Bernanke’s prepared testimony is more cautious than his last, given in February. He says it will take “a significant amount of time” to restore the millions of jobs lost in the recession, and says “the economic outlook remains unusually uncertain.” He nevertheless says that the recovery is “proceeding at a moderate pace,” though job growth is still “insufficient to reduce the unemployment rate materially” and joblessness in general remains an “important drag on household spending.” He noted that since February, the Federal Reserve has revised down its estimates of job growth and believes unemployment will remain high for longer than thought, also noting the troubling plight of the long-term unemployed.

Despite his warnings on the state of economy, Bernanke said the Fed will not engage in any expansionary policy at the time: “We will continue to carefully assess ongoing financial and economic developments, and we remain prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability.”

Other economists are calling on the Federal Reserve to be more proactive in ginning up the economy and reducing joblessness.

Earlier this afternoon, Senate Minority Leader Mitch McConnell (R-Ky.) said Republicans would no longer stand in opposition to the bill reaching the floor. Republicans Olympia Snowe (Maine), Susan Collins (Maine) and Lamar Alexander (Tenn.) indicated they would vote for the cloture motion. But Senate Majority Leader Harry Reid (D-Nev.) just asked for unanimous consent — a parliamentary procedure that does not require a vote, as long as no senator objects.

Senators are currently speaking and anyone interested can watch all of the hot Hill action here.

Additionally, the Senate Agriculture Committee passed Sen. Blanche Lincoln’s (D-Ark.) derivatives reform bill out of committee. All of the committee Democrats, plus Sen. Charles Grassley (R-Iowa), agreed to the plan, which Wall Street stringently opposes.

The Council, which has generally drawn little public attention, was created by Congress in 1976 as the public’s link to the Fed, and it includes about 30 members, representing consumer advocates, the financial services industry, government, and academia. The CAC’s purpose is to give input and advice to the Fed on consumer protection issues. It meets three times a year.

Of course, the financial crisis — and the Fed’s inaction on regulating subprime mortgages — probably gives a clear glimpse into just how effective the CAC has been. Some 18 former and present members of the council earlier this month urged Sen. Christopher Dodd (D-Conn.), who chairs the Banking Committee, to fight for an independent consumer financial protection agency. They pointed out that the Fed largely ignored their worries about high-rate mortgages, credit card fees, and other lending abuses — not to mention their recommendations to remedy them over the years.

It’s a little worse than that. Some members also say the CAC is supposed to the consumer’s voice, but things never quite worked out that way. Their specific complaints: Over the years, industry officials outnumbered the consumer representatives at the meetings. Consumer reps felt their concerns weren’t heard.  And the industry reps used their memberships on the CAC to lobby for their positions against regulation.

Dodd’s latest proposal calls for the CFPA to be an independent entity within the Fed — but existing bank regulators would have veto power over some of its decisions, including a Fed representative. That’s left more than a few regulatory reform watchers concerned.

I’m going to follow up with some public transcripts of CAC meetings — you can judge for yourself.

Overlooked, though, has been the fact that every panel Democrat voted for the bill. That might not sound unusual, but the Senate Banking Committee is home to Sen. Tim Johnson, the South Dakota Democrat with a long record of protecting the finance industry in the face of reforms. (South Dakota is a banking hub.) Indeed, last year Johnson opposed even the Democrats’ credit card reforms, a bill seen as the low-hanging fruit of finance reforms (if only because the banks were wildly unpopular at the time and so many voters have direct experience with the tricks used by credit card companies).

No matter. Johnson said at the time that the bill went “too far in prohibiting lenders from adjusting prices to account for increased risk.”

On the much more comprehensive bill passed by the Banking panel yesterday, though, Johnson indicated a change of tune, saying he was “pleased” Congress is moving to “modernize” the nation’s finance system. His vote in favor of the reforms, which are sponsored by Banking Chairman Chris Dodd (D-Conn.), provided the proof.

There’s still a long way to go. Indeed, more than 400 amendments have been filed against the bill, many of which would protect the banks at the expense of consumer protection. Still, some observers on Capitol Hill are saying today that Dodd’s ability to rally all the Democrats behind the bill is no small achievement — that Senate Democrats, for once, have shown some party discipline.

Johnson’s entire statement:

I am pleased that we are moving forward legislation that will create better regulation and protect consumers and Main Street small businesses. This has been a long process, and I commend the Chairman for working hard to find common ground to target the causes of the financial crisis, and reform and modernize our nation’s financial regulatory system.

