Bernanke Beats Back Republican Criticisms of the Fed

Federal Reserve chairman Ben Bernanke , beating back Republican criticisms, today defended the Fed's actions to end the nation's worst recession since the Great Depression.

"The Fed has been doing a good job for the past three years or so," he told the House Financial Services Committee.

One sign of improvements he cited was the recent rise in the markets. The Dow is up 35 percent from its lows in early March.

"The public has been responding to some signs, some glimmers, if you will, of improvement," he told lawmakers. "So, consumer sentiment, for example, has improved somewhat as the stock market has gone up, and as the outlook has looked better, and as the job situation has, at least, stopped deteriorating quite as quickly as it was.

"But," he added, "I want to be clear that we have a very long haul here, because even if the economy begins to turn up in terms of production, unemployment is going to stay high for quite a while. And so it's not going to feel like a really strong economy."

While most Democrats seemed supportive of the Fed's efforts, Republicans across the aisle did not.

"I think we're in far worse shape than people want to recognize right now," said Rep. Gary Miller, R-Calif.

He added to Bernanke, "I wouldn't want your job for anything in the world right now."

Rep. Spencer Bachus of Alabama, the panel's ranking Republican, was also far from impressed by the government's efforts to end the financial crisis.

"The American people can be forgiven for increasingly asking tough questions about these enormous government outlays and interventions, because so far, Mr. Chairman, there has been very little bang for the taxpayer's buck," Bachus said.

Another GOP member, Rep. Ron Paul, accused the Fed of helping to create the current crisis.

"The Federal Reserve, in collaboration with the giant banks, has created the greatest financial crisis the world has ever seen," the Texan said. "The foolish notion that unlimited amounts of money and credit, created out of thin air, can provide sustained economic growth has delivered this crisis to us."

Obama Pushes for Increased Federal Reserve Powers

The stinging criticism came as the Obama administration continues its push for the Fed's powers to be increased as part of its financial regulatory reform efforts. Judging by the responses of Republicans at today's hearing, getting those measures passed will be a tough sell.

"The Fed has made some big mistakes," Bachus said. "And historically, the board has done a poor job of identifying and addressing systemic risk before they become crises.

"Asking the Fed to serve as a systemic regulator is just inviting a false sense of security that inevitably will be shattered at the expense of the taxpayer," he added.

But the Fed chief defended the work of the central bank, saying that they were up to the task.

"There's, I think, a misapprehension that somehow this plan makes the Federal Reserve a super-regulator with, sort of, untrammeled powers to go wherever it -- it likes," Bernanke said.

"It would be a challenging thing for us to do," he acknowledged, "But it does not radically reorient our set of powers."

Despite the recent progress in forging the country's economic recovery that Bernanke cited, he warned that joblessness will continue to take its toll, especially on the housing crisis. The nation's unemployment rate currently sits at a 26-year high of 9.5 percent.

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