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Bernanke: US economy on cusp of recovery

(Agencies)
Updated: 2009-08-21 23:19

In this July 22, 2009 file photo, Chairman of the Federal Reserve Ben Bernanke testifies before the Senate Banking, Housing and Urban Affairs Committee on Capitol Hill in Washington. [Agencies]

The Fed swooped in with unprecedented emergency lending programs to fight the crisis. It eventually slashed a key bank lending rate to a record low near zero. And Congress enacted programs to stimulate the economy, the most recent coming in February with President Barack Obama's $787 billion package of tax cuts and increased government spending.

"Without these speedy and forceful actions, last October's panic would likely have continued to intensify, more major firms would have failed and the entire global financial system would have been at serious risk," Bernanke said.

Unlike in the 1930s, Washington policymakers this time acted aggressively and quickly to contain the crisis, said Bernanke, a scholar of the Great Depression.

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"As severe as the economic impact has been, however, the outcome could have been decidedly worse," he said.

Global cooperation in battling the crisis was crucial, with central banks slashing interest rates and the US and other governments delivering fiscal stimulus, he noted.

"The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge," the Fed chief observed.

Sponsored by the Federal Reserve Bank of Kansas City, the conference draws a virtual who's who of the financial world -- Bernanke's counterparts in other countries, academics and economists. This year's forum focused on lessons learned from the crisis and how they can be applied to prevent a repeat of the debacles.

To that end, Bernanke again called a rewrite of the US financial rule book -- something Congress is currently involved in. He again pressed for stricter oversight of companies -- like AIG -- whose failure would endanger the entire financial system and the broader economy. Obama would tap the Fed for that job, something many lawmakers in Congress don't like.

Bernanke also said the US needs a process to wind down big, globally interconnected companies, much like the Federal Deposit Insurance Corp. does for failing banks.

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