US Fed chairman calls for aggressive action to prevent prolonged recession

Ben Bernanke, Federal Reserve chairman, is calling for aggressive action to stimulate the US economy.

Speaking in front of the Senate Budget Committee in Washington, Mr Bernanke said that stabilising financial markets is vital for economic recovery.

Mr Bernanke said progress has been made on the financial side since last autumn but more bold action needs to be taken.

Newly-elected President, Barack Obama, recently enacted a $787 billion (£561 billion) stimulus package designed to save or create 4 million jobs. Mr Bernanke said the package should help revive the economy but its success is subject to “considerable uncertainty, reflecting both the state of economic knowledge and the unusual economic circumstances that we face”.

However, Mr Bernanke’s comments failed to boost the markets. The Dow Jones had already fallen to a 12-year low yesterday after stricken insurer AIG reported the biggest ever loss in US history of $61 billion.

Meanwhile, the Treasury and the Fed have introduced a scheme to boost new lending. The scheme, called the Term Asset-Backed Securities Loan Facility (TALF), will see the Fed lend up to $200 billion to boost consumer lending for cars, credit cards and education.

British Prime Minister Gordon Brown is in Washington this week to meet President Obama to discuss ways of stabilising the global economy.

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