Bernanke: Markets are 'working well'
Fed chief says that Wednesday's sell-off did not sway central bank's view on the U.S. economic growth.
February 28 2007: 11:01 AM EST
NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke told members of Congress Wednesday that U.S. financial markets appear to be "working well" and are functioning normally, one day after the Dow posted its biggest one-day point loss since the market reopened after after the Sept. 11 attacks.
Responding to a question from a member of the House Budget Committee, Bernanke said that the central bank was closely monitoring the stock market after the Dow slumped 416 points Tuesday amid a selloff in stocks worldwide.
Bernanke said the selloff did not change the Fed's view on U.S. economic growth. "There is really no material change in our expectations for the U.S. economy since I last reported to Congress couple weeks ago," he said.
In his prepared remarks, Bernanke renewed his warning to Congress that failure to take action soon to prepare for the retirement of aging Baby Boomers could lead to serious economic harm.
Bernanke's prepared remarks were nearly identical to remarks he delivered to a Senate panel last month. "A vicious cycle may develop in which large [budget] deficits lead to rapid growth in debt and interest payments, which in turn adds to subsequent deficits," he said in his prepared remarks.
He said that over time, the United States needed to move toward fiscal policies that were sustainable and that would promote more saving to support the Social Security retirement program without imposing undue costs on taxpayers. However, he offered no specific policy prescriptions.