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Fed Chair Bernanke testified in front of the Joint Economic Committee on The economic outlook for the US.

Key takeaways:

Credit
- Recent Fed actions appear to have helped stabilize the situation somewhat;
- Financial markets remain under considerable stress;
- Pressures in short-term bank funding markets have increased once again;
- Lenders have been reluctant to provide credit to counterparties, especially leveraged investors, and have increased the amount of collateral they require;
- Corporate debt market yields and spreads have been falling more recently

Labor, Wages & Income
- Demand for labor has also moderated;
- Claims for unemployment insurance have risen;
- Unemployment is expected to move higher in coming months;
- Declining home values and tighter credit conditions have caused consumer spending to decelerate considerably;
- Tax rebates, fiscal stimulus package recently will provide some support to consumer spending in coming quarters

Inflation
- Real disposable income increased at only about a 1 percent annual rate, reflecting weaker employment conditions and higher prices for energy and food;
- Price index for personal consumption expenditures rose 3.4%;
- Sharp increases in the prices of crude oil and agricultural products;
- Decline in the foreign exchange value of the dollar has boosted some non-commodity import prices;
- We expect inflation to moderate in coming quarters

Conclusion
"Clearly, the U.S. economy is going through a very difficult period. But among the great strengths of our economy is its ability to adapt and to respond to diverse challenges. Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year. I remain confident in our economy'€™s long-term prospects."

Wednesday morning on Bloomberg, a headline crossed stating that Bear Stearns (NYSE:BSC) had approached the Fed to discuss the plans of their imminent bankruptcy filing.

Source:
The economic outlook
Chairman Ben S. Bernanke
Before the Joint Economic Committee, U.S. Congress, April 2, 2008
http://www.federalreserve.gov/newsevents/testimony/bernanke20080402a.htm

Related:
What Congress and Investors Should Understand About the Bear Stearns Deal
John P. Hussman, Ph.D.
March 31, 2008
http://www.hussmanfunds.com/wmc/wmc080331.htm

Fed Should Clarify Link to Bear Stearns Assets
Caroline Baum
Bloomberg, April 2, 2008

Source: Bernanke: Economy Slowing, GDP Flat in 1H '08