Despite uncertainties, he's confident that economy will rebound
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) -- The U.S. economy likely won't improve significantly for at least another year, the No. 2 leader at the Federal Reserve said Wednesday, echoing equally dour comments from his boss earlier in the day.
In a speech at Georgetown University, Fed Vice Chairman Donald Kohn expressed optimism that the extraordinary global efforts by the Fed and other financial leaders in recent weeks will succeed in restoring a normal, functioning credit market that can support economic growth.
"Given the likely drawn-out nature of the prospective adjustments in housing and financial markets, I see the most probable scenario as one in which the performance of the economy remains subpar well into next year and then gradually improves in late 2009 and 2010," Kohn said.
It will take time to restore the necessary confidence that has been shattered by the hundreds of billions in loses stemming from subprime mortgages and falling home prices, he said.
"I am optimistic that this multipronged approach is laying the groundwork for a return to more normal functioning in financial markets and a restoration of vigorous economic growth," Kohn said.
Earlier Wednesday, Fed Chairman Ben Bernanke delivered essentially the same message at the Economic Club of New York: The actions taken by the Fed, the Treasury and the Europeans will slowly thaw out the credit markets, but economic recovery won't come easily or quickly.
"Broader economic recovery will not come right away," Bernanke said. See full story
