Fed chairman Ben Bernanke promised Monday that inflation will stay low. (Photo by Katie Rogers/MNS)
WASHINGTON – On the heels of a heated Senate hearing regarding his second term as Federal Reserve chairman, Ben Bernanke pledged to a group of economists Monday that the U.S. economy is on the right track.
The movement, though, is at more of a crawl than a clip.
“We have come a long way from the darkest period of the crisis,” Bernanke said, “but we have some distance yet to go.”
Bernanke said the Fed will continue to toughen banking regulations while working to help toughen up banks themselves. Bernanke promised that inflation would remain in check, even after Fed programs slashed interest rates to zero and ballooned the bank’s balance sheet from $900 million before the recession to $2.2 trillion today.
The Fed will also work with other agencies to regulate banks, Bernanke added.
“Working cooperatively with other agencies, we are toughening our banking regulations to help constrain excessive risk-taking and enhance the ability of banks to withstand financial stress.”
White House Press Secretary Robert Gibbs told reporters Monday that President Barack Obama “stands by his nomination” decision to keep Bernanke on for a second term as Fed Chairman. U.S. stocks raised and the dollar gained ground against the euro after Bernanke’s promise to keep inflation under control, according to Bloomberg LP.
More highlights from Bernanke’s speech:
On Texas Congressman Ron Paul’s latest proposal to allow auditing of the Fed’s monetary policy: The thing that we’re concerned about is the independence and the integrity of the monetary policy making process. We believe that reducing the independence of the Fed to take actions in the immediate term, long-term interests of the U.S. economy would be bad for markets, bad for the Fed’s credibility, bad for inflation expectations and bad for the dollar.
On preventing future meltdowns of institutions like Bear Sterns and Lehman Brothers: Congress should create a new resolution regime … that would permit the government to wind down a troubled systematically important firm in a way that protects financial stability but that also imposes losses on shareholders and creditors of the failed firm, without costs to the taxpayer.
On thoughts of a possible “double dip” recession: Economic forecasting is very difficult … the most likely outcome is a moderate pace of recovery. There seem to be enough forces in play to sustain a recovery going through next year. At the same time, there are headwinds like tight credit and high unemployment that make a vigorous snapback seem less likely.
On the best thing about being Fed chairman: Um, I get to go through the security lines at the airport.