Bernanke defends his Federal Reserve record

Federal Reserve Chairman Ben Bernanke has defended the central bank’s response to the global crisis.

He made the statement to a Senate panel sitting to consider his nomination for a second four-year term.

Under Mr Bernanke’s tenure, the Fed has cut interest rates close to zero, as well as spending $3 trillion (£1.8tn) to buoy the credit markets.

He also said that a retreat from low interest rates “will require careful analysis and judgement”.

He’s the smartest guy in the world, why didn’t he do anything to prevent us from sinking into this disaster?
Senator Bernie Sanders of Vermont

World’s mightiest banker humbled

“My colleagues on the Federal Open Market Committee and I are committed to implementing our exit strategy in a manner that both supports job creation and fosters continued price stability,” he told the panel.

Opening the hearing, Senate Banking Committee Chairman Christopher Dodd said he would support Mr Bernanke’s re-nomination, saying it would send the “right signal” to financial markets.

It is expected that the Senate will vote on the renewal of Mr Bernanke’s tenure before Christmas, which is up for renewal at the end of January.

But not everyone is in agreement that Mr Bernanke should remain in the post.

Senator Bernie Sanders of Vermont is angry about the bailouts and says he will attempt to block the nomination when it reaches the senate floor.

Ben approached a financial system on the verge of collapse with calm and wisdom
President Barack Obama

“I absolutely will not vote for Mr Bernanke. He is part of the problem. He’s the smartest guy in the world, why didn’t he do anything to prevent us from sinking into this disaster that Wall Street caused and which he was a part of?” he asked the panel.

And the banking committee’s chief Republican, Senator Richard Shelby, has criticised the Fed’s pre-crisis policies.

Both houses in Congress are moving legislation to cut the Fed’s powers. They want an audit of the central bank’s interest rate decisions, weaker regulatory powers over banks, and a reduced role for private bankers in the 12 regional Fed banks.

Presidential support

President Barack Obama nominated Mr Bernanke for another term as chairman of the US central bank, the Federal Reserve, in August.

At the time, Mr Obama said he believed Mr Bernanke’s action to bail out failing banks had limited the effects of the economic crisis.

“Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and outside-the-box thinking that has helped put the brakes on our economic free-fall,” the president said at the time.

In partnership with the US Treasury, the Fed organised the $700bn bank bail-out plan in October 2008.

Mr Bernanke was named as Federal Reserve chairman by Mr Obama’s predecessor, George W Bush, in 2005.

His reappointment must be confirmed by the Senate.