WASHINGTON — Senators took aim Thursday at Federal Reserve Chairman Ben Bernanke, linking him to rising unemployment, regulatory lapses that led to the financial crisis and the corporate bailouts that followed.
And some warned that the Fed’s record-low interest rates could feed a new speculative bubble.
Bernanke remained stoic during the roughly five-hour hearing by the Senate Banking Committee, which is weighing his nomination to a second four-year term. He acknowledged some mistakes but defended his record, saying that without the Fed’s bold action, the crisis would have been “markedly worse.”
And by day’s end, despite the verbal swipes and a move by one senator to block Bernanke’s nomination, his confirmation didn’t appear in doubt.
Some senators credited Bernanke with helping keep the Great Recession from becoming a second Great Depression.
Sen. Christopher Dodd, D-Conn., chairman of the panel, predicted Bernanke would win confirmation.
“Under your leadership, the Fed has taken extraordinary actions to right the economy,” Dodd said. “These efforts played, in my view, a very significant role in arresting the financial crisis.”
Nonetheless, Dodd wants to strip the Fed of some of its powers, including overseeing banks because regulators failed to crack down on dubious mortgages and other problems that figured prominently in the financial crisis.
Dodd and others drew a distinction between Bernanke’s economic leadership and the operations of the Fed as an institution itself.
If confirmed to another term, Bernanke vowed to work with Congress to overhaul the nation’s financial regulatory structure and to bring about stronger and more effective supervision.
“It would be a tragedy if, after all the hardships that Americans have endured during the past two years, our nation failed to take the steps necessary to prevent a recurrence of a crisis of the magnitude we have recently confronted,” Bernanke told the panel.
Efforts already have begun at the Fed to tighten oversight of banks and other financial firms. And the central bank is actively engaged in identifying and implementing improvements, Bernanke said.
“A financial crisis of the severity we have experienced must prompt financial institutions and regulators alike to undertake unsparing self-assessment of their past performance,” the Fed chief said.
Bernanke, 55, has taken heat for failing to detect early signs of the housing collapse. Lax regulatory oversight by the Fed and others was blamed for contributing to the crisis.
“The Fed has done a horrible job as a regulator,” said the committee’s top Republican, Sen. Richard Shelby of Alabama.
“We didn’t do a perfect job by any means,” Bernanke acknowledged. But he added: “We didn’t do the worst job” either.
