Feb. 26 - Bernanke played defense when he faced Senators on Tuesday in his semi- annual testimony- arguing that his policies are working- and warning that the upcoming forced spending cuts could have dire consequences. Hoda Emam reports.
Federal Reserve Chairman Ben Bernanke calmed markets, confirming he would continue the Fed's quantitative easing program. He also mollified the concerns about Fed policy- after last week's FOMC minutes indicated dissent - rattling the markets- making it clear the central bank was sticking to the plan- and will keep buying bonds to support the economy. SOUNDBITE: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE (ENGLISH) SAYING: "These additional purchases of longer-term Treasury securities replace the purchases we were conducting under our now-completed maturity extension program, which lengthened the maturity of our securities portfolio without increasing its size." S&P's David Blitzer says Bernanke's testimony helped the markets regain their footing. SOUNDBITE: DAVID BLITZER, MANAGING DIRECTOR AND CHAIRMAN OF THE INDEX COMMITTEE, S&P DOW JONES INDICES (ENGLISH) SAYING: "Markets reaction to Bernanke prices went up, I think as a result, he really did job number one which was to get people back on an even keel, compared to where we had been since the minutes from the Fed came out last week. But also a lot of the news, the Italian elections, concerns about the outcome or the uncertainly about the outcome of the election." The Fed chief was also concerned about the automatic spending cuts set to take effect on Friday. SOUNDBITE: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE (ENGLISH) SAYING: "Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant. Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions." Bernanke warned that while the full impact of the sequestration will not be felt immediately, over time, furloughs and spending cuts would have a substantial and potentially very damaging effect.