Federal Reserve Chairman Ben Bernanke made first appearance before the 112th Congress testifing before the Senate Budget Committee. Much of the questioning was on the Fed’s attempt to stimulate the economy by injecting $600 billion into Treasury bonds.
The strategy involves the central bank buying long-term Treasury bonds from banks. But rather than using money already in the system, the Fed would credit the banks' accounts, thereby injecting an additional $600 billion into the U.S. economy.
Bernanke voiced his concern in October of last year about the slow economic growth and said the economy wouldn’t improve at a quick enough pace in 2011 to lead to strong recovery unless further action is taken. He expressed his hopes that the move will lead to an increase of bank loans and job growth.
The plan could face some resistance by the Republican majority in the House, which may limit some of the government's spending and dampen the plan’s impact. Additionally, if there is a sense that the market is responding positively to the fiscal assistance, then the Fed may not need to purchase as many bonds as originally thought.