Bernanke takes on Occupy Wall Street

Federal Reserve Chairman Ben Bernanke took on critics from both the right and left Wednesday, using a rare press conference to defend the central bank’s efforts to boost the economy.

Bernanke pushed back against critiques by GOP lawmakers and presidential candidates on one side and Wall Street protesters on the other, mounting a broad defense of the Fed’s recent moves even as the central bank lowered its expectations for the economy going forward.

“Politics is politics and the Federal Reserve tries to stay nonpartisan,” he said. “Our job is to do the best we can for the economy.”

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Bernanke was asked about prevalent Fed critiques emerging at protests tied to the Occupy Wall Street movement. While he expressed sympathy with frustrations about the economy, he said many of the complaints levied at the Fed — including those made against the steps it took during the financial crisis — are misguided.

“The concerns about the Fed are based on misconceptions,” he said. “A very simplistic interpretation of that [criticism] was that we were doing that because we wanted to preserve banker salaries. That was obviously not the case.”

If the Fed hadn’t stepped in, things would have been much worse, Bernanke said.

“The consequences would have been dire,” he said. “Not everyone understands that, and so sometimes people misunderstand our motives.”

Bernanke also has faced criticism from Republicans. In September, GOP leaders in the House and Senate sent a letter to Bernanke, urging him and the Fed to steer clear of further attempts to boost the economy, saying they would do more harm than good.

The direct plea did not sway the Fed chief, as the central bank announced shortly thereafter it was embarking on a new effort to boost the economy. Bernanke said Wednesday that those policies would continue. 

GOP presidential candidates have been eager to pile on, highlighted by Texas Gov. Rick Perry’s claim that the Fed chairman was engaged in “almost ... treasonous” policies. But Bernanke dismissed the growing GOP argument that the Fed was encouraging inflation with its moves, saying that claim has “not proven to be very valid.”

“I would simply point to the record,” he said, noting that inflation, while increasing recently, on average has lingered around 2 percent, which is “close to a reasonable definition of price stability.” The Fed said Wednesday it expects inflation to fall in the coming quarters.

Rather, the bigger problem for the Fed has been the other half of its mandate — maximizing employment, which is driving most of its moves, he said.


Bernanke acknowledged that the Fed ultimately is accountable to Congress, but he warned that it was “very important” that the Fed not be politically pressured in the short term.

“We listen to everybody’s input, but the most important thing is that we are free to make the decision based on what’s in the interest of the American people and what’s in the interest of the American economy,” he said. “And that’s what we’re going to do.”

In fact, he indicated the Fed could possibly do more in the future, saying further action “remains on the table.”

He also expressed frustration with the deadlocked Congress, saying at one point it would be “helpful if we could get some assistance from other parts of the government ... certainly we are doing our part.”

Later on, he rattled off ways the Fed has helped boost the economy and kept prices stable, even as people “rightly recognize” the economy is not where it should be. “I think our policies ... were very important for helping to explain why the economy stopped contracting and began to grow again,” he said. “Absent the support of monetary policy, the economy would be in a much deeper ditch.”

However, he acknowledged that the Fed’s impact has been “blunted” in one of the economy’s biggest problem areas: the housing market. Tight credit conditions there have prevented people from buying new homes or refinancing existing mortgages.

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While saying he did not want to make excuses, he also said that the economy has had a run of bad luck this year, citing the natural disaster in Japan that disrupted global supply chains for months and the European debt crisis that was more severe than first imagined.

Bernanke’s comments came after the Fed slashed its expectations for the next several years, the third straight time the central bank has tempered its outlook.

The Fed now expects the nation’s economy will grow just 1.6 percent to 1.7 percent in 2011, down from 2.7 percent to 2.9 percent expectations back in June. The economy will not return to healthy growth above 3 percent until 2013, according to the central bank.

Similarly, it reduced expectations for the nation’s unemployment rate, which it now expects to linger from 8.5 to 8.7 percent through 2012’s presidential election. The Fed boosted its expectations on inflation for the remainder of 2011 but largely held it steady for 2012 and 2013, expecting it to fall between 1.5 and 2.0 percent.

Earlier on Wednesday, the policy-setting Federal Open Market Committee announced that, though the economy had “strengthened somewhat,” it was sticking with its plan of near-zero interest rates until at least mid-2013, as well as the portfolio realignment known as “Operation Twist.”

— Originally posted at 2:44 p.m. and updated at 8:31 p.m.