Washington – Federal Reserve Chairman Ben Bernanke doesn’t believe the nation will slip into a recession, rejecting the notion raised by predecessor Alan Greenspan that the economy’s expansion could be in danger of fizzling out.
But the good news for investors stops there.
Bernanke suggested Wednesday that Wall Street jumped too far last week in thinking that Fed policymakers had signaled that interest rates might drop. That new comment sent stocks spiraling downward.
The Dow Jones industrials lost 96.93 points to close at 12,300.36.
The Fed chief testified on Capitol Hill amid growing concerns that problems with risky mortgages and a painful housing slump could send the economy into a tailspin.
Greenspan, who left the Fed last year, recently said there’s a one-in-three possibility of a recession this year.
But Bernanke, while acknowledging there are risks, told Congress’ Joint Economic Committee that the Fed does not see such negative forces pushing the economy into a recession.
“I would make a point, I think, which is important, which is there seems to be a sense that expansions die of old age, that after they reach a certain point, then they naturally begin to end,” Bernanke said. “I don’t think the evidence really supports that. If we look at history, we see that the periods of expansions have varied considerably. Some have been quite long.”
Greenspan, in remarks that contributed to a gut-wrenching 416-point plunge in the Dow Jones industrial average on Feb. 27, suggested that the expansion, now in its sixth year, could be in danger of petering out.
