WORLD> America
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WORLD> America
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Bernanke preps for hot seat on bailouts, recovery
(Agencies)
Updated: 2009-07-21 16:17 The number of US households on the verge of losing their homes soared by nearly 15 percent in the first half of the year, according to RealtyTrac Inc. Experts expect foreclosures will peak in the middle of next year before heading downward. Housing, credit and financial debacles created a perfect storm for the economy at levels not seen since the Great Depression. Those negative forces plunged the economy into the longest recession since World War II. Although credit and financial conditions have improved since last fall, markets are not back to normal. Getting banks to lend more freely again is an important ingredient to turning the economy around. Recoveries after financial crises tend to be slow. And given the economy's fragile state, it can be vulnerable to any shocks. Against that backdrop, many economists predict the Fed will hold its key bank lending rate at a record low near zero for the rest of this year, with the hope of bracing economic activity. Expectations for a lethargic recovery should keep a lid on inflation, the Fed has said. With consumers likely to stay cautious amid rising unemployment, companies won't be in a position to jack up prices. Still, Bernanke will attempt to assure Wall Street investors that the Fed won't let inflation get out of control and that it stands ready to unwind its stimulus when the recovery is more firmly rooted. Politically, that will be a delicate move because the Fed -- to prevent inflation from taking hold -- is likely to have to start raising rates and dismantling some of its programs when unemployment is still elevated. Bernanke's term expires early next year, and Obama will have to decide whether to reappoint him or select a new chairman. The Fed chief's innovative policies have been credited with pulling the economy from the edge of the abyss last year. But those actions also have touched off criticism about putting taxpayers at risk and whether the government should be cleaning up Wall Street's messes. On Wednesday, Bernanke is slated to testify on the economy before the Senate Banking Committee.
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