WASHINGTON – President-elect Barack Obama’s administration and the Congress will need to take more steps to revive the ailing U.S. economy, and the focus should be on strengthening the financial system, Federal Reserve Chairman Ben Bernanke said Tuesday.
“The Federal Reserve will do its part to promote economic recovery, but other policy measures will be needed as well,” Bernanke said in a speech at the London School of Economics reported by The Wall Street Journal. “The incoming administration and the Congress are currently discussing a substantial fiscal package that, if enacted, could provide a significant boost to economic activity.
“In my view, however, fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,” he added.
Bernanke said the government may need to provide more capital injections to financial firms to help stabilize the markets considering the worsening of the economy’s growth prospects. Additionally, guarantees may become necessary “to ensure stability and the normalization of credit markets,” he said, according to a prepared text of his speech.
He added that there would be several ways for the U.S. Treasury to move forward with its original plan to remove troubled assets from institutions’ balance sheets if such a decision were made.
He also said efforts to reduce preventable foreclosures could help strengthen the housing market and increase financial stability.
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