WASHINGTON Below are highlights from the question and answer session of a House Financial Services Committee hearing on Wednesday with Federal Reserve Chairman Ben Bernanke testifying on monetary policy and the U.S. economy.
BERNANKE ON LOW INTEREST RATES:
"One of the paradoxes is that the best way to get interest rates up is to have low interest rates, because that promotes a stronger growing economy and that causes interest rates to rise. In some ways the fact that interest rates have gone up a bit, and it happens on the real not the inflation side, is actually indicative of a stronger economy, which again suggests that maybe this is having some benefit."
BERNANKE ON HEALTHCARE COSTS:
"Recently in the last four to five years the healthcare costs have actually gone up somewhat more slowly. Part of that may be due to the recession and the fact that fewer people are able to afford or seek care. ... There remains a lot to be done in the health care area to improve incentives, to improve quality and to improve access."
BERNANKE ON SUCCESS OF CURRENT POLICY:
"If we see no progress for an extended period, which I don't expect because we've already seen some progress, then I think we want to discuss the efficacy side of the equation."
"This is very much focused on the average American citizen. Our estimates are that we've helped create many private sector jobs, government jobs to support the economy quite significantly."
BERNANKE ON FINANCIAL MARKETS:
"The Treasury and the MBS market functioning is something that we do ... every hour because we are heavily engaged in those markets obviously. To this point we don't see any significant problems with those markets. But if we do see any problems obviously we will react to that."
BERNANKE ON HOUSING MARKET RECOVERY:
"The evidence thus far is that the housing market has hit the bottom and is recovering. We've seen rising prices over the last year or so. We've seen some significant increases in starts and sales. Foreclosures are still too high but they're coming down. The number of people under water on their mortgages is coming down. So we're still far from where we'd like to be but the evidence is that the housing market is strengthening."
BERNANKE ON FOMC SUPPORT FOR CURRENT POLICY:
"The significant majority of the committee is supportive of the policy that we are taking."
BERNANKE ON FISCAL POLICY:
"I cited in my testimony just the numbers from the Congressional Budget Office which suggest that fiscal measures will reduce growth this year by 1.5 percentage points which is very significant. ...
"My suggestion for your consideration is to align the timing of your fiscal consolidation better with the problem, that is to do somewhat less in the very near term when it will have the greatest impact on growth and jobs and where the Federal Reserve doesn't have any scope to offset it and instead to focus on the longer term where the real problems I think still remain.
"I am very much in favor of getting our fiscal house in order but I think it's a long run issue and I would be supportive of a less front-loaded set of measures."