- The Washington Times - Thursday, February 19, 2009

Federal Reserve Chairman Ben S. Bernanke committed the central bank Wednesday to do “everything possible within the limits of its authority” to get the United States out of recession and to stabilize financial markets.

Mr. Bernanke made his pledge in a speech at the National Press Club on the same day the Fed released a dour economic forecast for 2009. The Fed’s revised forecast estimated that the unemployment rate could reach 8.8 percent this year as the economy shrinks as much as 1.3 percent. The Fed’s previous forecast said the economy could grow as much as 1.1 percent in 2009, with unemployment remaining well below 8 percent.

Participants at the Fed’s latest policy committee meeting in late January “anticipated that labor market conditions would deteriorate substantially further over the course of this year,” the minutes of the meeting stated.

Since the beginning of 2008, the private sector has lost more than 3.7 million jobs - 2.5 million during the past five months alone.

Two reports on January economic activity, including one released by the Fed, suggested the latest economic forecast could still be too optimistic.

Homebuilders in the United States broke ground in January on the fewest number of new houses since the government began keeping records 50 years ago.

As the worst housing market since the Great Depression continued to deteriorate, housing starts in January were 56 percent below their pace a year ago, the Commerce Department reported Wednesday.

To help the housing market, President Obama announced plans Wednesday to funnel an additional $200 billion of taxpayer funds into mortgage-financing giants Fannie Mae and Freddie Mac, which were taken over by the government in September.

The president also announced the creation of a $75 billion Homeowner Stability Initiative to help financially stressed homeowners lower their mortgage payments and to force lenders to reduce interest rates for troubled borrowers.

As demand for goods continued to plummet worldwide, the Federal Reserve reported that industrial output plunged 1.8 percent in January - the sixth reduction in the past seven months. The January output of U.S. mines, utilities and factories was 10 percent lower than it was a year ago. In fact, January’s industrial output was lower than it was in January 2001.

“The production plunge in January means that total industrial production declined over the past eight years for the first eight-year period since the eight years ending in 1938,” said Charles McMillion, president and chief economist of MBG Information Services.

Nearly a third of manufacturing production capacity sat idle in January. The auto industry led the plunge in manufacturing output last month. After declining 13 percent in December, vehicle output collapsed by 40 percent in January. Fewer vehicles were assembled in January than in any month since record-keeping began in 1967.

Like struggling homeowners, the auto industry is tapping taxpayer coffers. On Tuesday, General Motors, which has already received $13.4 billion in government bailout loans, requested an additional $16.6 billion of taxpayer help.

Chrysler asked for $5 billion on top of the $4 billion it received in December.

Markets barely reacted to the drumbeat of negative news. In a trading session that seesawed throughout the day, the Dow Jones Industrial Average gained 3 points and closed at 7,555.63. The Dow remained slightly above its Nov. 20 closing level of 7,552, which marks the bottom of the bear market thus far.

The S&P 500 stock index fell 0.75 point to close at 788.42, while the Nasdaq Composite Index lost 2.69 points and finished the day at 1,467.97.

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