Bernanke: Stimulus Plan Needed for Economy

Federal Reserve Chairman Ben Bernanke wants Congress to act quickly to pass an economic stimulus package, Sen. Charles Schumer told CNBC.

Federal Reserve Bank Chairman Ben Bernanke
Ted S. Warren
Federal Reserve Bank Chairman Ben Bernanke

Schumer recounted a conversation he had Monday with the central bank chief, who did not discuss specifics but encouraged legislators to move rapidly to help jump-start the economy.

"It's his tradition not to get into specifics, although he did say the No. 1 watchword that would make this effective would be getting the money out quickly," Schumer said in a live interview. "The worry is Congress will spend a lot of time arguing back and forth, dithering and not doing anything until June or July and that may be too late."

Bernanke testifies to Congress on Thursday amid a chorus of election year demands for action to stop the U.S. economy from being tipped by a slumping housing market into recession.

His testimony will be aired live on beginning at 10 am.

While Schumer did not give a timetable himself on how soon Congress can get the stimulus package through, House Majority Leader Steny Hoyer said passage could happen within a month.

"I think it can be done in 30 days," Hoyer told reporters. "Whether it will be done in 30 days is obviously another question."

Bush has said he was considering what steps might be appropriate to give the economy a lift, and lawmakers from both parties are discussing options for an election-year package
Democrats say could total $100 billion to $125 billion.

Many analysts, however, have said Congress was unlikely to act swiftly enough to do much good for an economy heavily weighed down by a deep housing slump, high energy costs and
tight credit.

Hoyer, however, said it was possible Democrats and Republicans could come together quickly. "Bipartisanship is breaking out all over," the Maryland Democrat said.

Among the main tenets of the stimulus package would be an instant cash rebate to taxpayers of up to $500, an increase in spending including extended unemployment compensation and business tax credits.

"He said that fiscal stimulus is certainly needed and that he would be generally supportive of the Congress and the president enacting such a stimulus," Schumer told Reuters.

"He said that while he wasn't going to endorse a specific plan, if an economic stimulus package was properly designed and enacted so that it enters the economy quickly, it could have a very positive effect," Schumer said at a congressional hearing.

An aide to a Republican member of the House of Representatives Budget Committee, which will hear from Bernanke at 10 a.m. Thursday, said the Fed chief would be quizzed about the risks of a "quick Band-aid solution" bringing "significant harm to the longer-term budget outlook."

"I will ask him what steps he believes are necessary to address the problems troubling our economy," said Rep. John Spratt, the Democrat from South Carolina who chairs the budget panel.

"The Federal Reserve has been easing monetary conditions in response to this slowdown, but Congress and the president must move quickly to enact a fiscal stimulus plan as a complement to the Fed's actions," he said in a statement on Tuesday.

The Fed has slashed its key interest rate by a full percentage point since mid-September and financial markets expect Bernanke on Thursday to restate his remarks of Jan. 10 "to take substantive additional action as needed to support growth."

This was read by markets as a signal to expect a half-percentage point interest-rate cut at the Fed's next meeting on January 29-30. Bernanke's words on the economy will be examined closely for any sign of a shift in tone.

-- Reuters contributed to this report.