Former Federal Reserve Chairman Ben Bernanke defended the central bank’s actions after the financial crisis, telling a gathering in Fort Worth on Monday that warnings about higher inflation and a collapsing dollar resulting from the Fed’s policies never transpired.
In terms of economic stability, Bernanke said, “I think we’re a lot safer today than we were in 2007.”
Bernanke did not comment on whether the Federal Reserve Board should raise interest rates at its next meeting in December. But he said interest rates are not at record lows because of the Fed, but because the general economy has not been able to support higher rates.
“The Fed will not be able to successfully raise interest rates until the underlying economy can sustain it,” Bernanke told a luncheon crowd of 575 at the Fort Worth Club sponsored by the World Affairs Council of Dallas/Fort Worth.
“The reason interest rates are low is not because the central banks have decided to do it,” he said. “What’s the interest rate the economy can sustain? What’s the interest rate that’s consistent with full employment and with growth? In the world today, that interest rate is very low.”
Bernanke also countered criticism from some quarters that low interest rates have benefited the wealthy at the expense of the general population by driving up stock prices and broadening income inequality.
“That’s a very, very weak argument. So what was the Fed supposed to do, let the country stay in deep recession?” Bernanke said. “If you don’t like low interest rates, I’ll give you the address of the Congress, because that’s why interest rates are low.”
Bernanke maintains that after approving an economic stimulus program during the financial crisis, Congress failed to provide more help for the economy through infrastructure spending or other programs, leaving the burden of supporting the economy to the Federal Reserve.
“The main thing low interest rates have done is support the economy and put millions of people back to work,” he said “That’s the best thing you can do for the broad public.”
Bernanke was first appointed to be Fed chairman by President George W. Bush in 2006 and was reappointed by President Barack Obama in 2010. He left the Fed in 2014 and has been speaking throughout the country recently to promote the release of his memoir, “The Courage to Act.”
On other topics:
▪ Bernanke said he opposes moves led by Congress members such as Sens. Rand Paul and Ted Cruz to “audit” the Fed because it essentially would give Congress the ability to change Fed interest rate decisions. “I ask you, if you like Congress’s work on fiscal policy, put them in charge of monetary policy?” he said. “You may not agree with Janet Yellen, but I’d rather have her in charge of monetary policy than your representative congressmen.”
▪ He doesn’t support a proposal from Democratic presidential candidate Bernie Sanders to make college tuition free for everyone.