Ben Bernanke bites back at critics of economic policies at Fed
Published 08/12/2011 | 03:42
Ben Bernanke, the chairman of the US Federal Reserve, is launching a counter-offensive against its growing number of critics, penning a muscular defence of its actions during the 2008 financial panic and readying the publication of new details about how it sets US monetary policy.
With the Fed's legitimacy being called into question by politicians, commentators and activists from across the political spectrum, Mr Bernanke has signed off on a strategy of increased transparency.
While the chairman has long advocated being more explicit about its monetary policy goals, the matter has become more urgent as the central bank has used unprecedented tactics to counter the credit crisis and recession.
In recent days, officials have become alarmed at criticismof its actions in 2008, when it stepped in as a "lender of last resort" to the financial sector when the rest of the credit markets had stopped functioning. The Fed's actions, characterised as a bailout of Wall Street, stoked public anger. In particular, Mr Bernanke went to war against a Bloomberg magazine article last week which asserted that the sum total of lending activity the Fed was willing to support through emergency financing schemes and guarantees was $7.7 trillion at its height.
That figure was widely repeated and often misrepresented as the total of the Fed's actual lending, including on TV programmes such as the left-leaning Daily Show With Jon Stewart. Republican presidential candidates are also attacking the Fed for being too cosy with Wall Street and for stoking inflation with loose monetary policy.
The Fed's actual lending to financial institutions peaked at $1.2trn in December 2008, Mr Bernanke said, and the central bank says it has been, or will be, paid back in full, returning a profit of about $125bn to the US taxpayer in the process. Critics typically call the Fed's lending "secret", though the scale of its lending was known and only the details of the recipients were kept confidential.
Meanwhile, at its next interest rate-setting meeting next week, the Fed is likely to debate a new communications strategy aimed at providing the public with extra information about its targets for unemployment and inflation, the twin pillars of its responsibility to smooth the US economy.