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Economy May Bottom in '09: White House's Romer

The US economy is not out of the woods yet, but the worst of the downturn will probably pass this year, as various components of the stimulus thrown at it will start to show results, White House adviser Christina Romer told CNBC Tuesday.

"For the overall economy I think we are likely to bottom out this year," Romer said.

Unemployment is a lagging indicator and it is hard to say whether it will peak this year of the next, but the measures taken to create jobs will work, she added.

"That stimulus package has just started. We expect it as we go through to 2009 and 2010 to be a big job creator," Romer said.

Street crowd
AP
Street crowd

Asked whether she fears a double-dip recession, in which the economy seems to recover after the first dip only to fall again, Romer said "in terms of the double dip I very much have the sense that policy has been really good in this downturn."

Stress tests carried out at banks will bring clarity on which ones are healthy and which ones need more capital, according to Romer, and the government will do all it can to make them all healthy.

Goldman's move to raise private capital is a good sign, as it would be "terrific" if banks could get finance privately so they can lend on and boost the economy, she said, adding that she was not worried other financial institutions will follow Goldman's lead and try to repay the TARP money early even if they cannot afford it.

"I think in terms of paying back the money that's something that we will be working with the banks on a case by case basis," Romer said.

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