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.

Ron Paul Calls For The Federal Reserve To Increase Transparency

By Learned Foote- Talk Radio News Service

Congressman Ron Paul (R-Texas) recently introduced the Federal Reserve Transparency Act to House, a piece of legislation that calls for a stronger audit of the Federal Reserve along with a "detailed report to Congress.” The bill currently has 241 co-sponsors.

During a forum at the Cato Institute, Paul said he originally decided to run for Congress in the 1970s due to his interest in monetary policy, which is conducted by the Federal Reserve. “I’ve been talking about it for decades, and arguing that we had a financial system that was very fryable, very vulnerable, and it was the Fed that was creating the bubbles. Therefore we should be looking into it and preventing these problems rather than waiting for cataclysmic financial crisis to hit.”

Gilbert Schwartz, Former Associate General Counsel to the Federal Reserve, appeared alongside Paul, argued that the Fed is responsible for the financial crisis to some degree, he praised the “flexibility that the Federal Reserve exhibited in terms of their willingness to make sure that the economy—not just the U.S. economy, but also the world financial system—did not collapse.”

Schwartz went on to explain that the Fed understands the growing demand for transparency. He cited recent financial statements released by the Fed, saying, “clearly the message is getting to the Fed, and... this indicates at least some degree of attempt by the Fed to: one, be responsive to that criticism, and number two, probably to thwart the legislation that would otherwise subject them to GAO [U.S. Government Accountability Office] audit.”

Paul said that his bill will “open the books,” but not necessarily affect monetary policy. “It’s less confrontational for those who want to design regulations and deal with with monetary policy, and I think that’s why we’re getting such bipartisan support.” Paul believes, however, that if the audit is conducted, public opinion will turn against the Fed and monetary policy will be substantially challenged.

Ron Paul attributed the bills' support to the changing landscape of the economic system. “It had to do with the TARP funds,” Paul explained. “There are a few spammers out there that are interested in what I’ve been doing, and they’re letting their Congressmen know."

Sen. Vitter (R-La.) Criticizes Plan To Increase The Fed's Powers

Senator David Vitter (R-La.) argued that Obama's plan to increase the power of the Fed and link some of its behavior to Treasury approval could go too far in collapsing the distinction between the Federal Reserve and the government. (0:34)

Regulation Reform Could Grant The Fed New Powers

By Learned Foote- Talk Radio News Service

At a hearing before the Senate Committee on Banking, Housing, and Urban Affairs, Treasury Secretary Tim Geithner answered questions about the proposal for a "sweeping set of regulatory reforms" announced on Wednesday by President Obama.

All of the senators agreed that regulatory reform was long overdue, but several questioned the expansion of power granted to the Federal Reserve under this proposal.

Geithner said that this proposal will not address every problem of the financial system, but is instead designed to cope with the major causes of the financial crisis. Geithner argued that the regulatory system failed due to the absence of an overarching regulator guarding the system as a whole, in order to identify concentrated systemic risk to the financial system.


"Risk to our system can come from almost any quarter," said Geithner. "We must be able to look in every corner and across the horizon for dangers, and our system was not able to do that."

He proposed a Financial Services Oversight Council, consisting of the heads of all regulatory agencies to identify gaps in the the government supervisory framework. However, he argued that a committee should not regulate the largest, most complicated institutions. Geithner said that the Federal Reserve could best take on that regulatory role, with a "carefully designed, modest amount of additional authority." He noted that some powers would also be taken away from the Fed under this proposal.

Senator Chris Dodd (D-Conn) said that the proposal would grant "extraordinary authority and power" to the Fed, and quoted the former Chairman of the Federal Reserve, Paul Volcker, who had previously stated that giving the Fed too many responsibilities could interfere with its ability to regulate monetary policy. Dodd also criticized the track record of the Fed in the past. Dodd noted that Congress gave authority to the Fed to regulate mortgages in 1994, and yet they "dropped the ball entirely" by failing to address the mortgage crisis in a timely manner.

The senators also expressed wishes that the Fed should remain an independent entity, and a few criticized certain provisions that would require the Fed to obtain the permission of the executive branch to lend money to institutions unregulated by the Fed, a move that some argued would politicize the policies set forth by the Fed.