Bernanke warms to second stimulus

By Emily Kaiser and Mark Felsenthal

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke told Congress on Monday that another wave of government spending may be needed as the economy limps through what could be an extended period of subpar growth.

"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Bernanke told a congressional panel.

Another central bank official, Atlanta Fed President Dennis Lockhart, echoed Bernanke's gloomy outlook, saying that the global credit crisis will chill U.S. economic growth well into next year, but added that powerful steps to unlock financial markets have been taken and will work.

"We at the Atlanta Fed expect weakness to persist for some time into 2009 as credit markets gradually improve," Lockhart told the Buckhead Rotary Club.

Bernanke's endorsement of a new stimulus was the first time the chairman of the Fed -- the U.S. central bank -- had explicitly endorsed such a package.

The government sent out about $100 billion (58 billon pounds) in tax rebate checks over the summer to consumers to try to jump-start the economy, but consumer spending has struggled since then. Retail sales fell for three consecutive months through September.

The White House also appeared to be warming to the idea of another spending program. Spokeswoman Dana Perino said the Bush administration was "open" to a new stimulus plan, depending on its makeup, and would look to Bernanke and others for guidance.

For many months, Democrats in Congress have been pushing for a second economic stimulus measure that could spend up to tens of billions of dollars or more on domestic construction projects, expanded food stamps and broader federal spending to help states pay for growing health care costs for the poor.