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A Bernanke cliffhanger

Thursday, June 07, 2012 - 02:48

June 7 - Instead of giving clues on additional stimulus, Federal Reserve Chairman Ben Bernanke chided lawmakers on fiscal issues that threaten to send U.S. economic growth off the cliff. Conway G. Gittens reports.

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PLEASE NOTE: THIS EDIT CONTAINS 4:3 MATERIAL Federal Reserve Chairman Ben Bernanke - not going out on a limb when it comes to hinting at more stimulus - but willing to peal over the cliff, the so-called fiscal cliff. SOUNDBITE: FEDERAL RESERVE CHAIRMAN BEN BERNANKE (ENGLISH) SAYING: "Indeed, a severe tightening of fiscal policy at the beginning of next year that is built into current law, the so-called fiscal cliff, would, if allowed to occur, pose a significant threat to the recovery. Moreover, uncertainty about the resolution of these fiscal issues could itself undermine business and household confidence." For Reuters Economics Correspondent Mark Felsenthal, Bernanke's tone to the Joint Economic Committee about the debt debate was noticeably different with the double threat of tax hikes and spending cuts at the end of the year. SOUNDBITE: MARK FELSENTHAL, REUTERS ECONOMICS CORRESPONDENT (ENGLISH) SAYING: "He's normally pretty respectful but this time he said he thought it was amazing that Congress could spend five dollars, raise three dollars, and not fully commit to borrowing the other two dollars. When asked to compare the United States to Greece, he said one difference was that the United States sort of has this stellar record over the years for paying its debt back, but it could put that at risk if it had another damaging debate about the debt ceiling." Bernanke message: fix the budget mess and the Fed will keep easy money flowing, says John Lonski of Moody's Capital Markets. SOUNDBITE: JOHN LONSKI, CHIEF ECONOMIST, MOODY'S CAPITAL MARKETS GROUP (ENGLISH) SAYING: "I think what he is making clear in this particular testimony is that if Washington can agree on a credible plan to reduce the budget deficit over time, and if in doing so real GDP growth would be lower than otherwise, then the Fed will be more than willing to adhere to an accommodative monetary policy indefinitely in order not to jeopardize the adequacy of economic growth." For Joint Economic Committee Vice Chairman Kevin Brady, Bernanke's warnings are pertinent. SOUNDBITE: REPRESENTATIVE KEVIN BRADY, VICE CHAIRMAN, JOINT ECONOMIC COMMITTEE (REPUBLICAN) (ENGLISH) SAYING: "I also think the point he made today about don't wait to extend tax cuts is important. He's making the point that our spending cuts ought to be balanced over a period of time. I think that we need to send a stronger signal to the markets that we are willing to tackle our entitlements: Social Security, Medicare and put them on sustainable paths. I think that ought to be done now rather than wait for the lame duck session. I get the impression the Chairman feels the same way." Bernanke admits, fiscal risk can be addressed in Washington, but the European debt crisis poses a bigger near-term threat, and the Fed is prepared to defend the U.S. economy if necessary. Conway Gittens, Reuters

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A Bernanke cliffhanger

Thursday, June 07, 2012 - 02:48