US bailout No 2!

Ben

Washington: Pitching for a second round of fiscal package, the US Federal Reserve Chairman, Ben S. Bernanke, on Monday said consideration of such an idea is appropriate as there is a risk of a "protracted slowdown".

The Fed chief also reiterated that stabilisation of the financial system would not immediately eliminate the challenges faced by the broader economy.

"I understand that the Congress is evaluating the desirability of a second fiscal package... With the outlook exceptionally uncertain, the optimal timing, scale, and composition of any fiscal package are unclear.

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"All that being said, 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 said in his remarks to the Committee on the Budget, US House of Representatives.

Meanwhile, The Wall Street Journal in a report said the Democratic lawmakers are considering a stimulus package targeted at infrastructure spending, aid to states, food stamps and jobless benefits.

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Asserting that fiscal package should be designed to limit the longer term effects on "structural budget deficit," he said such a plan would also be aimed at redressing specific factors that could deepen the economic slowdown.

"... The extraordinary tightening in credit conditions has played a central role in the slowdown thus far and could be an important factor delaying the recovery.

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"If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, homebuyers, businesses, and other borrowers. Such actions might be particularly effective at promoting economic growth and job creation," Bernanke pointed out.

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Referring to the recent measures including the mammoth bailout package and the co-ordinated rate cuts, Bernanke said that even though he is seeing "some encouraging signs," it is too early to "assess their full effects".

Pointing out that "dramatic steps" taken to provide capital to the banking system and expanding guarantees were initiated in consultation with other countries, Bernanke said, "Given the global nature of the financial system, international consultation and co-operation on actions to address the crisis are important for restoring confidence and stability."

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