Bernanke: ‘I didn’t want to preside over Great Depression II’
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Federal Reserve Chairman Ben S. Bernanke, continuing his campaign to humanize the central bank, explained in one sentence Sunday why the Fed has pumped unprecedented trillions of dollars into the financial system since September.
‘I was not going to be the Federal Reserve chairman who presided over the Second Great Depression,’ he said at a town-hall forum in Kansas City, Mo.
The forum, to be aired this week on ‘The NewsHour with Jim Lehrer’ on PBS, gave Bernanke an opportunity to take his case for the Fed’s policies directly to the American people -- and to defend the central bank’s independence against forces on Capitol Hill that would like to make the Fed more answerable to Congress.
‘We are an agency of the government, but within the government, we need to have some independence from Congress and the administration,’ he said. ‘When a central bank makes monetary policy without interference, you get low inflation and good growth. We’re very very sensitive to that issue. Studies have shown that political influence does not lead to good policy.’
He also insisted that, ultimately, ‘I’m answerable the American people.’
But, of course, the American people don’t vote for Fed governors or decide who chairs the board.
Bernanke’s efforts to step out publicly in recent months to address questions about Fed policy clearly are aimed at building support for his renomination as Fed chief. President Obama has to decide in the next few months whether to reappoint Bernanke for another four-year term as chairman when his current term expires in January.
Bernanke didn’t drop any bombs at today’s forum, but nobody expected him to do much more than reiterate his already well-known views. A few of his comments, as compiled by Reuters:
--- On the sky-high jobless rate: ‘It takes about 2.5% [economic] growth to absorb new workers, keep the unemployment rate about constant. Right now we’re seeing growth in the second half of the year. But our best guess, and it’s only a guess, is that growth in the second half of the year will be about 1% on an annual basis. So that’s not enough to bring down the unemployment rate.’
--- On the Obama administration’s fiscal-stimulus plan, much of which won’t kick in until 2010: ‘It may or may not succeed, but I think we should give it more time. . . . Having the stimulus next year will actually be helpful and will help create more jobs.’ --- On the inflation outlook and when the Fed might begin to raise interest rates: ‘We expect for the next couple of years that inflation will be quite low. . . . Once the economy starts to grow and begins to move ahead, then it will be very important for the Fed to unwind, to raise interest rates.’ --- On the ballooning federal budget deficit: ‘Even though I don’t think we could have avoided having a big deficit this year and next year, given the weakness in the economy, given the financial problems and so on, it is very, very important for the Congress and the administration to develop a plan, to say, ‘Here is how we’re going to get back to fiscal sanity.’ ‘
-- Tom Petruno