Bernanke starts new term with speech acknowledging critics' points
Thursday, February 4, 2010
Ben S. Bernanke officially kicked off his second term as Federal Reserve chairman Wednesday with a simple message for those who criticized him during a bruising Senate confirmation battle: I hear you.
In brief remarks after his ceremonial swearing-in, Bernanke appeared to address head-on much of the criticism directed his way as he sketched out an agenda for his second four-year term. Bernanke was confirmed by the Senate 70 to 30 last Thursday, and his first term expired Sunday.
"This institution, like our country, faces enormous challenges," Bernanke told an audience of a few hundred Fed staffers gathered in the main atrium of the Foggy Bottom headquarters of the central bank, according to a text provided by the agency.
The recent growth in the economy is "encouraging," Bernanke said, "But far too many people remain unemployed, foreclosures continue at record rates, and bank credit continues to contract."
Though the Fed cannot solve those problems on its own, he said, "we must continue to do all that we can to ensure that our policies are helping to guide the country's return to prosperity in an environment of price stability."
Translation: I get that the economy is still in horrendous shape, and the Fed will keep doing everything it can to fix that, so long as we don't think those steps will cause an inflation problem.
He also acknowledged that the Fed made regulatory mistakes that helped contribute to the crisis -- a sore point for critics on both sides of the aisle during the confirmation battle, including among many senators who ultimately voted to confirm Bernanke.
"The crisis revealed weaknesses and gaps in the regulation and supervision of financial institutions and financial markets," Bernanke said, adding that the Fed has "made considerable progress in identifying problems and improving how we carry out our oversight responsibilities."
And Bernanke pledged to disclose more details of the Fed's actions to the outside world.
"In a democratic society like our own, institutional independence brings with it fundamental obligations of transparency, responsiveness and accountability," Bernanke said. While the Fed already releases a lot of information, "I believe that we should be prepared to do even more, to become even more transparent."
He did not specify what the Fed might consider disclosing, however. Many in Congress have been angered that the Fed, in a long-standing practice, will not disclose which banks have received emergency loans from the "discount window," nor recipients of loans through various special lending programs.
Also Wednesday, Federal Reserve governor Kevin M. Warsh gave a speech in which he argued that the key to preventing or lessening the impact of future financial crises is not giving more power to regulators, but ensuring that market discipline can be allowed to function.
Particularly important, he argued, is to avoid situations that give the appearance that some firms have the protection of the government.
"Competition is undermined when a privileged class of financial firms has the implicit support of the government," Warsh told the New York Association for Business Economics. "No firm ought to be entitled to favored consideration by regulators or government policy. No rating agency. No mortgage finance entity. No dealer or underwriter. And no bank."