Bernanke: Economic Growth Is A Shared Responsibility

By Andrea Salazar

Federal Reserve Chairman Ben Bernanke pointed out Tuesday that fiscal policy is not the only tool needed to fix the nation’s economic problems.

“Fostering healthy economic growth and job creation is a shared responsibility of all economic policymakers, in close cooperation with the private sector,” Bernanke said. “Fiscal policy is of critical importance…but a wide range of other policies - pertaining to labor, markets, housing, trade, taxation and regulation, for example - also have important roles to play.”

Bernanke told members of the Joint Economic Committee that “the recovery is close to faltering.”

Although the chairman would not comment on how, specifically, Congress should act, he did offer some advice.

“As you think about reducing our deficits and putting us on a sustainable path, it’s also important to think about how good is our tax system? How efficient, how effective is it? How equitable is it? How effective is our government spending? Is it producing the results we want. Is it supporting growth and recovery?”

Bernanke said that the financial crises in Europe, the housing market, the job market and consumer behavior are all factors that are hindering domestic growth.

“Consumer behavior has both reflected and contributed to the slow pace of recovery,” Bernanke said. “Households have been very cautious in their spending decisions, as declines in house prices and in the values of financial assets have reduced household wealth, and many families continue to struggle with high debt burdens or reduced access to credit.  

Bernanke’s complete testimony is available on the Federal Reserve website.

Fed Chair: Economic Impact Of GOP Cuts Will Be Less Painful Than Reports State

Federal Reserve Chair Ben Bernanke told Congress Tuesday that recent reports that warn economic recovery will be significantly stalled if proposed cuts by the GOP go through are overstated.

Last week, a report from Goldman Sachs claimed that the cuts would cut growth by 2 percent and another released this week by Moody’s Analytics warned that 700,000 jobs could ultimately be eliminated by the Republican attempt to rein in spending.

“We get smaller impact than that,” Bernanke told the Senate Banking Committee of the Fed’s in-house analysis.

However, the White House is still opposed to the $100 billion in cuts proposed by the Republican controlled House. President Barack Obama has indicated he will veto a spending bill that includes such deep cuts and OMB Director Jack Lew said that the reductions would be a mistake and ultimately not make much of an impact on the nation’s debt.

The 111^th Congress was unable to pass a budget for fiscal year 2011, instead opting to let 2010 spending levels carry over into the next Congress. However, federal spending is scheduled to run out this Friday without Congressional action. Currently, both chambers are considering a measure to extend funding, sans $4 billion, for two weeks while they craft a more enduring budget proprosal.

Sanders Defends Amendment To Audit The Fed

Sen. Bernie Sanders (I-Vt.) insisted on Friday that his amendment within a Senate financial regulatory reform bill to audit the Federal Reserve (Fed) would not grant Congress the authority to set monetary policy.

“That was not my intent,” Sanders said to reporters.

Sanders’s effort received a huge boost last night when he was able to strike a deal on the amendment with Senate Banking Committee Chairman Chris Dodd (D-Conn.) Under the agreement, the Government Accountability Office (GAO) would be authorized to perform a full audit of the Fed, going back to December 1, 2007. If the bill is signed into law, the GAO would be required to publish its findings online no later than one year after the law is enacted.

Most analysts say the amendment is not too radical of an idea. Sanders, on Friday, said it’s really just a matter of bringing about common-sense transparency to the financial system.

“The American people have a right to know what [Fed Chairman] Ben Bernanke has refused to allow them to know,” said Sanders, who admitted that the Chairman “is not one of my best friends.”

Indeed, the powerful banking agency along with firms on Wall Street are aggressively pushing back on the provision. Earlier this week, Bernanke wrote a letter to Dodd urging him to strip the amendment from the bill. But with Dodd -- the bill’s author -- as well as conservative South Carolina Republican Jim DeMint both saying they support Sanders, the measure looks like a safe bet to end up in the final Senate bill. Now, the question becomes whether or not it will survive a potential conference committee.

