Bernanke on ‘Occupiers’: Fed’s Motives are Misunderstood

A defensive but sympathetic Federal Reserve Chairman Ben Bernanke said he understands concerns about the economy and income inequality brewing among Occupy Wall Street protesters, but that the Fed’s motives are often misunderstood by the public.
Following yesterday’s monetary policy meeting, Bernanke fielded questions regarding political attacks on the Fed from Republican presidential candidates. He was also asked to respond to the assertions of “Occupiers” that the Fed has fostered income inequality and corporate greed through its expansionary policies in recent years.
“I understand that a lot of people are dissatisfied with the state of the economy,” Bernanke said. “I am dissatisfied with the state of the economy. Unemployment is far too high, and inequality, which is not a new phenomenon, has increased … for at least 30 years. As this goes on, obviously, we have a more unequal society than we’ve had in the past. So I fully sympathize with the notion that the economy is not performing as we would like it to be.”
According to a recently released nonpartisan report, the top 1 percent of Americans with the highest incomes saw their earnings grow by an average of 275 percent over the last three decades. At the same time, the 60 percent of those in the middle of the income spectrum saw their earnings grow by just 40 percent.
Bernanke is no stranger to the hot seat of negative public and political opinion. He played a central role in the bailout program that focused on the biggest U.S. banks at the onset of the financial crisis in 2008. The bailouts amount to a sore point with protesters and the general public. But most big banks have repaid their bailout funds and the program is anticipated to turn a profit.
“I think concerns about the Fed are based on misconceptions,” Bernanke said. “The Federal Reserve was involved in trying to stabilize the financial system in 2008 and 2009. A very simplistic interpretation … is that we were doing that because we wanted to preserve bankers’ salaries. That is obviously not the case. We’re trying to protect the financial system in order to prevent a serious collapse of both the financial system and the American economy.”
The Fed chief emphasized that all actions he authorizes are meant to be in the best interest of the general pubic.
“Our motives are strictly to do what is in the best interest of the broad public and I believe that our efforts to stabilize the financial system, which were ultimately proved successful, were very much in the interest of the broad public,” Bernanke said.
The Federal Reserve acts as its own bank and is primarily independent, although the Fed was created by Congress and its members are appointed by the president.
Bernanke was most defensive when responding to criticisms from Republican presidential contenders aimed at his policies to keep inflationary forces in check and the economic recovery unhindered.
“I would simply point to the record,” Bernanke said. “If you look back for the last five years, inflation, even though it’s been volatile due to commodity fluctuations, has averaged about 2 percent, which is close to a reasonable explanation of price stability. The area where we have fallen short is, obviously, on the unemployment side. So I think criticism based on concerns about inflation are not very valid.”

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