Bush, Bernanke: Time is right for new stimulus

One-third of Americans are worried about losing their jobs, half fret they will be unable to keep up with mortgage and credit card payments, and seven in 10 are anxious that their stocks and retirement investments are losing value, according to an Associated Press-Yahoo News poll of likely voters released Monday.

Sen. Charles Schumer, D-N.Y., a member of the Democratic leadership, predicted Congress would return in November. “We couldn’t have gotten a better supporter for a stimulus package than Ben Bernanke,” Schumer said. “His support will change the stimulus from a possibility to a reality.”

Pelosi said, “I call on President Bush and congressional Republicans to once again heed Chairman Bernanke’s advice and as they did in January, work with Democrats in Congress to enact a targeted, timely and fiscally responsible economic recovery and job creation package.”

However, in an interview with The Associated Press last Friday, Pelosi had said Congress is unlikely to approve a tax rebate before Bush leaves office, and she signaled that prospects were dim that Democrats would be able to strike a deal with the president on an economic aid package during a post-election session.

In February, Congress enacted a $168 billion stimulus package that included tax rebates for people and tax breaks for businesses. The rebate checks did help to lift economic growth in the spring. After that, though, consumers cut back sharply and businesses have retrenched in turn.

“With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate,” Bernanke told the House Budget Committee. It marked the first time Bernanke endorsed the need for another round of economic stimulus.

The Fed chief suggested that Congress design the package to limit the longer-term affects on the government’s budget deficit, which hit a record in the recently ended budget year and is undoubtedly headed higher.

Bernanke said the package also should include provisions “to help improve access to credit by consumers, home buyers, businesses and other borrowers.”

He also left the door open to further interest rate reductions by the Federal Reserve itself.

Fed policymakers meet next on Oct. 28-29, and many economists believe they will again lower their key rate — now at 1.50 percent — to bolster the economy. Just a few weeks ago, the Fed and the world’s other major central banks joined forces to ratchet down rates, the first coordinated action of that kind in the Fed’s history.

There were some signs that credit problems were improving a bit. Bank-to-bank lending rates fell for a sixth straight day on Monday. Demand for Treasury bills, regarded as the world’s safest investment, lessened somewhat but remained relatively high in a sign that there was still much fear in the markets.

Last week, the Treasury Department announced it would inject up to $250 billion in U.S. banks in return for partial ownership. So far this year, 15 banks have failed, including the largest U.S. bank failure in history, compared with three last year. And major Wall Street investment firms have been swallowed by other companies, have filed bankruptcy or have converted themselves into commercial banks to weather the financial storm.

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