Bernanke focuses on the technical as protesters demand action on unemployment
Federal Reserve Chairman Ben Bernanke said today that the central bank’s tools are limited in responding to financial crises and it should focus its efforts on preventing the kind of meltdowns that spurred the recent “Great Recession.”
Bernanke spoke at the Federal Reserve Bank of Boston as protesters occupying a patch of land across the street denounced him for failing to clearly articulate a way to fix a broken economy that has left more than 14 million in the US jobless. In a highly-technical speech on bank doctrine and practice, Bernanke rarely touched on the nation’s high levels of unemployment, using the word “unemployment” only once in his 30-minute speech.
“Address the people Bernanke,” said protester Nadeem Mazen, whose words were repeated in unison by a crowd of Occupy Boston protesters in an impromptu meeting with reporters. Mazen and others criticized Bernanke’s handling of the financial industry bailout as “incompetent,” called his day-to-day leadership “opaque” and questioned why more has not been done by the Federal Reserve to create jobs, stem home foreclosures, and police the financial industry.
“I think someone in that position doesn’t care what the common people think,” said Mazen, an MIT graduate and small business owner.“Their ears are not to the ground, they’re to other large corporations.”
Bernanke spoke at the the Boston Fed’s two -day conference, entitled “Long-Term Effects of the Great Recession,” offering lessons from the severe downturn that began in 2008, including the need for the Fed and other central banks to exercise oversight powers over financial institutions.
“As lender of last resort, a central bank works to contain episodes of financial instability; but recent events have shown the importance of anticipating and defusing threats to financial stability before they can inflict damage on the financial system and the economy,” he said in prepared remarks. “In particular, the crisis illustrated some important benefits of involving central banks in financial supervision.”
Bernanke did not take questions or refer to the protesters outside. But when asked about the turmoil roiling the Boston Red Sox, he said answering such a question would be “even more controversial than anything he would say” about the economy.
In his speech, Bernanke described an “evolving consensus” that monetary policy, which tends to rely on interest rates to stimulate or slow the economy, is “too blunt a tool” to be routinely used to address possible financial imbalances Monetary policy should be focused on wider, economic objectives, while more targeted tools should be used to address emerging financial risks.
In August, the Fed announced that it would keep short-term interest rates low at least through mid-2013.
“Certainly,” he said, “ those tool kits appear to be much better stocked today than before the crisis. “ He pledged that the Fed, which has traditionally been a secretive institution, would continue to “increase transparency about its forecasts and policy plans.”
He added that understanding and applying the lessons of the crisis will “take some time yet.”
“Both theorists and practitioners of central banking, he said, “have their work cut out for them.”
