WASHINGTON — Ben S. Bernanke, making his first appearance before Congress since the Senate confirmed him last month to a second term as chairman of the Federal Reserve, reaffirmed on Wednesday that short-term interest rates would remain at a historically low point — near zero — for “an extended period.”þþIn presenting the Fed’s semiannual monetary report to Congress, Mr. Bernanke did not waver from the Jan. 27 statement of the central bank’s key policy-making board, or from a Feb. 10 statement in which he explained to Congress the strategies for gradually reducing the vast sums that banks hold in reserves at the Fed.þþ“Although the federal funds rate is likely to remain exceptionally low for an extended period, as the expansion matures, the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures,” Mr. Bernanke said in a prepared statement.þþMr. Bernanke predicted that the economic recovery would remain slow. Much of the pickup in growth late last year, he said, could be attributed to the companies reducing unwanted inventories of unsold goods, making them more willing to bolster production.þþ“As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services,” he said.þþMr. Bernanke’s prepared testimony, which accompanied the Fed’s 53-page monetary policy report, did not contain many surprises. Observers were more interested in what he would tell members of the House Financial Services Committee under questioning.þþIn his testimony, Mr. Bernanke said the consumer demand seemed to be “growing at a moderate pace,” notably business investment in equipment and software and in a rebound of international trade. Housing starts, however, have been flat, and despite recent signs that job losses have slowed, the “job market remains quite weak.” þþAs the hearing commenced, the chairman, Representative Barney Frank of Massachusetts, allowed various members to air their views.þþRepresentative Bill Foster, Democrat of Illinois, put up slides showing that the net worth of American households dropped by $17.5 billion from July 2007 and March 2009. “Our economy is suffering through the aftermath of the largest destruction of wealth in human in history,” Mr. Foster said, blaming the disaster on deregulation.þþRepresentative Ron Paul, Texas of Republican and a persistent libertarian critic of the Fed — he favors something like a return to the gold standard — said the Fed continued to create “moral hazard” by allowing companies to take risks because they believe they will be bailed out if they fail.þþ“ ‘Too big to fail’ creates a tremendous moral hazard,” he said, “but of course the real moral hazard over the many decades has been the deception put into the markets by the Federal Reserve.”þþRepresentative Melvin L. Watt, Democrat of North Carolina, said he hoped to learn “what tools the Fed has in its tool kit to reverse the trends and spur job growth in the 12th district of North Carolina and across America.”þþRepresentative Lynn Jenkins, Republican of Kansas, said she wanted to ask Mr. Bernanke “if a true economic recovery can occur with continued, excess deficits.”þþMr. Frank argued that the testimony demonstrated the success of the $787 billion stimulus package that the Obama administration shepherded through Congress, over Republican opposition, early last year. þþ“The chairman twice notes the positive impact of the stimulus on the economy,” Mr. Frank said.þ
Source: NY Times