“Some of [the House bill’s] language is stronger that what we have, some of our language is stronger than what they have,” said Sanders, adding that the only thing on his mind right now is getting the 60 votes necessary to move forward on the legislation.

Time To Act On Financial Reform Is Now, Says Dodd

Citing the urgent need to repair the nation’s ailing financial system, Sen. Chris Dodd (D-Conn.) unveiled his own financial regulatory reform plan on Monday.

Dodd, who presides over the powerful Senate Banking Committee, said although a package he had been working on with fellow committee members Richard Shelby (R-Ala.) and Bob Corker (R-Tenn.) was close to being finished, he decided he could no longer wait for them to help put forth legislation.

“Nearly seven million have lost their homes to foreclosure over the last several years. Millions more have lost their retirement funds or their small businesses...Americans are frustrated...and they wonder if anyone is looking out for them...It is certainly time to act.”

In an attempt to prevent future collapses of both the housing and credit markets, Dodd’s plan would do four main things: First, it would abolish the belief that certain banks and financial institutions are “too large to fail,” ensuring that taxpayers would not again be asked to help bail out firms that fall into trouble. Next, it would create a new independent consumer protection agency (CFPA) to serve as a watchdog over various financial products, and would also establish a council tasked with identifying threats to the nation’s economic stability. Finally, it would increase the transparency by which complex financial tools such as hedge funds and derivatives are regulated.

“The legislation I’m offering is comprehensive in its scope because the crisis it aims to solve is comprehensive in its scope,” Dodd said.

While the plan has bipartisan agreement on several of its provisions, Dodd acknowledged that it currently lacks bipartisan support. Additionally, Dodd hesitated to say that the plan would even receive the blessing of every Democrat on the committee.

There are a few reasons for this. First, lawmakers and outside experts are skeptical over whether housing the CFPA inside the Federal Reserve (Fed) is a good idea. Those skeptics argue that the Fed contributed largely to the economic decline, and thus should not be given increased authority. During his press conference however, Dodd insisted that the CFPA would be an independent body, under no command of the Fed.

Another area of concern for some is that smaller-to-medium-sized banks would be needlessly subjected to tightened regulation under the legislation. But Dodd assured that firms with assets valued at under $10 billion would be excluded from increased oversight.

“We must restore confidence and optimism in our economy, accountability in our markets and stability to our middle class,” he said.

The hardest part for Dodd will now, of course, be getting the votes necessary to pass his plan. With the debate over health reform having renewed an atmosphere of partisanship in Washington, Dodd’s legislation will probably be viewed as too politically risky by moderates and conservatives who face re-election this year. Yet on Monday, Dodd -- who has announced he will not be running for another term in office -- viewed the prospects of passage with an almost defiant sense of confidence.

“We will have financial reform adopted this year in the Congress of the United States.”

Rep. Barney Frank Optimistic Over State Of U.S. Economy

By Meagan Wiseley - University of New Mexico/Talk Radio News Service

Chairman of the House Financial Services Committee Barney Frank (D-Mass.) said Friday that on the economic front, America received good news and bad news today following the Labor Department's announcement of a 10.2% unemployment rate.

“Although 190,000 more American’s lost their jobs...that is substantially less than the pace at which they were losing jobs until fairly recently,” Frank said during remarks at a conference sponsored by NoLimits.org, a progressive on-line organization founded by Frank's sister.

Frank said the American Recovery and Reinvestment Act, or the stimulus bill, had a positive impact in deterring unemployment, explaining that unemployment rates would be higher if the stimulus bill hadn’t passed.

Frank also said that the lack of regulation in the financial sector, which he contributed to Alan Greenspan, the former Chairman of the Federal Reserve, led to the AIG crisis and the following recession. He praised the current Chairman of the Federal Reserve Ben Bernanke for his willingness to collaborate with Congress over new financial regulatory reforms.

Frank remained positive about the economic outlook.

“We are making progress ... things are getting better virtually on every front [and] I am confident that when we are through with financial regulations...the kind of things that got us in trouble in the past won’t get us in trouble in the future,” Frank added.