Bernanke Blasted at Confirmation Hearing
Senators sharply criticized Federal Reserve Chairman Ben Bernanke at his confirmation hearing Thursday, saying he and his colleagues failed to head off last year's financial crisis.
Bernanke, 55, conceded the central bank "should have done more" but maintained it's best suited to prevent future crises.
The former Princeton economics professor is widely expected to be confirmed for a second four-year term, but some senators on both the left and the right have signaled they'll try to obstruct or delay the process.
On Wednesday, Sen. Bernie Sanders, I-Vt., said he put a hold on the nomination, a maneuver that likely will slow the process.
While crediting Bernanke with helping rescue the economy last fall, some Democrats argued for sharply constraining the Fed's powers as Congress considers sweeping financial reform.
"Under your leadership, Mr. Chairman, the Federal Reserve has taken extraordinary actions to right the economy," said Senate Banking Committee Chairman Chris Dodd, D-Conn.
Dodd said he'll support Bernanke's nomination, but he told the chairman the Fed "failed terribly in giving us the kind of warnings of where we were headed."
Sen. Richard Shelby, R-Ala., the committee's ranking Republican, said the Fed "kept interest rates too low for too long, encouraging a housing bubble and excessive risk taking." He also said the Fed failed until recently to crack down on risky mortgage products.
Sen. Jim Bunning, R-Ky., offered a more scathing rebuke, saying the Fed has spent billions to bail out banks without requiring them to increase lending.
"From monetary policy to regulation, consumer protection, transparency and independence, your time as Fed chairman has been a failure," Bunning said. He said he'll try to block Bernanke's confirmation.
Dodd has introduced a bill that would largely strip the Fed of regulatory authority over banks, giving a new entity that power. Separate bodies would oversee consumer protection and the financial system's stability.
Dodd said that allowing the Fed to keep its bank oversight and handing it new responsibility over the financial system - as a House bill proposes - would "distract" it from its "core mission" of setting interest rates.
For his part, Bernanke admitted mistakes.
"If we had been more proactive (in overseeing certain mortgages) it would have been helpful," he said.
The Fed "played a central role in efforts to quell the financial crisis," he said, by funding faltering institutions and frozen credit markets and keeping rates near zero.