By Alexander Bolton - 10/20/11 08:42 PM EDT
Federal Reserve Chairman Ben Bernanke told Senate Democrats on Thursday that they should not expect additional monetary stimulus from the Fed, putting pressure on them to pass jobs and deficit-reduction legislation.
Some Democratic lawmakers have urged the Fed to take more aggressive steps to spur the economy and lower the national unemployment rate.
“He’s said he’s done all he can do on the monetary side, and I think it’s probably accurate,” said Senate Democratic Whip Dick DurbinDick DurbinElizabeth Warren stumps, raises funds for Duckworth Senators roll out changes to criminal justice bill Let the Democratic veepstakes begin MORE (Ill.), who attended the meeting. “Now it’s up to us.”
A Senate Democratic aide said Bernanke’s statement makes it all the more important to pass a $35 billion measure to prevent layoffs to teachers and first responders.
“That’s right, we need to pass a jobs bill, and that’s what we’re trying to do,” said the aide.
Bernanke attended the Democrats’ weekly policy lunch in the Senate Mansfield room, where he fielded questions from lawmakers anxious about the economic outlook.
Most of the session was devoted to discussing the debt crisis in Europe, which senators fear could further tighten business credit.
Bernanke told lawmakers that he and other senior U.S. economic officials have recommended to European leaders steps to avoid a financial crisis.
Lawmakers said they received a lot of new information on the scope of the problem but declined to say whether Bernanke thought the financial contagion could be contained within Europe. They also declined to discuss his recommendations for addressing the growing crisis.
“There are some critical decisions being made over there that could have an impact on the United States. He did talk about some meetings that are coming up very soon that are very critical when it comes to the future of Greece,” Durbin said.
Lawmakers are concerned about the implications of Moody's decision this week to downgrade Spain's government bond ratings.
“What one always has to be concerned about is a contagion effect. This crisis is manageable but the right things have to be done and the great concern one always has to have is that you get something started that isn’t managed, like Lehman Brothers, and the next thing you have is a crisis,” said Senate Budget Committee Chairman Kent Conrad (D-N.D.).
Democrats also pressed Bernanke for strategies to revive the domestic economy.
Sens. Dianne FeinsteinDianne FeinsteinIntel leaders push controversial encryption draft Democrats block energy spending bill over Iran amendment Durbin: Iran amendment could kill energy bill MORE (D-Calif.) and Barbara BoxerBarbara BoxerCarter pledges probe of sex assault testimony Senate panel backs B water bill with Flint aid The Hill's 12:30 Report MORE (D-Calif.) quizzed the Fed chief on how to reduce foreclosures, which have left many homeowners under water.
“We also talked with him about how to get more renegotiation of home loans,” said Feinstein, noting that in some California counties as many as 55 percent of homes are worth less than the value of their mortgages.
Bernanke said he would submit to Congress next week a list of legislative recommendations to reverse the tide of foreclosures.
Several leading Democrats in Congress have urged more aggressive monetary stimulus from the Fed. The stock markets reacted negatively when Bernanke unveiled Operation Twist last month, but have since rallied.
Operation Twist is designed to flatten the yield curve by buying long-term bonds and selling short-term debt. Since the purchase of long-term debt is financed by sales, it does not inject new flows of money into the economy.
“I think it’s a good idea, but I would have gone further,” Rep. Barney Frank (Mass.), the ranking Democrat on the House Financial Services Committee, said in a statement to The Hill last month.
Republicans, however, warned Bernanke that flooding dollars into the economy could trigger inflation.