Fed chief urges Obama, Cong to do more for economy

The Federal Reserve chairman, Ben S. Bernanke, told a Congressional committee that lawmakers and the Obama administration should do more to increase economic growth.

Bernanke described the nation’s economic health in bleak terms, saying that “the recovery is close to faltering,” and suggested that avoiding another recession might require fresh government action.

“We need to make sure that the recovery continues and doesn’t drop back,” he said.

Such talk from a Fed chairman usually means the central bank is preparing to reduce interest rates, and  Bernanke said that the Fed was not ruling out such a step. But on Tuesday, as at other recent appearances, he made clear that his remarks were aimed at the rest of the government.

“Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy,” Bernanke said. “Fostering healthy growth and job creation is a shared responsibility of all economic policy makers.”

Bernanke has repeatedly called on Congress to adopt a plan for paying down the federal debt, as well as for reducing inequities and loopholes in the corporate tax code, two ideas that enjoy wide support among economists.

On Tuesday he also focused on housing policy, suggesting that the government could help underwater homeowners refinance and also improve the availability of mortgages for potential buyers.

Moody's slashes Italy credit rating

Meanwhile, Moody's lowered its rating on Italy's bonds by three notches on Tuesday, saying it saw a "material increase" in funding risks for euro zone countries with high levels of debt and warning that further downgrades were possible.

The agency downgraded Italy to A2 from Aa2, a lower rating than it holds on Estonia and on a par with Malta and kept a negative outlook on the rating.
The euro pared gains against the dollar and Japanese yen immediately following the announcement which comes after Moody's rival Standard and Poor's cut its rating on Italy by one notch to A/A-1 on September 19.
The cuts underline growing investor concern about the euro zone's third largest economy, which is now firmly at the center of the debt crisis and dependent on help from the European Central Bank to keep its borrowing costs under control.
"The negative outlook reflects ongoing economic and financial risks in Italy and in the euro area," Moody's said in a statement.
"The uncertain market environment and the risk of further deterioration in investor sentiment could constrain the country's access to the public debt markets," it said.