Bernanke Defends Fed's Low-Interest-Rate Policies

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Bernanke defends Fed's low-interest-rate policiesBy MARTIN CRUTSINGER

WASHINGTON (AP) - Facing criticism from Republican lawmakers, Chairman Ben Bernanke stood behind the Federal Reserve's low-interest-rate policies Wednesday and sought to reassure members of Congress that the central bank has a handle on the risks.

In his second day of testimony on Capitol Hill, Bernanke told members of the House Financial Services Committee that the bond purchases are needed to boost a still-weak economy and that they have helped create jobs for average Americans.

The bond purchases are intended to lower long-term interest rates. That encourages more borrowing and spending, which generates growth.

Still, Republicans said the bond purchases could generate higher inflation.

"We have gone too far in monetary policy and the monetary easing and it is in this member's opinion time to pull back," said Rep. Gary Miller, R-Calif.

Bernanke said the Fed is weighing the costs and the benefits.

"We plan to have a continual discussion and review of both the costs and the benefits and try to make sure that we are taking the right steps given those costs and benefits," Bernanke told the House panel.

Bernanke's remarks during his semiannual monetary report to Congress largely repeated comments made a day earlier to a Senate panel.

The Fed chairman made clear that the Fed's low-interest-rate policies are giving crucial support to an economy still burdened by high unemployment. He also acknowledged the risks of keeping rates low indefinitely. But he expressed confidence that such risks pose little threat now and gave no signal that the Fed might shift away from those policies.

The aggressive program to buy $85 billion a month in Treasurys and mortgage bonds had kept borrowing costs low, he said. And that, in turn, has helped strengthen sectors such as housing and autos, he said.

Bernanke rejected a suggestion by Rep. John Campbell, R-Calif., that the Fed's policies were mainly helping the federal government with its borrowing needs and big banks and foreign governments.

"This is very much focused at the average American citizen," Bernanke said. "Our estimates are that we've helped create many private-sector jobs. ... People are able to buy houses at very low mortgage rates, refinancing at low mortgage rates. People are able to get car loans at low rates."

The low borrowing rates have boosted demand, Bernanke said, and that has helped to lift home prices, making home owners feel more financially secure.

"In a lot of dimensions, we have, I think, benefited Main Street and that's certainly our objective," Bernanke said.

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Minor Von

upto I looked at the check ov $7503, I didn't believe that...my... best friend had been actualey taking home money part-time from there pretty old laptop.. there sisters neighbour had bean doing this for less than eight months and by now paid the morgage on there place and got themselves a Toyota. go to............ BIT40.ℂOℳ

February 27 2013 at 7:03 PM Report abuse rate up rate down Reply
nsoccio

If Helicopter Ben had left interest rates alone in 07, we would have never had this mess. Matt said it very well. if borrowing & spending generate growth, then snorting cocaine generates energy. If you stop & think about what Bernanke said that borrowing & spending generate growth, it's unbelievable, it's an insult to someone's intelligent's. He's never ran a business or hustled for a buck, he's always been on the tit of the Goverment.

February 27 2013 at 5:03 PM Report abuse rate up rate down Reply
Matt

"That encourages more borrowing and spending, which generates growth."

You sure about that? I though production and saving/lending generate growth. If borrowing and spending generate growth, then snorting cocaine generates energy. The "growth" is only in bubbles, currently a government bond bubble, and is always, ALWAYS followed by a painful correction.

Growth comes from production and saving. Hunger isn't cured by eating: it's cured by hunting/cultivating. Eating/spending is the easy, fun part. Hunting/underconsuming are the hard, not fun parts. The Fed wants everyone to eat more of the food we have already hunted and gathered and saved. All it means is that we'll all run out of food/capital sooner. The feast will be delicious while it lasts, just like the dot-com and housing bubbles were great before we ran out of credit.

"People are able to buy houses at very low mortgage rates, refinancing at low mortgage rates."

Is this an admission that the housing crisis was caused by artificially low interest rates?

February 27 2013 at 3:03 PM Report abuse rate up rate down Reply
usaguy45

Who's saving money now a days with gas prices sky high hell I put any extra in my gas tank.It's all a lie.

February 27 2013 at 2:37 PM Report abuse rate up rate down Reply
amani4000

Because of what Ben has been doing for five years, if he raises the intrest rates the economy will implode. Banks will pull money now in Fed banks, into the mainstream economy to make more money. This will send inflation to the moon because the Fed needs the money currently invested in bonds to pay the intrest rates for TRILLIONS borrowed in the last four years. Hope ya got a safety net cause the impending crash will be the worst ever seen. This administration has done nothing to correct the disaster looming ahead but add more debt. Good Luck!

February 27 2013 at 2:35 PM Report abuse +1 rate up rate down Reply
white41990

You the reason for high unemployment Bernanke, who wants to spend money when they cant get rewarded for saving first? Try raising interests rates and I bet the economy will fix itself by giving the consumer more confidence to spend again, when you have higher interest rates you have lower unemployment and lower prices on things such as gas and food which besides health care right now is where most people are spending their money today.

February 27 2013 at 2:18 PM Report abuse rate up rate down Reply