Bernanke said there didn’t appear to be a “single trigger” to Tuesday’s plunge.
WASHINGTON — Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that the administration and federal regulators are closely monitoring financial markets in the wake of the biggest stock market sell-off in more than five years, but so far the markets appear to be “working well.”
Facing his first market crisis since taking the top Federal Reserve job a year ago, Bernanke answered questions on Tuesday’s market plunge with a calm, matter-of-fact demeanor, explaining developments in plain language without any of the famously obscure language that his predecessor, Alan Greenspan, sometimes used.
In what might have been a reference to Greenspan, Bernanke testified that there did not appear to be a “single trigger” to Tuesday’s sharp sell-off where the Dow Jones industrial average fell by 416.02 points.
Some analysts say that Greenspan’s comments over the weekend that there was a possibility of a recession by the end of the year along with a sharp drop in China’s Shanghai stock market contributed to Tuesday’s big drop on Wall Street.
But Bernanke let members of the House Budget Committee know that he didn’t intend to assign blame.
“There didn’t seem to be any single trigger of the market correction we saw yesterday,” he said in response to a question.
“I don’t think it would be useful for me to try to parse the movement into the components associated with different pieces of news or pieces of information.”
On Wall Street, investors seemed to take comfort from Bernanke’s comments.
The Dow Jones industrial average closed up slightly 52.39 to 12,268.63.
The 30-member index was up by more than 100 points earlier in trading.
Despite Tuesday’s market turmoil, Bernanke said he did not believe there had been a major change in the outlook for the economy.
Bernanke said that the Fed, along with the president’s working group — formed in the wake of the 1987 stock market crash — had been closely monitoring market developments. He said that the markets “seem to be working well.”
He said there had been “no material change in our expectations for the U.S. economy since I last reported to Congress” when he delivered the Fed’s latest economic outlook two weeks ago.
“We are looking for moderate growth in the U.S. economy going forward,” Bernanke said. He said that if current corrections under way in housing and the amount of inventories being held by business stabilize in coming months, the economy should begin to rebound from its current slowdown by the end of the year.
Bernanke’s comments occurred at a hearing where he delivered virtually identical warnings as he did in a Senate hearing last month about the need to deal with looming budget problems in the government’s giant benefit programs of Social Security, Medicare and Medicaid.
Greenspan, speaking by satellite to an audience in Hong Kong on Sunday night, had said the current five-year-old expansion was beginning to show early signs of the types of imbalances that could lead to a recession.
He said it was possible the U.S. could be in a recession by the end of this year, although he noted that most private forecasters did not consider that a likely outcome.