In many circles, former Federal Reserve Chairman Alan Greenspan was defined by and/or mocked for using the word "frothy" to describe the overheated housing market's fueling of the economy last decade. His successor, who remains keenly concerned about ongoing small businesses and commercial real estate problems, may now find himself defined by two: "unusual uncertainty."
The two words were the primary talking point coming out of Fed Chairman Ben Bernanke's presentation of the "Semiannual Monetary Policy Report to the Congress" before the Senate Banking Committee Wednesday. Such "unusual uncertainty" was the trigger behind scaled-back economic projections of the already tepid recovery's strength. Bernanke noted small businesses have been "particularly hard hit" among ongoing overall economic struggles because of factors such as tight credit standards, newer regulations that are better suited for large banks and ongoing elevated unemployment levels. He also talked of the more than 40 meetings Fed officials have had with small businesses and lenders in recent months in an attempt to help matters.
Various problems with real estate were also noted by Bernanke: "The housing market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction...spending on nonresidential structures-weighed down by high vacancy rates and tight credit-has continued to contract."
However, Bernanke, who has been panned of late for being less clear and detailed with lawmakers than when he first took the chair position, did note several reasons to hold on to some optimism for the rebound to continue, even if at a slower-than-desired pace. Bernanke outlined predictions for low inflation and Fed rates for the next year-plus, an unemployment rate that is likely to drop by nearly 3 full percentage points by the end of 2012 and vague signs that the rate of decline in commercial real estate is ready to fall.
"We don't think a double-dip [recession] is a likely event," said Bernanke, trying to reassure a group of senators on both sides of the political aisle who appeared throughout the hearing to be more interested in trying to use the chairman to lob thinly veiled shots at their counterparts than ask questions pertaining to the actual monetary policy report or even the economic recovery.
Brian Shappell, NACM staff writer