SHUT UP, BEN!
Ben Bernanke fielded hostile grilling yesterday by politicians exasperated over the weakening economy and its toll on Americans – and briefly sent stocks tumbling as he conceded harder times are ahead.
The Federal Reserve chairman offered familiar one-liners about watching the economy for “signs of inflation,” but did little to appease any of his angry interrogators on the Congressional Joint Economic Committee or Wall Street itself.
After hinting that he won’t cut interest rates any more, the Dow Jones industrial average tumbled as much as 200 points.
However, the market recovered as bargain-hunters jumped in, pushing the Dow to another losing day, down 33.73 to 13,266.29 – which was a vast improvement from the prior day’s 360.92-point plunge.
Economists said Bernanke apparently is worried that more rate cuts would cause the weak dollar to become further devalued and trigger a bout of stagflation – slow growth and rising inflation.
The dollar crisis and the housing recession took up much of his morning appearance before the panel.
One member, Rep. Elijah Cummings (D-Md.), said he was outraged by skyrocketing foreclosures in his Baltimore district, and appeared to rattle Bernanke by barking “If you were in my neighborhood people there would be very upset seeing how calm you are about people losing their homes.”
Bernanke defended himself and said the Fed is pledging to take steps to help homeowners facing foreclosures rework their mortgages into more manageable payments.
At another juncture in the wide-ranging questioning, panel head Sen. Chuck Schumer (D-N.Y.) flatly asked Bernanke if a recession was unfolding.
Bernanke replied that “economists are bad about predicting” such events, but said the Fed is monitoring all data that would indicate a recession.
Rep. Ron Paul (R-Tex.) peppered Bernanke about the dollar’s 22 percent loss this year, saying it’s wrecking savings of older Americans. “You keep lowering the value of the doller with rate cuts. You’re robbing people of their dollars,” Paul said.
Bernanke shrugged him off, saying that Americans spend dollars in America, but they lose purchasing power only if they “buy more expensive imported goods.”
Bernanke testified that economic growth will slow noticeably in coming months, with surging oil prices heating up inflation.
Oil stayed close to the $100-a-barrel mark yesterday, settling at $95.46 a barrel, off 91 cents after an intraday high of $97.70.
The dollar fell to a near-record low against the euro at $1.4670.
The Nasdaq ended the day in the red after Cisco Systems warned that the credit crisis was hurting customer demand, pushing the stock down 9.5 percent. The Nasdaq fell 52.76, or 1.92 percent, to at 2,696.00.
The Standard & Poor’s 500 Index slipped 0.85 to 1,474.77.