WASHINGTON — Federal Reserve Chairman Ben Bernanke bluntly warned Congress today it risks a recession, with higher unemployment and increased home foreclosures, if it fails to act on the Bush administration’s plan to bail out the financial industry.
Bernanke told the Senate Banking Committee that failure to act could leave ordinary businesses unable to borrow the money they need to expand and hire additional employees, while consumers could find themselves unable to finance big-ticket purchases such as cars and homes.
Bernanke’s remarks came in response to a question from Sen. Chris Dodd, D-Conn., the committee’s chairman, who seemed eager to hear a strong rationate for lawmakers to act swiftly on the administration’s unprecedented request.
“The financial markets are in quite fragile condition and I think absent a plan they will get worse,” Bernanke said.
Ominously, he added, “I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way.”
GDP is a measure of growth, and a decline correlates with a recession.
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