Bernanke calls on Congress to act

Federal Reserve Chairman Ben Bernanke’s call for Congress to take action on Tuesday led to several pointed exchanges with GOP lawmakers, some of whom bristled at his pressure and argued the Fed was not making their jobs easier.

Bernanke said the economic recovery was “close to faltering” and told lawmakers they cannot “safely or responsibly” delay making “difficult and fundamental fiscal choices.”

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Days before a new report on the nation’s unemployment rate, he painted a bleak picture, saying recent data point to “the likelihood of more sluggish job growth in the period ahead.”

“The recovery is close to faltering. We need to make sure the recovery continues and doesn't drop back,” Bernanke said. 

Bernanke's testimony began with the backdrop of deep losses on Wall Street, but market rallied Tuesday afternoon to close up for the day.

Rep. Mick Mulvaney (R-S.C) contended that the Fed's drive to lower interest rates is spurring the government to borrow more.

“One of the unintended consequences of doing what you're doing is you're making it easier for us to continue to do what we're doing, which is to borrow money,” he said.

Bernanke strongly rebutted that argument: “I don't think that's a valid point,” he said. “We keep interest rates down somewhat. I don't think that eliminates the responsibility of Congress to take its own action.”

Bernanke also described Sen. Mike LeeMichael (Mike) Shumway LeeMcConnell, allies lean into Twitter, media 'war' Conservatives buck Trump over worries of 'socialist' drug pricing Criminal justice reform should extend to student financial aid MORE’s (R-Utah) claim the Fed operated under a “general veil of secrecy” as an “urban legend.”

“We are very thoroughly audited at this point,” he said. "Nobody's found any impropriety whatsoever...that's really just an urban legend."

Bernanke repeated that the Fed cannot salvage the economy on its own and that monetary policy is not a “panacea” for the nation’s economic struggles.

Nonetheless, he maintained that the Fed is prepared to take even more steps “as appropriate” to boost the economy.

Even if the deficit supercommittee successfully cuts $1.2 trillion off annual deficits, Bernanke warned it won’t be enough to restore the nation to fiscal good health. “Accomplishing that goal would be a substantial step; however, more will be needed to achieve fiscal sustainability,” he told the Joint Economic Committee.

The central bank has been under consistent pressure from lawmakers since it began digging deep into its playbook in several attempts to boost the flagging economy.

After it had lowered interest rates as far as it could after the financial crisis, the Fed began dabbling in more unorthodox policies.

This summer, the Fed took the unusual step of announcing it would be keeping interest rates near zero for at least the next two years.

And in a further bid to lower long-term interest rates, it announced in September that it would be overloading its portfolio with longer-term securities, buying up $400 billion of long-term bonds while selling off the same amount in short-term securities.

The gambit, dubbed “Operation Twist,” came days after GOP leaders made a direct plea to the Fed, arguing in a letter to Bernanke that the Fed should resist further efforts to boost the economy, as those moves were doing more harm than good.

Republicans have argued that the Fed’s policies are having little impact, and are sowing the seeds of future inflation. Democrats have also begun second-guessing the Fed, arguing the central bank should be taking more dramatic steps to boost the economy.

For his part, Bernanke downplayed the reach of the move, which also served to underline the need for Congress to act.

“We think this is a meaningful, but not an enormous, support for the economy,” he said.

As Bernanke pressured Congress, the Fed also was the subject of a partisan tug of war. Committee Chairman Sen. Bob CaseyRobert (Bob) Patrick CaseyThe Hill's Morning Report - Progressives, centrists clash in lively Democratic debate Democrats press Trump Treasury picks on donor disclosure guidelines Pennsylvania school district turns down local businessman's offer to pay off student lunch debts MORE Jr. (D-Pa.) chided Republicans for pressuring the Fed, and defended the central bank’s moves as “needed to strengthen the economy.”

But the vice chairman of the panel, Rep. Kevin BradyKevin Patrick BradyRepublicans' rendezvous with reality — their plan is to cut Social Security The Social Security 2100 Act is critical for millennials and small business owners House panel releases documents of presidential tax return request before Trump MORE (R-Texas), said the Fed needed to refine its focus, and that he would be introducing legislation to reduce the Fed’s mandate so it focused only on inflation, and not on maximizing employment as well.

Several Republican lawmakers similarly probed Bernanke on a single mandate, as he defended the Fed’s dual mandate as “workable.” However, he noted that Congress had the right to change it if it saw fit.

“We will do whatever you assign us to do,” he said.

Brady also called on the Fed to clarify exactly how it functions as a lender of last resort, noting the unprecedented steps the central bank took in the throes of the financial crisis. While he was critical of the Fed’s recent moves, Brady said he was not challenging the Fed’s political independence.

“For our economy’s sake, the Federal Reserve must remain independent and free from any undue political pressure in implementing monetary policy,” he said.

On the economy, Bernanke hit many of the same notes he had in past public comments.

He noted that the economic downturn had been deeper and the recovery slower than expected. While some temporary factors weighed down the economy in the beginning of the year, he said, “more persistent factors” are also at work.

He also noted that concerned consumers are slow to pump their money into the economy, and still struggle with high debt levels and reduced access to credit. The poor performance of the job market is “probably the most significant factor” weighing on consumer confidence, he added.

This story was last updated at 4:44 p.m.