Bernanke fears lack of will to end crisis

The U.S. recession could last most of the year, said Ben Bernanke, the Federal Reserve chairman, warning that the biggest risk was that the political will needed to fix the fractured financial system could be lacking.

"This decline will begin to moderate and we'll begin to see a leveling off," Mr. Bernanke said when pressed during an interview on the CBS television program "60 Minutes" about whether he sees the recession ending this year. "We won't be back to full employment. But we will, I hope, see the end of these declines that have been so strong in the last couple of quarters."

Mr. Bernanke told Congress in January that the Fed believed there was a reasonable prospect that the recession that took hold in December 2007 would end this year and that 2010 would be a year of recovery.

In the rare on-the-record interview, shown Sunday, he largely stuck to that view, while suggesting that recent developments might have dimmed the outlook a bit.

"We'll see the recession coming to an end, probably this year," Mr. Bernanke said. "We'll see recovery beginning next year."

Government efforts to combat the crisis have been criticized as stock markets have plunged and unemployment has soared even as the authorities have stepped in to prop up companies such as American International Group.

The financial system remains fragile, despite a $700 billion bailout of banks approved by Congress in October, and President Barack Obama has said more money will likely be needed to repair debt-laden banks.

The Fed chairman said his greatest worry is that lawmakers and the public will withdraw support for efforts aimed at stabilizing the shattered banking system.

"The biggest risk is that, you know, we don't have the political will," he said. "We don't have the commitment to solve this problem, and that we let it just continue."

If that occurs, he said, "we can't count on recovery."

Recent economic data have pointed to an intensifying economic downturn. The U.S. unemployment rate rose to a 25-year high in February as employers cut 651,000 jobs, taking the recession's job loss total to 4.4 million. Home and auto sales have slid in recent months, and manufacturing has contracted.

Last week, Mr. Obama and his top aides issued some of their most optimistic remarks since the new president had taken office, concerned that a grim outlook among investors or the public might become part of the problem.

Lawrence H. Summers, director of the National Economic Council, said that low stock prices offered "the sale of the century."

Yet in an interview Sunday, Mr. Summers struck a note of caution.

Asked on "This Week," on ABC, whether a bottoming of the economy was in sight, Mr. Summers said, "No one can make that judgment." Job losses were likely to continue for some time, he suggested, noting: "We've got an economy that's losing 600,000 jobs a month. It's probably not going to stop imminently."

And queried about whether the unexpected profit reports for this year from Citibank and some other major banks meant that they were "out of the woods," he replied, "I wish I could say that."

"It's going to take some time" for the administration's rescue efforts to gain serious traction, he said.

But Mr. Summers insisted that the administration economic team was moving expeditiously to flesh out its financial rescue efforts.

"On Monday, you're going to see the details of one key component of the plan," he said. Mr. Obama is expected to propose offering hundreds of millions in federal lending aid to help struggling small-business owners and to move aggressively to increase bank liquidity.

According to The Associated Press, the package will include $730 million from the stimulus plan to immediately reduce small-business lending fees and increase the government guarantee on some Small Business Administration loans to 90 percent. The government also will take steps to increase bank liquidity, with more than $10 billion aimed at unfreezing the secondary credit market, according to officials briefed on the plan who sought anonymity to avoid pre-empting the president's announcement.

Concerns have risen that the administration is moving too slowly, and perhaps too opaquely, to shore up banks and deal with so-called toxic assets weighing on many banks' books.

"There's a lack of confidence because this administration has not come forward with a plan on how to take these impaired assets out of the market," Representative Eric Cantor of Virginia, the House Republican whip, said on NBC.

But Christina D. Romer , another administration adviser, indicated that a plan was near. "I can tell you that that kind of a blueprint is top on our agenda, and I expect it to come out very soon," she said.