Federal Reserve Chairman Ben Bernanke in remarks Monday directly rebutted many of the critiques and complaints directed at his institution by congressional Republicans.
Bernanke did not specifically identify GOP lawmakers as his target, but his speech delivered before the Economic Club of Indiana dissected one by one many of the accusations and complaints levied at the central bank by conservatives on Capitol Hill. Whether it was critiques of the Fed's latest round of quantitative easing, accusations of "monetizing the debt" or growing efforts to fully audit the central bank, Bernanke was resolute in defending the Fed under his leadership.
"The way for the Fed to support a return to a strong economy is by maintaining monetary accommodation, which requires low interest rates for a time," he said, according to his prepared remarks.
Bernanke's comments come roughly two weeks after the Fed announced it was embarking on a third round of "quantitative easing" in a bid to support a laggard recovery. The central bank decided to buy $40 billion of mortgage bonds a month in an effort to spur economic activity, and said it planned to do so until it was satisfied with growth in the labor market.
"Why did we act? Though the economy has been growing since mid-2009 and we expect it to continue to expand, it simply has not been growing fast enough recently to make significant progress in bringing down unemployment," he said.
GOP lawmakers have been loudly critical of the Fed's novel attempts to stimulate the economy since the second round of easing was announced, and have argued the Fed is doing little to boost the economy while encouraging damaging inflation down the line when it comes time to sell off the trillions of dollars in securities it has accumulated along the way. The Fed's decision to embark on "QE3" was met with similar disdain by many GOP members.
Bernanke said it was "not unreasonable" to ask if Fed policies were encouraging inflation in the future before swatting away the notion, saying he is confident the Fed can handle it.
"The Federal Reserve's price stability record is excellent, and we are fully committed to maintaining it," he said.
The idea that the Fed is "monetizing the debt" by printing money to facilitate government spending misses the mark, according to the Fed head.
"That's not what is happening, and that will not happen," he said.
He also dismissed out of hand the notion that the Fed's low, low interest rates are enabling profligate government spending by making it so easy to borrow — a line of thinking raised by multiple GOP lawmakers.
"I find this argument unpersuasive," he said, adding that it would be "highly inappropriate" for the Fed to try to "influence the political debate" via its monetary policy tools. And if that weren't enough, he added that boosting rates to make it costlier for the government to borrow would actually increase the deficit and weaken the recovery, doing more harm than good.
He also pointed out that the Fed has actually paid back $200 billion over the last three years to the government on its investments, and expects its ongoing efforts to eventually be a boon for the government's finances.
As he has several times in the past, Bernanke laid the need for healthy fiscal readjustment at the feet of Congress and the White House.
"The responsibility for fiscal policy lies squarely with the Administration and the Congress," he said.
He again reiterated the need for policymakers to adjust policy so the nation's debt trajectory slows, and the economy is not taken over the "fiscal cliff" at the end of the year.
"According to the Congressional Budget Office and virtually all other experts, if that were allowed to occur, it would likely throw the economy back into recession," he said.
He also warned lawmakers of the need to raise the debt ceiling in a prompt fashion early next year to avoid "extremely negative consequences for the country."
In perhaps his most direct challenge to Congress, Bernanke sought to beat back a growing movement in Congress to have the Fed's monetary policy decisions subject to an audit by the Government Accountability Office (GAO).
Bernanke pointed out that many of the Fed's operations are already subject to oversight, and said giving lawmakers the ability to demand an audit of any monetary policy decision "could be seen, with good reason, as efforts to bring political pressure to bear on monetary policymakers."
Today's Congress should heed the wisdom of their predecessors and let the Fed make decisions without fear of political recrimination, according to Bernanke.
"A perceived politicization of monetary policy would reduce public confidence in the ability of the Federal Reserve to make its policy decisions based strictly on what is good for the economy in the longer term," he warned.
House lawmakers, including nearly all Republicans and roughly half of the Democrats, cleared a bill to subject Fed decisions to GAO audits earlier this year. However, there are no plans so far for it to be brought up for a vote in the Senate.