 PM Feb 19 2009

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The term "Ni**er Rigged" is no longer acceptable...... Effective immediately: It will now be referred to as a "Presidential Solution".Thank You!!

BengalOneTZ 12:14:11 PM Feb 19 2009

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The bic 3 need to go bankrupt and get rid of the lazy grabbing union pukes and then hire people who want to work. No bailouts needed. The UAW is doing to the auto industry what the AFL-CIO did to the steel industry. It's time that we wise up...

Rwzn2bix 12:11:41 PM Feb 19 2009

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Don't you love the way that that as*hole Bernanke talks about how the Fed will do ANYTHING to help the economy??? This is the jerk off that raised all the interest rates that caused the variable rate on mortgages and credit cards to spike way up at a time when gasoline prices and heating fuel prices were killing the nation.All this to make the crooked federal reserve richer!! Start by firing him !!!!!!!!!!!!

DwdRc 12:10:09 PM Feb 19 2009

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dwdrc: If the Federal Officials can not get their act together and can not make more accurate sitiuation on the economy and have to keep adjusting I believe they need to be fired as there are better experts than those in office now. Where is President Obama's and his party word that they will use the brightest input in and out of the government. It does not seem they are upholding their promise made to the voters and an openess to the voters as stated during the election and afterwards. Lets get back to your pormises to the american working voters as promised!!!!!!!!!!

Rwzn2bix 11:58:43 AM Feb 19 2009

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CURTISBIGJ7 11:48:09 AM Feb 19 2009 Report This! Bank's got bill and nothing changed! Auto makers got bill , layed off people , nothing changed! your government has been doing this since it's inception, the only way to stop it is with a civil war!! When is the revolution, get your gun's and ammo ready it's comeing!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!===Didn't you read about the Gun control that was part of Obama's stimulus package???? All firearms must be registered,including ones never registered. Warrantless (unconstitutional) searches are allowed. Up to 10 years in jail for failure to comply. Now you know why the public was only given 3 hours to read the bill. The media did not even mention this !!

AAAprecise 11:54:50 AM Feb 19 2009

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The new ammo in the stimulas bill states all bullets will have serial numbers on them and that the bullets will be registered and everyone made to destroy your old ones. Dear god don't get your gun stolen other wise you will be blamed for any murder caused by it. This guy is clueless. Where is his think tank or did we save those jobs that he mentions 1.5 million jobs for foreigners only no more e-verify so the companies can hire illegals. Ron Paul dear god help us. Stop these crooks!!! Stop both parties. Republicans defecting to the democrats so cause a fillabuster to push the stimulas bill. The true republicans where not invited to vote because they didn't need there votes. Those republicans that defected should be charged with treason!! They lied to us and told us they where republicans when they where not.

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