Federal Reserve Chairman Ben Bernanke on Wednesday said the Fed must be more transparent to the public but also guard its independence, which serves a vital public interest.

In the interest of maintaining public confidence and promoting economic and financial stability, we must continue to protect our independence, he said in remarks at a ceremonial swearing in marking the start of his second four-year term as Fed chairman.

Bernanke faced the stiffest opposition of any nominee in the more than 30 years the Senate has been voting on heads of the central bank. While widely credited for steering the economy through its worst upheaval since the Great Depression, Bernanke endured scathing criticism from lawmakers for his role in easy money and hands-off regulatory policies that many believe set the stage for the crisis.

Bernanke acknowledged the turmoil revealed regulatory gaps at the Fed and elsewhere. The Fed faces enormous challenges, and must persuade the public of the integrity of all of its operations, he said.

The Federal Reserve is already one of the most transparent and accountable central banks in the world, he said. We should be prepared to do even more, to become even more transparent.


However, Bernanke said the Fed would stop short of agreeing to anything compromising its ability to conduct policy independently.

Lawmakers are considering opening the Fed's monetary policy decision-making to congressional reviews. Bernanke and the Fed have strenuously resisted that change, saying such audits would result in political pressure on Fed interest rates decisions.

The Fed says politicians are likely to pressure central banks to keep interest rates low, which could lead to inflation, a view that is widely held among central bankers.

Bernanke said independence gives the Fed freedom to make regulatory decisions on their merits rather than be subjected to political influence.

Anger directed at Bernanke and the Fed also reflects public frustration over high unemployment and lost wealth. Bernanke said the Fed will try to guide the economy toward recovery without stirring inflation.

The resumption of growth... is encouraging, he said, in reference to a report the nation's gross domestic product advanced 5.7 percent at the end of 2009. But far too many people remain unemployed, (home) foreclosures continue at record rates, and bank credit continues to contract.

(Reporting by Mark Felsenthal; Editing by Andrew Hay)