Wording: Talking about the economy

WASHINGTON (AP) - February 15, 2008 Well, it seemed that way at times during a Senate Banking Committee hearing Thursday. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson talked about the challenges the country faces from a housing slump and credit crunch and what additional steps might be taken to bring about relief.

Bernanke spoke of "sluggish growth," a jobs market that is not "rip roaring," and a "virtual shutdown" in the market for subprime mortgages - those made to people with tarnished credit or low incomes.

For his part, Paulson spoke with emotion about the troubles of record numbers of people plunged into foreclosure and others struggling to stay in their homes.

"I'll tell you, when you're there and you look at the abuses and you look at the predatory lending abuses and you look at some of the - it's heartrending," the secretary said. "But what we're doing is trying to deal with it."

Lax credit standards during the housing boom was the spark that led to the current economic woes. "We had a dry forest out there," Paulson said.

Paulson was equally vivid when talking about the Treasury Department's efforts to develop a regulatory blueprint for players in financial markets.

"If someone came down - a man came down from Mars - and you were trying to explain the regulatory structure and how this works, the way the markets - you know, the regulatory structure has not evolved with the markets. And it's a patchwork quilt, in many ways," he said.

The Fed chief didn't sugarcoat the economy's problems and used crystal-clear language, something his famously Delphic predecessor Alan Greenspan often was loathe to do publicly. "The outlook for the economy has worsened in recent months," Bernanke, a former economics professor, told lawmakers.

People are tightening their belts and employers have slowed hiring. "We are going through a retrenchment, and that's a painful retrenchment," Bernanke said.

The big worry is that people and businesses will cut back sharply, throwing the economy into a recession. The odds of a recession have grown significantly over the last year. Some economists believe the economy, which nearly stalled in the final three months of last year, is shrinking now.

Many people - 61 percent - believe the U.S. is in a recession, according to a recent Associated Press-Ipsos poll.

Bernanke and Paulson are hopeful the country can skirt a recession. They still believe the economy is growing - but at a slower pace.

Even with the occasional unvarnished moments, both Bernanke and Paulson resisted one senator's efforts to pin them down on a description of the housing market.

"There's been a lot of descriptions about where we are in the housing sector, whether it's a crisis or whether this is a correction," said Sen. Bob Corker, R-Tenn. "I'm wondering if each of you might choose a word to describe where we are today."

Replied Paulson, "I don't use loaded words, and so I've been using correction because it is a correction."

Sen. Chris Dodd, D-Conn., the committee's chairman, stepped in. "It would be inappropriate for the secretary and the chairman to start putting a label" on the housing situation, he said.

"That could have its own self-fulfilling prophecy here," Dodd said. "So we've got to be careful about language. Language has significance and implications."