July 27, 2009 / 12:24 AM / 9 years ago

Bernanke takes his message to the heartland

KANSAS CITY, Missouri (Reuters) - Federal Reserve Chairman Ben Bernanke traveled to the U.S. heartland to defend the central bank’s actions and reaffirm his assessment of an improving, but still vulnerable, U.S. economy.

Federal Reserve Chairman Ben Bernanke in a back room on Capitol Hill in a file photo. REUTERS/Larry Downing

Taping a special that will air on television network PBS over three days this week on its program The NewsHour, Bernanke said a financial crisis that rivaled that of the 1930s needed decisive actions.

“I was not going to be the Federal Reserve Chairman who presided over the second Great Depression,” Bernanke said.

“When you’re in a situation like this, a perfect storm, sometimes you have to do things that are a little unorthodox, out of the box.”

About 190 citizens from the Kansas City area, assembled by a nonpartisan civic group, were on hand for the taping at the Kansas City Fed, moderated by veteran news anchor Jim Lehrer.

Some two dozen peppered the chairman with questions ranging from the Fed’s role in consumer protection actions, to efforts to stem foreclosures, to the outlook for the dollar.

Bernanke sought to demystify the role of the Federal Reserve, and especially debunk ideas that the Fed has almost unfettered power as an unelected fourth branch of government.

“I’m answerable to the American people,” Bernanke said.


Bernanke said the Fed is doing all it can to turn the U.S. economy around, and that he was confident the nation would be back on a strong growth track within a few years.

“The Federal Reserve has been putting the pedal to the metal,” he said, adding that “recessions happen,” even though the current one is especially long and painful.

Bernanke’s core message was similar to that he delivered last week in congressional testimony: that the recession should end soon, but that considerable risks remain — especially relating to the labor market.

It takes GDP growth of about 2.5 percent to keep the jobless rate constant, Bernanke noted. But the Fed expects growth of only about 1 percent in the last six months of the year.

“So that’s not enough to bring down the unemployment rate,” he said.

Latest government data show the U.S. unemployment rate at 9.5 percent, the highest since 1983, and many forecasters expect the rate to keep climbing even after the recession technically comes to a end.

With unemployment high and factories producing well below capacity, inflation should not be a problem — giving the Fed some breathing room on interest rates, Bernanke said.

“But once the economy starts to grow, and begins to move ahead, it will be very important for the Fed to start to unwind, to raise interest rates.”


Asked about his opinion on the dollar, a topic many Fed officials veer away from, Bernanke said the U.S. central bank, in general, supports a strong dollar policy.

“The best way to have a strong dollar is to have a strong economy,” he added.

Mostly cool under fire, Bernanke bristled with emotion when asked about a measure before Congress to open the Fed’s monetary policy decision-making to scrutiny by a congressional watchdog, the Government Accountability Office.

“I don’t think the American people want Congress running monetary policy. That’s exactly what (the bill) would do,” he said.

Markets would likely assess that inflation would rise if Congress or the administration started to meddle with interest rate decisions, he added.

A group of about two dozen protesters picketed outside the Kansas City Fed building on Sunday night to call for more disclosure by the central bank.

As he did in testimony on Capital Hill last week, Bernanke suggested Congress get its own act together — and form a plan to get massive budget deficits under control.

“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.’”


Retirees Elbert and Gloria Willingham of Overland Park, Kansas, who were among the studio audience, gave Bernanke two thumbs up.

“I’m very impressed with Bernanke. I strongly hope that Obama sees fit to reappoint him — it would be bad for the economy if he didn’t,” Elbert Willingham said.

“He’s down to earth and believable. He’s got the ideas, but also the practical understanding,” his wife added. “He cares about the small businessman.

Bernanke’s term as chairman ends in January and while his reappointment is seen as likely, it is not a given.

Sunday’s event was the latest in a series of moves by Bernanke to communicate outside of the Fed’s usual channels.

Bernanke recently spoke at the National Press Club in Washington, and last week outlined the Fed’s likely “exit strategy” from its unconventional policy programs in an op-ed piece in the Wall Street Journal.

Additional reporting by Mark Felsenthal in Washington; Editing by Andrea Ricci

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