RTTNews - A Senate panel Wednesday fired pointed questions at Federal Reserve Chairman Ben Bernanke over the state of the economy.
Sen. Chris Dodd, D-Conn., the chairman of the Senate Banking Committee, said that while some signs of economic recovery have been seen on Wall Street, the benefits have yet to make it to Main Street.
Today we meet to receive the semi-annual monetary policy report, Dodd said. And if the goal is full employment, then obviously the news today is rather grim.
Dodd noted that although big banks that received government bailouts are now posting profits, consumer and small business lending remains sluggish, with many Americans still concerned about reports of executive bonuses at the same time layoffs are being made.
I appreciate your hard work on the monetary policy side of the equation and the positive indicators we have seen in recent weeks, Dodd said. But these positive indicators seem to be stuck at the top.
He added, We on this committee work for the American people. When can they expect the recovery that they have funded? When will working families see their rally, their pay raise, their jobs stabilized?
Bernanke conceded that unemployment is the most pressing issue facing the Fed, but he noted that there are steps that Congress could take to ease the situation, similar to the already-passed extension of unemployment benefits.
He said one serious concern was that the long-term unemployed might see their job skills atrophy, leaving them unqualified for work once the economy recovers. Extending job training programs might be one response Congress should consider, the Fed chief said.
Dodd also said there was a history at the Fed that is deeply troubling regarding consumer protection. The Administration has proposed removing that duty from the Fed and placing it in the hands of a consumer financial protection agency.
Bernanke conceded that the Fed had not acted quickly enough and that there are legitimate concerns about the long-term commitment of the Fed.
However, he said that the agency has the capacity to take strong actions to protect consumers and that Congress could take steps to ensure the Fed focuses more on consumer protection, perhaps by requiring a semi-annual report specifically focused on the Fed's actions to protect consumers.
Sen. Richard Shelby, R-Ala., the ranking Republican on the panel, questioned Bernanke's role in the recent financial rescue efforts.
While monetary policy is the central focus of this hearing, I believe we must also examine the Fed's performance as a bank regulator as well as its participation in bailouts over the last year, Shelby said. I do not believe that the board or the regional banks have handled their regulatory responsibilities very well.
He added, I am not aware of any effort on the part of the Fed, prior to the crisis, to question or require such [financial] firms to take any actions to address the significant risks they were taking.
Shelby also asked Bernanke to what degree he would be willing to subject the Fed's actions to Congressional or Government Accountability Office scrutiny.
Bernanke said that with the exception of the Fed's deliberations and decisions regarding monetary policy, Congress should have the ability to oversee all aspects of the Fed's actions.
He added that he was willing to work with congress on legislation to establish such oversight.
Bernanke added that it would be somewhat premature to make a strong case that the $787 billion federal economic and recovery package had either worked or failed.
I also think it's premature to consider an additional stimulus measure, he said.
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