WASHINGTON (MNI) – The following is an excerpt from Federal Reserve
Chairman Ben Bernanke’s press conference Wednesday following the Federal
Open Market Committee meeting:

“If the economy actually went off the fiscal cliff our assessment,
the CBO’s assessment, outside forecasters, all think that would have
very significant adverse affects on economy and on unemployment rate —
and so, on the margin we would try to do what we could — we would
perhaps increase a bit.

But I want be clear that we cannot offset the full impact of the
fiscal cliff — it’s too big given the tools we have that we available
and the limitations on our policy tool kit at this point. In terms of
terminology, well, people have different preferences about what they
want to call things. I think it is a sensible term because fiscal policy
is providing support to the economy, if fiscal policy becomes very
retractionary the economy will I think go off a cliff, it’s reasonable
to be concerned about this.

I don’t buy the idea that a short-term dissent off the fiscal cliff
would be not costly — I think it would be costly and in fact we’re
already seeing costs.

Why is it that consumer confidence dropped so sharply this week and
why is it small business confidence dropped so sharply and why are the
markets volatile, why is business investment among its weakest levels
during the recovery.

I think all of these things at least to some extent can be traced
to anticipation and concern about the fiscal cliff and I think that you
know we don’t know exactly what would happen, but I think there’s
certainly a risk that it could be serious and therefore I think it is
very important that most helpful thing that I think Congress and this
Administration can do is find a resolution that on one hand achieves
long fiscal sustainability which is critical, absolutely critical for a
healthy economy but also avoids derailing the recovery which is
currently in process.”

–MNI Washington Bureau; tel: +1 202-371-2121; email: dcoffice@mni-news.com