Economy Is 'Leveling Out,' Bernanke Says

Chairman Ben S. Bernanke rendered his most positive assessment of the economy yet in a speech Friday and gave credit in part to his own institution's handling of the worst economic crisis in decades.

The U.S. and global economy "appear to be leveling out," Bernanke told an audience of some of the world's leading economists and central bankers, and "prospects for a return to growth in the near term appear good." He warned, however, that the recovery is "likely to be relatively slow at first," with unemployment declining only gradually.

The idea that the economy is starting to improve was bolstered Friday by a report that sales of existing homes soared 7.2 percent in July to the highest level in two years. Bernanke's comments and the housing news sent Standard & Poor's 500-stock index up 1.9 percent to a new high this year.

But the meat of Bernanke's speech was not about the stabilizing economy, but rather an extensive defense of the Fed's handling of the financial crisis and recession. It is part of a broader effort to shore up confidence in the central bank, which has come under fire in Congress and in public opinion polls for its role in various bailouts.

And it comes as speculation heats up over whether President Obama will reappoint the chairman when his term expires Jan. 31.

"History is full of examples in which the policy responses to financial crises have been slow and inadequate," Bernanke said at the annual symposium sponsored by the Kansas City Fed. By contrast, in the current crisis "policymakers in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation." link.....