So Ben spoke to Congress last week, part of the Fed's Humphrey-Hawkins (HH) Act testimony (the link is to a short explanation of the name and act on "the street.com").  Sorry that I have taken so long but work takes precedence - now that I will begin to teach the Fed today - the Full Employment and Balanced Budget Act of 1978 (HH) - takes precedence too!  Fun when work and "play" come together!  (Wait, you don't think watching the Fed is fun - well, maybe one has to be an Economist, eh?!!  laughing).

The following is taken from three articles on Bloomberg.com (Markets impaired)and Bloomberg.com (More rate cuts), as well as the NY Times (my Wall Street Journal subscription is ending so I will be switching to a MUCH better newspaper and a bit more of a global view - the Financial Times - out of London).

From the NY Times:

Mr. Bernanke made clear that the home mortgage crisis remained the single biggest drag on prospects for a recovery, and said that it was up to Congress to act. He cited a need to strengthen federal agencies that insure mortgages.

In partial response to another Senator's "Socialism" comment quoted previously on this blog about the Bear Stearns help the Fed provided:

“That was an extraordinary thing to do,” the Fed chief acknowledged to Senator Sam Brownback, Republican of Kansas. “I thought about it long and hard. I would hope not to ever do it again.”

Note that for class especially, the role of the Fed is changing:

Acknowledging that the Fed was moving beyond a traditional role of regulating bank holding companies and moving into a new realm of investment banks and other financial institutions, he said the Fed would examine several issues related to their solvency and risk management.

“Clearly, we’re looking at asset quality and capital,” Mr. Bernanke said. “We’re looking at liquidity. We’re trying to make judgments about risk management, earnings quality — a variety of things that we look at to try to ascertain whether a financial institution is sound or not. And if not, you know, we need to push them to improve their processes, to raise capital, improve their liquidity.”

Wait for Congress? at least one Democrat thinks not!

Led by Senator Charles E. Schumer, Democrat of New York and chairman of the Joint Economic Committee, many lawmakers appeared encouraged that the Fed chief was not waiting for Congressional authority to move into the S.E.C.’s territory and regulate what Mr. Bernanke referred to as “our brave new world, our much broader, more diverse set of financial institutions.”

From Bloomberg.com:

April 4 (Bloomberg) -- Federal Reserve officials signaled the central bank will keep lowering interest rates because financial markets remain distressed even after the fastest reduction of borrowing costs in two decades.

Fed Chairman Ben S. Bernanke told lawmakers yesterday that the central bank is "ready to respond to whatever situation evolves,'' and cited "considerable stress'' in markets. New York Fed President Timothy Geithner said policy makers must "continue to act forcefully.''

A quarter point or a half point?  The odds are still at a quarter:

Bernanke “painted a pretty dismal picture,'' said Peter Kretzmer, senior economist at Bank of America Corp. in New York, who used to work as an economist at the New York Fed and Fed Board in Washington. “This credit crisis is different and the credit condition problems are fairly severe,'' he added, forecasting a half-point rate cut this month.

Traders now see a one-in-five chance of a half-point reduction in the benchmark rate, to 1.75 percent, at the April 29-30 Fed meeting. That's up from 12 percent odds two days ago, while today's Labor Department report will offer investors fresh clues on future Fed actions.

Finally, a comment about the effect of Bear Stearns on the economy:

“Absent a forceful policy response, the consequences would be lower incomes for working families, higher borrowing costs for housing, education and the expenses of everyday life, lower value of retirement savings, and rising unemployment,'' said Geithner, who was lead negotiator during the decision to finance $30 billion of illiquid Bear securities in the takeover by JPMorgan Chase & Co., the first transaction of its kind.