Taking the Economists' Pulse

The Treasury secretary and the Fed chairman: bored, or just uninterested? (By Mark Wilson -- Getty Images)

Paulson provided a quick retort: "If you are trying to talk the economy up, I'd hate to see you try to talk it down."

"I'm just not trying to hide my head in the sand," Menendez said bitterly.

For much of the exchange, Paulson leaned back, draping his left arm over the back of his chair. Bernanke looked down, admired the chamber's marble walls and stroked his beard.

Even a couple of Republicans on the panel were troubled by the lethargy. "Chairman Bernanke, I just want to give you a heads-up: When you see something coming, don't put it off," suggested Jim Bunning (Ky.). "This housing market has been coming to us for a year, a year and a half, and we didn't react properly to it."

Sen. Bob Corker (R-Tenn.) tried a semantic question to draw out the witnesses. Is it a housing "crisis" or a "correction"?

"I don't use loaded words," came Paulson's inevitable reply, "so I've been using 'correction' because it is a correction."

By contrast, Dodd, the chairman, used the word "crisis" 12 times in his opening statement alone. "The current economic situation," he said, is no "mere recession." Job losses, weak retail sales, falling output, rising delinquencies and inflation, slumping stocks -- the senator hit them all. "This would be the first time since the Great Depression that national home prices will have dropped in two consecutive years."

Bernanke leaned back in his chair for Dodd's lengthy remarks. He allowed that there has been "considerable strain" in markets, a "softened" labor market and a "deteriorated" housing market -- but no recession. In fact, he forecast a "strong pace of growth" later this year.

Paulson went even further in buoyancy. Despite a "housing correction," he asserted that "the U.S. economy is fundamentally strong, diverse and resilient." The former Wall Street executive reassured the senators: "I have confidence in our markets."

Dodd didn't agree. "Pressure is mounting here," he pushed. "What are you going to do about it?"

"The markets are going to work," Paulson repeated. Bernanke offered something about "the complex causality that we're seeing promulgating."

Dodd asked whether previous economic forecasts had to be downgraded. They did. "But I do believe we're going to keep growing here," the secretary said.

Paulson must have known he sounded off key, because toward the end he seasoned his remarks with disclaimers such as "I don't mean to be overly complacent" and "I don't mean to sound heartless."

Heartless? No. But complacent was harder to avoid. Schumer pointed out that Wall Street bankers "seem much more worried than you guys."

"Some seem more worried than others," Paulson replied.

Clearly.