Bernanke: Obama Stimulus Helps, More Action Needed

Some Americans and some on Capitol Hill have been upset about Treasury's management of the $700 billion program, which has provided aid to financial companies and others on Wall Street — some of whom are blamed for getting the country into economic the mess in the first place — while other struggling industries get little or no assistance.

Ben S. Bernanke,centre, Chariman of the Federal Reserve, with the US Ambassador to Britain Robert...

Ben S. Bernanke,centre, Chariman of the Federal Reserve, with the US Ambassador to Britain Robert Tuttle leave 10 Downing Street in London after a meeting with the British Prime Minister Gordon Brown, Tuesday, Jan. 13, 2009. Federal Reserve Chairman Ben Bernanke says a stimulus package being crafted by President-elect Barack Obama and Congress could provide a "significant boost" to the sinking economy. (AP Photo/Alastair Grant)

(AP)

Bernanke said he understands this concern, but added: "This disparate treatment, unappealing as it is, appears unavoidable."

The United States' economic system is critically dependent on the free-flow of credit, Bernanke said. It is like the economy's oxygen. As it has been cut off, the economy has sunk deeper into recession, taking Americans' jobs with it.

Washington policymakers, Bernanke said, "must therefore do what they can to communicate to their constituencies why financial stabilization is essential for economic recovery and is therefore in the broader public interest."

Additional efforts to stem skyrocketing home foreclosures could strengthen the collapsed housing market, which in turn would buttress financial stability, Bernanke said. Obama also wants to see more done to curb foreclosures.

To cushion fallout from the recession, the Fed in December slashed its key rate to an all-time low of between zero and 0.25 percent. The Fed signaled that it would keep rates at that level for some time and pledged to use unconventional tools to revive the economy. One such tool Bernanke again mentioned is the possibility of the Fed buying longer-term Treasury securities.

The central bank will meet later this month to assess economic and financial conditions.

Even as the U.S. battles the current crisis, it must move to prevent future ones. To be effective, international cooperation is needed, Bernanke said.

"A clear lesson of the recent period is that the world is too interconnected for nations to go it alone in their economic, financial and regulatory policies," Bernanke said. "International cooperation is thus essential if we are to address the crisis successfully and provide the basis for a healthy, sustained recovery."