Federal Reserve Chairman Ben Bernanke on Monday advised Congress to consider another economic stimulus package to help consumers cope with a slowing economy, but noted that funds must be dispersed wisely to be effective.
But Bernanke, acknowledging the mounting budget deficit, said stimulus funds need to be "well-targeted," in areas that will push forward a so-called knowledge-based economy. He mentioned areas like research and development, technology, energy and science, as well as basic infrastructure, which the Roosevelt administration invested in heavily to bring the country out of the Great Depression.
Finally, Bernanke noted that Congress should focus on improving access to credit by consumers, homebuyers and businesses, perhaps by providing direct loans or otherwise supporting a lending program. While the government has taken strong initiative to help grease the wheels of the financial system by lowering a key interest rate target, easing lending standards and structuring a program to inject $250 billion in capital into cash-starved banks in return for preferred equity.Banks that will take part in the program include Goldman Sachs (STOCK QUOTE: GS), Morgan Stanley (STOCK QUOTE: MS), JPMorgan Chase (STOCK QUOTE: JPM), Bank of America (STOCK QUOTE: BAC), Merrill Lynch (STOCK QUOTE: MER) Citigroup (STOCK QUOTE: C), Wells Fargo (STOCK QUOTE: WFC), Bank of New York Mellon (STOCK QUOTE: BK) and State Street (STOCK QUOTE: STT).
Still, Bernanke noted, a contraction of lending has only started to hit consumers and businesses, and if it continues, it could worsen the decline.