The Federal Reserve Chairman, Ben Bernanke, said he believes the economy will continue to grow this year despite high unemployment rates, weak job growth and an “exceptionally weak housing sector”.
In the Fed's Semiannual Monetary Policy Report to Congress, Bernanke highlighted the positive direction the economy has taken citing as evidence the real GDP's return to where it was before the financial crisis occurred.
In today’s hearing conducted by the Senate Banking Committee, the focus seemed to be on the Fed’s decision to buy securities issued by the Department of Treasury and the effectiveness of that process known as quantitative easing (QE) and the effects of possible inflation.
“I think [it’s] working well,” Bernanke said of the QE process and pointed to the fact that the stock market has doubled since the Fed’s first round of buying Treasury securities worth $1.7 trillion. The plan to buy $600 billion more in Treasury securities was announced on Nov. 3, 2010.
The issue of transparency was also discussed multiple times during the hearing. Sen.Mike Crapo, R-Idaho, suggested placing the liabilities gained by Fannie Mae and Freddie Mac on the Fed’s balance sheet and asked Bernanke for his opinion. Because Fannie and Freddie are both now government-run agencies tax payers are on the hook for all of the loans owned by the two organizations people should know what those balances are, Crapo said.
Bernanke didn’t address the question directly, only saying that the assets would also appear on the balance sheet implying an offset.
Bernanke’s testimony addressed transparency in a general manner.
“The Congress and the public must have all the information needed to understand our decisions, to be assured of the integrity of our operations, and to be confident that our actions are consistent with the mandate given to us by the Congress” Bernanke said.
He did highlight the Fed’s release of details for more than 21,000 transactions completed through programs put into place specifically to rescue the economy from crisis. An example of one of those programs is the Term Asset-Backed Loan Facility (TALF).
Bernanke will testify tomorrow before the House Committee on Financial Services tomorrow.