Talk Radio News Service: News, Politics, Media

By Annie Berman -- Talk Radio News Service

Federal Reserve Chairman Benjamin Bernanke testified before the House Budget Committee today concerning the current economic recession and warned that the retirement of the baby boomers and an increase in medical and entitlement costs makes it more difficult for the economy to be restored.

In his opening statement, Bernanke said that “Our expectation is that we will begin to see growth in the economy, so, at the end of the technical recession later this year. Underlying that prediction is some stablization in final demand, including consumer spending.”

Though there is hope that we will begin to see our economy turn around, Bernanke stated that unemployment rates will continue to rise into next year.

The American Recovery and Reinvestment Act (ARRA) was enacted by Congress and signed into law by President Obama in February 2009. This act is intended to provide stimulus to the US economy and is worth $787 billion. It includes federal tax relief, unemployment benefits, and domestic spending on education, health care, and energy.

Bernanke said, “by the end of 2010, the stimulus package (ARRA) could boost the level of real GDP between about 1 percent and a little more than 3 percent and the level of employment between roughly 1 million and 3-1/2 million jobs.”

Recently, the credit markets have also taken a downturn, one of the worst since the Great Depression. When Bernanke was asked by the committee how long it would take for additional credit to be made available to consumers and small businesses he said that though this group rely heavily on bank loans, banks have been reluctant to extend credit because they are concerned about their own financial positions.

“We’ve heard complaints that bank examiners from the Fed and other agencies are too prone from preventing banks from making loans, in the interest of safety and soundness... Making loans to credit worthy borrowers, maintaining credit relationships, is profitable, for banks and therefore good for banks,” Bernanke said.

To avoid the another recession as large as this one, Bernanke stated that there needs to be a stronger oversight of large firms, resolution regimes to help resolve failing firms, and to strengthen the financial infrastructure.