Fed’s Bernanke says economy is poised for growth

Federal Reserve Chairman Ben Bernanke offered his most optimistic outlook since the financial crisis struck, saying the economy is on the verge of growing again.

Speaking at an annual Fed conference, Bernanke acknowledged no missteps by the central bank in managing the worst crisis since the Great Depression. But he conceded that consumers and businesses are still having trouble getting loans, even though the financial system is gradually stabilizing.

Economic activity in both the U.S. and around the world seems to be leveling out, and the economy is likely to start growing again soon, Bernanke said in a speech in Jackson, Wyo.

Despite his upbeat tone, Bernanke cautioned that the recovery is likely to be "relatively slow at first."

His comments were "realistic," said Dean Croushore, a professor and chairman of the economics department at the University of Richmond.

"As economists are looking at all the incoming data, it is pretty clear that the worst of the downward slide is over, not everywhere, but it is starting to look like what we usually see at the beginning of an economic recovery," Croushore said.

"Recoveries always move in fits and starts; you will see an uptick here and downtick there," he said. "We still have a long ways to go, but the good news is that at least we don't see this big, continued deterioration."

The mood at the annual Fed conference was decidedly more hopeful than it was last summer, when a sense of foreboding hung over the forum just before the financial crisis erupted.

"Although we have avoided the worst, difficult challenges still lie ahead," Bernanke told the gathering at the conference, which draws a virtual who's who of the financial world -- Bernanke's counterparts in other countries, academics and economists.

"We must work together to build on the gains already made to secure a sustained economic recovery."

Bernanke's hopeful remarks on the economy contributed to a rally on Wall Street. The Dow Jones industrial average surged about 155 points, or 1.7 percent, and broader stock averages also gained sharply.

Reviewing the past year's crisis, Bernanke outlined the many emergency measures the Fed and other regulators took to help ward off a global financial meltdown.

He declined to acknowledge critics' arguments that regulators failed to detect signs of the crisis before it occurred -- or that Wall Street bailouts sent a message that big companies that make reckless bets would be rescued with taxpayer money.

"The crisis, in turn, sparked a deep global recession, from which we are only now beginning to emerge," the Fed chief observed.

Croushore, who knows Bernanke, noted that most of his speech recounted the aggressive steps taken by the Federal Reserve to contain the worst financial crisis since the Great Depression, which Bernanke has extensively studied.

"In his speech, he lays out all of that and why the policies the Fed followed are the things that most economists who have studied financial panics think that a central bank and governments ought to do in order to prevent a depression," Croushore said.

Christine Chmura, president and chief economist with Chmura Economics & Analytics in Richmond, said gross domestic product, the basic measure of a nation's economic performance, should turn positive during the current quarter. GDP is the sum of all goods and services made within a year.

"The third quarter will most likely be the beginning of the next expansion," she said.

The Cash-for-Clunkers program, for instance, is giving the economy a jump-start, with automakers adding jobs to make up for diminished inventory. "And it's rippling to steel companies and other companies that supply auto manufacturers."

As yet unknown is whether that federal stimulus program accelerated people's plans to buy new cars, which could mean a slump in future sales.

"The question is whether the growth rate we'll see in the third quarter will be sustainable," Chmura said.

Staff writers John Reid Blackwell and Emily C. Dooley and The Associated Press contributed to this report.