Bernanke urges Congress to act on debt

bernanke_020311.top.jpgSpeaking to reporters at the National Press Club Thursday, the Fed chairman promised more transparency. But he was less forthcoming on his Super Bowl pick. By Annalyn Censky, staff reporter


WASHINGTON, D.C. (CNNMoney) -- In a rare on-the-record appearance before reporters, Federal Reserve Chairman Ben Bernanke gave a dire warning to lawmakers: Raise the debt limit now.

Speaking to a room full of reporters at the National Press Club Thursday, Bernanke said that without an increase in the debt limit, the United States could potentially default on its debt, an outcome he referred to as "catastrophic."

"There's only so far that we can kick the can down the road," he said in response to a question about the deficit.

Bernanke's comments echoed ominous remarks by Treasury Secretary Timothy Geithner last month. The Treasury Department said Wednesday, it now expects the United States to surpass its legal borrowing limit of $14.294 trillion between April 5 and May 31.

Recovery picking up steam

Bernanke also defended the Fed's latest controversial stimulus policies, by offering evidence that the economy is on the mend. He pointed to recent signs of improvement including stronger business and consumer spending.

"A wide range of market indicators supports the view that the Federal Reserve's securities purchases have been effective at easing financial conditions," he said in his remarks.

Critics of the Federal Reserve have recently railed on Bernanke and his colleagues for continuing a policy known as quantitative easing, which pumps $600 billion into the economy. They say the economy is starting to improve, and easy-money policies will only spur long-term inflation to accelerate.

A recent surge in gas and food prices and uprisings in the Middle East, have only made cries from the Fed's critics grow louder.

But while Bernanke recognized rising commodity prices, he mostly shrugged off questions about global food and energy inflation as a problem largely confined to the emerging economies and other parts of the world.

"Right now, inflation overall -- including food and energy prices -- is quite low in the United States, quite lower than any other industrialized country," he said.

The Fed chairman was bluntly honest about the current state of the labor market in his remarks, but his answers to questions about jobs were more optimistic and forward looking.

"The sense is that employers are becoming more willing to hire and I think we'll start seeing some stronger payroll reports and some lower unemployment rates pretty soon."

But he acknowledged that the recovery is still not at a point that will significantly reduce the unemployment rate, which currently sits at 9.4%.

The government's next jobs report is due Friday, and economists surveyed by CNNMoney expect it to show that employers added 149,000 to their payrolls during the month and unemployment ticked up to 9.5%.

A more transparent Fed

Bernanke hardly ever takes journalists' questions publicly, so the event was considered a rare opportunity for media to finally get candid answers to their questions about the Fed.

When asked about the Fed's communication strategy, Bernanke said he supports a more open relationship with the press. His colleague, Fed Governor Janet Yellen, is currently heading a committee focusing on that topic.

"We are looking very seriously at the idea that I would give regular press conferences, in a hope that that would further increase Fed transparency," he said.

But Bernanke was more tight-lipped on another subject. When asked about his preference for a Super Bowl champion this weekend, he gave only a hint.

"I will be studiously objective," Bernanke said. "Although I do hear one of the teams has a quarterback named Ben." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,810.06 91.06 0.51%
Nasdaq 4,712.97 11.10 0.24%
S&P 500 2,063.50 10.75 0.52%
Treasuries 2.32 -0.02 -0.86%
Data as of 1:50pm ET
Company Price Change % Change
Bank of America Corp... 17.12 0.12 0.71%
Kinder Morgan Inc 39.75 -0.17 -0.43%
Apple Inc 116.47 0.16 0.14%
Intel Corp 35.59 -0.36 -1.00%
Microsoft Corp 47.98 -0.72 -1.48%
Data as of Nov 21

Sections

This arrangement, announced Friday, illustrates how the lines have blurred between traditional TV networks and newfangled options like Netflix. More

The Obama administration is touting that its immigration action will boost wages. But the hike amounts to only $170 a year by 2024. More

Obama doesn't have the authority to create a startup visa, but part of his reform announcement could include a workaround for entrepreneurs: 'parole status.' More

Nearly half of all Americans say there's a chance they'll have to work during a holiday between Thanksgiving and New Year's, according to a new poll. And one in four say they'll have to work whether they want to or not. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.