Bernanke sees possible end to recession in 2009

WASHINGTON -- Federal Reserve Chairman Ben Bernanke said Tuesday that it could take years for the economy to fully recover from the current "severe contraction," even as new, dismal data on housing and consumer confidence underscored the depth of the historic recession.

"If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability — and only if that is the case, in my view — there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery," Bernanke told the Senate Banking Committee.

Even if financial markets revive, however, Fed policymakers believe a "full recovery is likely to take more than two or three years," Bernanke said in presenting his twice-annual economic report to Congress.

He emphasized the outlook is "subject to considerable uncertainty" given deep problems in financial markets and the deterioration of other economies around the globe. "Overall, the downside risks probably outweigh those on the upside," he said.

The stark comments came as The Conference Board reported that its monthly consumer confidence index plummeted to an all-time low in February, sliding to a weak reading of 25 from 37.4 in January. Consumer expectations of economic conditions six months out also skidded to a record low. The findings are based on a survey of 5,000 households through Feb. 18.

"Not only do consumers feel overall economic conditions have grown more dire, but just as disconcerting, they anticipate no improvement in conditions over the next six months," said Lynn Franco, director of The Conference Board Consumer Research Center.

Home prices continued their long nose dive during the three months ended in December. The Standard & Poor's/Case-Shiller index of house prices in 20 cities in December fell more than 18% from the same period in 2008 — the biggest drop since the index was created 21 years ago.

The Treasury Department, working with the Fed and other bank regulators, is working on a multipronged plan to revive the economy, including providing more aid to banks and reworking mortgages for homeowners in danger of default. President Obama has signed into law a $787 billion economic stimulus measure, and the Fed has slashed a key interest rate basically to zero and announced a long list of lending programs to credit markets. Bernanke said the Fed was likely to leave rates low for some time given the weak economy.