The bill incorporates good ideas from both sides of the aisle.  It creates a systemic risk council to act as an early warning system, monitoring our economy and financial institutions for trouble.  It ends government bailouts by addressing the gaps that existed when large nonbank financial companies, like AIG and Lehman, failed and there were no tools to unwind them.  By ending “too big to fail,” the American taxpayer will never again be forced to shoulder the costs of risk taken on Wall Street.  It will also finally regulate exotic products like credit default swaps, and hold Wall Street companies accountable for the risks they take that put consumers at risk.

Our efforts at bipartisanship have led us to find good solutions to protect small community banks and credit unions. We have also found common ground to protect consumers, provide uniform rules regarding consumer protection, and level the playing field for banks and nonbanks.

This bill is not perfect, and there are certainly items each of us on this Committee would like to see improved as we go to the floor.  I am hopeful that bipartisan conversations will continue on these issues in coming weeks as the bill moves through the full Senate.

Okay, maybe it’s not so sweeping.

To entice the support of a few Republicans — notably Sen. Bob Corker (Tenn.), the lead negotiator for the GOP — the bill won’t include a separate consumer financial protection agency, which both the White House and countless consumer advocates say is the best strategy for reining in the most abusive practices of the banks and other financial institutions.

On top of that, Corker is reportedly insisting that any consumer protection unit included in the bill not have the power to regulate pawnbrokers, payday lenders and car dealers — among the most abusive branches of the finance industry, according to consumer advocates, who are already blasting the plan as insufficient.

“The point of the agency is to provide a cop on the beat that focuses where the problems are, not a cop that’s fenced off from some of the worst actors,” Elizabeth Warren, Harvard law professor and a longtime champion of a separate, robust consumer protection agency, told The Washington Post.

Still, Dodd says he’s pleased with the compromise on which he’s been focused for most of the year, even while he’s conceding that sticking points remain.

“Our talks will continue,” he said in a statement, “and it is still our hope to come to agreement on a strong bill all of the Senate can be proud to support very soon.”

Dodd said he hopes to hold a hearing to mark up the bill on March 22.

President Obama’s economic team is now open to housing the consumer regulator inside another agency, such as the Treasury Department, though they still prefer a stand-alone agency. In either case, they are insisting on a regulator with political autonomy and real teeth so it can effectively enforce rules designed to protect consumers of mortgages, credit cards and other financial products.

Politically, this was probably inevitable. Republicans are unanimously opposed to a new stand-alone agency, arguing that it would represent just another lumbering bureaucracy incapable of tying its own shoes. They fear it would become the EPA of the finance world (i.e., that it would hinder companies’ ability to do exactly what they want). They aren’t going to vote for such a plan, particularly since Sen. Bob Corker (Tenn.) — the Republican leading the negotiations with Banking Committee Chairman Chris Dodd (D-Conn.) — is as adamantly opposed as the rest of his caucus.

Translation: The banks may be unpopular, and they may be the reason that the global economy collapsed, but their influence over lawmakers still ensures that they’ll get most of what they want on Capitol Hill.

“What you don’t want to have in my opinion is a consumer protection agency that’s free standing,” Corker said. “Nor do you want one that is inside another entity but acts as if it’s freestanding.”

What does that leave? Corker said he was looking at ways to carve out a consumer protection unit within the new bank regulator proposed by Dodd, Bloomberg reports.

Add the CFPA to the long list of “things Democrats want that they won’t get.”

The president still believes it is a great priority to have the independent authority to ensure that consumers in this reform are protected from the type of loans that we’ve seen happen that have led to massive foreclosure, the types of tricks with credit cards that we had seen in the past. …  So the president continues to be a very strong supporter of that function of the reform bill that we sent to Congress.

Pressed about whether it should be a standalone agency, Gibbs hedged a bit, saying it would have to have “independent authority.” The question remains: Will any Republicans — notably Sen. Bob Corker (R-Tenn.), who has taken the GOP lead on negotiations — get on board?

While I still hope that we will ultimately have a consensus package, it is time to move the process forward.

I have instructed my staff to begin drafting legislation to present to the committee later this month.

There’s been a great deal of speculation about whether the retiring Dodd would use his newfound freedom to go populist with his financial reform plans in a way that he might not have been if he’d sought re-election. That is, would the Connecticut Democratic insist on the creation of a consumer financial protection agency — as House Democrats, President Obama and consumer advocates are hoping for? Or would he scrap that plan in the name of getting Shelby on board — as he hinted at last month?

Today’s announced doesn’t offer any answers, but Dodd’s plan to move forward without Shelby certainly leaves the advocates with more hope than moving forward with him.