Federal Reserve chairman Ben Bernanke spent a second straight day today fending off criticisms from Congress that the Fed had handled the current financial crisis poorly and should therefore not be granted additional power to deal with future ones.
"It's very hard to get credit for something that didn't happen, but in September and October, I believe we faced the worst global financial crisis since the 1930s and perhaps including the 1930s," he told the Senate Banking Committee.
Government interventions here and around the world, such as the $700 billion Troubled Asset Relief Program (TARP), had averted a far worse crisis, Bernanke said.
"If those actions had not been taken, if the TARP had not been available to prevent that collapse, if there had not been an aggressive international policy response, I believe we would be in a very, very deep and protracted recession, which might also be like a depression, I think much, much worse than what we're seeing now," the Fed chief said, noting that the present situation is dire enough.
"I do not want to understate: The situation is very poor," he added. "The unemployment rate is unacceptably high. Americans are suffering. But I do believe we have a much better situation today than we would have if we had seen a collapse of the global financial system last October."
A day after Tuesday's three-hour session before a House panel, Bernanke today continued to defend the central bank in the face of Republican opposition to an Obama administration proposal to increase the Fed's powers as part of new financial regulatory reform measures.
"The way to get the Fed back on track is to reduce your responsibilities, not increase them," argued Rep. Jim Bunning, R-Ky.
Even the panel's Democratic chairman, Sen. Christopher Dodd of Connecticut, weighed in with concerns about the central bank, noting, "There is a history at the Fed that is deeply troubling to me."
In response, Bernanke argued that the Fed was up to the challenge of monitoring systemic risks to the financial system, while at the same time he attempted to ease concerns that the Fed would become too powerful.
"We're not being the super-regulator at all," he said.
Bunning, for one, was far from convinced, blasting the Fed for a lack of transparency with the government's extensive financial rescue programs. The lawmaker cited a report released earlier this week by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, estimating the potential total government spending at a staggering $23.7 trillion.
"That number makes all kinds of assumptions which are just not realistic," said Bernanke.
Replied Bunning, "If you want to fight with the IG, that's your business. Don't fight with me about it."
Overall, Bernanke said, "the most pressing issue" for the country at the moment is rising unemployment. The nation's jobless rate currently sits at a 26-year high of 9.5 percent. High unemployment, he noted, will not only contribute to rising home foreclosures, but it will also delay any bounce back in consumer spending.
"We don't expect the consumer to come roaring back by any means, especially with the condition the labor market is in," he predicted.
The Fed chief today also reiterated his comments before the House panel that it was "premature" to consider a second stimulus package at this point.