Dems tell Fed not to rush for the exit

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Senate Banking Committee Chairman Tim Johnson (D-S.D.) warned at Thursday's hearing that the Fed "should not prematurely step on the brakes."

"When the time comes, it is important that monetary policy adjustments are gradual and do not disrupt financial stability and economic growth," he added.

And Sen. Robert Menendez (D-N.J.) was even more blunt, wondering if the Fed was considering removing an economic lifeline too soon.

"Isn't it still way too soon to consider any kind of policy tightening?" he asked, pointing to the continued high unemployment rate, coupled with consistently low inflation.

The Democratic push marked a flip of sorts, after Bernanke has heard for years from wary Republicans, who warned that the Fed's highly accommodative policy was too risky and should be averted.

Sen. Charles Schumer (D-N.Y.) pressed Bernanke on whether the Fed would begin to "taper" its latest round of bond purchases known as quantitative easing in September, as many market participants expect.

Bernanke, who has emphasize that any stimulus exit would be heavily reliant on incoming economic data, said it was "way too early" to nail down a precise timeframe.

"What we're looking for is a pickup as the year progresses," he said.

Meanwhile, Republicans continued to air concerns about the repercussions of the Fed's policies. Through three rounds of easing, the Fed has accumulated over $3 trillion in its portfolio, and GOP lawmakers worry that the economy could suffer when it comes time to cut off that stimulus. 

Bernanke also told lawmakers that federal fiscal policy is weighing on the economic recovery, criticizing as he has in the past the short-term sequester cuts and tax hikes that do not address the nation's long-term deficit issues. However, he stopped short of suggesting the Fed should bring more pressure to bear on Congress, or advocate for specific policies.

"I don't think we should be a in a position to try to threaten Congress with higher interest rates or anything like that," he said.

Like in the House a day prior, senators acknowledged that Bernanke's appearance before their panel may be his last, as his term as Fed chairman is set to end at the beginning of 2014 and the widespread expectation is that he will not be back for a third term.

Lawmakers in both parties, even those critical of his policy moves, offered kind words as the hearing at times served as a psuedo-send-off. In particular, lawmakers hailed Bernanke's role in steering the nation through the financial crisis.

Schumer said Bernanke was "instrumental in keeping our economy from falling into an abyss … we are now because of your leadership, on the path of turning that economy around."